Digging Into Gold's Glitter

Gold has been all over the news--almost as much as AI. And it's true: investors who bet on gold have made serious gains lately. Over the past year, gold is up over 70%, and just last month, it closed above $5,000 per ounce for the first time in history.

But despite the headlines, gold--like silver, platinum, or even bitcoin--is just a store of value. It doesn't generate earnings. It doesn't pay interest. It just exists. As Warren Buffett once quipped:

"Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again, and pay people to stand around guarding it. It has no utility."

That may be a little harsh, but his point stands: gold's value isn't productive--it's perceived. And lately, that perception has been in overdrive, with demand far outstripping supply. And we've seen this dynamic play out in a few distinct waves:

First, after the invasion of Ukraine, Russia was cut off from the global banking system, and its foreign currency reserves were frozen. That situation gave pause to many central banks about their reliance on US dollars and other reserve currencies. In response, they started buying gold.

Second, tariffs, deglobalization, threats to Fed independence, and a growing national debt have weakened the US dollar. Historically, that kind of instability would push investors toward dollars and Treasuries. Instead, many have turned to gold.

Third, traders piling in with leverage compounded momentum from the first two waves. Algorithmic trading and Reddit-fueled FOMO are very real forces in today's markets. And these trades are easier than ever to execute through levered ETFs like ProShares UGL, which targets twice the daily returns of gold futures.

But as we saw last Friday, January 30--when gold fell roughly 9%--momentum and leverage can cut both ways. As WSJ columnist Spencer Jakab put it, "Speculators love face-ripping volatility, but they also get bored quickly nowadays, jumping to the next shiny object."¹

You can make money trading gold. But as a long-term investment, I would much prefer a well-diversified portfolio of productive assets--like stocks and bonds. Gold may glitter, but not everything that glitters is worth holding forever.

1.Jakab, Spencer. “Gold Buyers, This Isn’t the 1970s.” The Wall Street Journal, February 2026.
https://www.wsj.com/finance/stocks/gold-buyers-this-isnt-the-1970s-9a7af920?mod=Searchresults&pos=1&page=1

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Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@lefleurfinancial.com.

Josh Norris, CPA, CFP, CFA is the managing member of LeFleur Financial, a wealth management and tax advisory firm.

Believe, But Diversify

Home-country bias is in our DNA as Americans—perhaps more so than anywhere else. Consider the now-ubiquitous chant, “I believe that we will win,” which featured prominently in ESPN commercials leading up to the 2014 World Cup.

It’s widely viewed as the anthem of US soccer, but its origins are even more patriotic. The chant dates back to 1998, when it was created by a student at the Naval Academy Preparatory School and later carried with him to the US Naval Academy. From there, it spread from Navy football to other collegiate sports before eventually becoming mainstream in professional soccer.¹

The chant resonates because it reflects something deeply American—a confident belief in our own success. That same mindset shows up clearly in how we invest.

And to be fair, home bias has worked extraordinarily well for US investors over the past couple of decades. The United States is the innovation capital of the world, home to companies like Apple, Amazon, Google, Microsoft, Tesla, Nvidia, Netflix, and Meta. The list goes on.

As a result, over the last 20 years the S&P 500 has delivered nearly a 700% total return, while international developed markets have returned closer to 200%.

However, despite all the tech buzz in 2025 around AI, data centers, and GPUs, international developed stocks quietly had a standout year, posting returns of over 31%, compared with roughly 16% for the S&P 500. The primary drivers were:

•  Valuations - Entering 2025, the S&P 500 (via SPY) traded at a forward P/E of roughly 23, while international developed markets (via EFA) traded closer to 13. In other words, US stocks were almost twice as expensive relative to expected earnings.

• Fiscal Policy - Germany, the European Union’s largest economy, passed a sizable defense and infrastructure spending package in mid-2025. The ripple effects should boost financials, industrials, and the whole European economy.

• Weaker Dollar - The US dollar declined by roughly 9% in 2025 against a basket of developed-market currencies. For US investors owning international equities priced in dollars (such as EFA), returns benefited not only from rising local stock prices but also from currency translation. Stripping out this currency tailwind, international developed markets were still up roughly 24%.

We’ve lived through a long period of US exceptionalism, where American innovation and capital markets dominated global investment returns. That experience makes it easy to forget that US stocks represent only about 60% of global public equity market capitalization.

So yes—you should absolutely own American companies, and they should comprise the majority of your equity portfolio. But if the goal is to maintain a truly balanced and diversified portfolio, you can’t afford to believe that the US will always win alone.

Sometimes, belief is best paired with diversification.

1. Yahoo Sports. “The Improbable Story of How the Trendiest Chant in Sports Began.” June 20, 2014.
https://sports.yahoo.com/blogs/soccer-dirty-tackle/the-improbable-story-of-how-the-trendiest-chant-in-sports-began-040228934.html

Swinging Early

Many sports fans know the often-quoted stat that for decades Babe Ruth held the record for both the most home runs and the most strikeouts. Back then, pitchers didn’t rely on overwhelming velocity—they relied on movement. And with Ruth’s long, powerful swing, he often had to commit early, getting out in front of the pitch.

Similarly, investing titans Ray Dalio (founder of Bridgewater Associates) and Peter Lynch (legendary manager of Fidelity’s Magellan Fund) both called the tech bubble. Unfortunately, they made that call in 1995, and the market didn’t peak until March 2000. During that time, the NASDAQ rose nearly 1,100%.¹ In other words: they swung early and struck out.

Currently, comparisons between AI stocks and the tech bubble abound. And, yes, valuations have climbed above historical norms, but we have no idea where we are in the cycle. Are we in 1995, when things only looked expensive before rising another 1,100%? Or are we in late 1999, a few months from exhaustion? If two of the greatest investors of their generation couldn’t nail that timing, it’s unrealistic to think the average investor can today.

To be fair, the idea of a tech-like bubble is unsettling—the S&P 500 didn’t fully recover its 2000 peak until 2007. But even the market lows of 2002 were still above the market highs of 1995—a reminder that long-term investors were better off staying invested than trying to sidestep the bubble. That’s why maintaining a long-term horizon matters. And if you have a shorter time horizon or a lower tolerance for volatility, your portfolio should reflect that from the start.

Markets will pull back at some point—hopefully not as drastically as they did in 2000. But the goal isn’t to perfectly time an exit and re-entry. The goal is to stay disciplined, stay invested, and let a diversified portfolio do its job.

Participation beats prediction.

1. The Economist, “How to Spot a Bubble Bursting,” December 1, 2025. https://www.economist.com/finance-and-economics/2025/12/01/how-to-spot-a-bubble-bursting

Not Good Enough

In the first season of Friday Night Lights, the Dillon Panthers lose the first game after their star quarterback is injured. The team falls apart, and despite a valiant effort from their backup, they come up short. In the locker room afterward, Coach Taylor delivers a sharp rebuke to the team: “Not good enough. Not nearly good enough.” The problem wasn’t talent—it was effort. They didn’t give it their best.

Recently, Palantir Technologies found itself in the opposite position. The AI powered data analytics company delivered what its CEO called “the best results any software company has ever delivered.” Revenue exceeded expectations, and the company raised guidance for the rest of the year. In other words, they gave it their best—and yet, Wall Street said it wasn't good enough--the stock dropped 8%.

Is Palantir overvalued? Probably, but that's not the point. It may go on to be even more overvalued, making investors plenty of money along the way. The point is that we're in a weird place--economically and in the markets--and you can feel it on days like last Tuesday when Palantir reported earnings. It and other AI-related stocks are priced for perfection, so any result that's merely "great" instead of "spectacular" brings an outsized reaction.

AI has created a new dynamic, and it may take a few years before we figure out who the ultimate winners and losers will be. In the meantime, the stock market is at all-time highs, GDP is steadily growing, and unemployment is historically low. Yet job growth is slowing, inflation is still stubbornly high, the government is in its longest shutdown ever, and tariff uncertainty continues to weigh on both businesses and consumers.

That is a lot of conflicting information--and it leaves many investors without a clear sense of direction. But long-term investors who already have a plan don't need direction from the markets. They have a diversified portfolio built for a range of outcomes and the patience to stick with it through uncertain times.

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Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@lefleurfinancial.com.

Josh Norris, CPA, CFP, CFA is the managing member of LeFleur Financial, a wealth management and tax advisory firm.

American Tailwind

In his 2018 letter to Berkshire Hathaway shareholders, Warren Buffett closed with a section called “The American Tailwind.” He described the simple but powerful idea that Americans are resilient and innovative—and that no matter what obstacles we face, we emerge stronger on the other side.

That positive perspective is refreshing in an era dominated by divisive headlines and partisan rhetoric. Buffett wrote:

“Our country’s almost unbelievable prosperity has been gained in a bipartisan manner. Since 1942, we have had seven Republican presidents and seven Democrats. In the years they served, the country contended at various times with a long period of viral inflation, a 21% prime rate, several controversial and costly wars, the resignation of a president, a pervasive collapse in home values, a paralyzing financial panic, and a host of other problems. All engendered scary headlines; all are now history.”

Since then, America has faced even more challenges—including a once-in-a-century global pandemic. And yet, the pattern Buffett described still holds: when you’re in the middle of a crisis, it feels unprecedented. But with time, resilience wins out. Life goes on, and so does the American economy.

Consider this: since Buffett wrote those words, the U.S. has become the clear world leader in generative AI, and the S&P 500 has delivered a return of more than 140%. The road wasn’t smooth—markets endured pullbacks, routs, corrections, and recessions—but the long-term trajectory has been undeniable.

Buffett’s conclusion to that letter still rings true today: “The major source of our gains will almost certainly be provided by The American Tailwind. We are lucky—gloriously lucky—to have that force at our back.”

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Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@lefleurfinancial.com.

Josh Norris, CPA, CFP, CFA is the managing member of LeFleur Financial, a wealth management and tax advisory firm.

Playing The Odds

In today's digital world, the line between gambling and investing is increasingly blurred. From your phone, you can flip between apps to trade stocks or place bets. Blurrier still, prediction market platforms like Kalshi and Polymarket allow you to wager on everything from stock market moves and interest rate decisions to political elections and current events--all in the same place.

So what is the difference between gambling and investing? It comes down to playing the odds.

In casinos, the odds are intentionally tilted in favor of the house. The dealer plays last in blackjack, the roulette wheel has two green pockets, and slot machines are programmed with payout ratios less than wagers. Even sportsbooks adjust their lines and charge a "vig" to make sure they profit regardless of the outcome.

But it's fun, so as long as you're responsible and view it as an entertainment, there's no issue. But the math always favors the house.

You can also gamble in the stock market, and that's where the confusion lies. Short-term trading, penny stocks, meme stocks, and especially the relatively new zero-dated ("0DTE") options that expire on the same day they are traded are all fast ways to lose money because the odds of success are stacked against the individual investor.

In these scenarios, the real winners are market makers--firms like Citadel, Virtu, and Jane Street--who act much like sportsbooks, profiting from spreads and order flow regardless of who wins or loses. But, again, it's fun, so as long as you're responsible and view it as an entertainment, there's no issue.

However, true investing plays the odds, tilting the markets in your favor by:

• Keeping a long-term perspective - Market downturns are inevitable, but history shows that returns favor those who remain invested.

• Maintaining a diversified portfolio - Combining assets that don't move perfectly together reduces overall risk without necessarily sacrificing return.

• Harnessing compounding returns - Reinvesting earnings generate additional returns, creating exponential growth over time.

Both gambling and investing involve risk, but only one is structured to reward patience, discipline, and diversification. Gambling is entertainment, where the house always wins. Investing is ownership in productive assets, where the odds--if you play them wisely--are tilted in your favor.

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Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@lefleurfinancial.com.

Josh Norris, CPA, CFP, CFA is the managing member of LeFleur Financial, a wealth management and tax advisory firm.

If By Alts

In 1952, Noah "Soggy" Sweat Jr. gave what became known as the "whiskey speech" on the floor of the Mississippi state legislature. Prohibition was a hot-button issue, and debate raged between the "wets" and "drys." When asked for his stance, Sweat delivered a two-and-a-half minute speech that captured the nuance--and contradiction-- of both sides (full text included below).

I think about this speech anytime there is a proposal to loosen regulations designed to protect people from themselves. Striking the right balance is tricky. And as momentum grows to allow "alternative investments" into traditionally conservative employer retirement plans, I've been weighing the idea through the lens of Sweat's logic:

The Stimulating Drink
What are alternative investments ("alts")? Broadly, they're anything that isn't a traditional stock or bond, but common examples include: private equity, private credit, hedge funds, real estate, commodities, and even crypto.

Historically, alts have provided three primary benefits:
1. Diversification - Well-selected alts tend to move differently than stocks and bonds. Adding them to a portfolio can reduce overall volatility while maintaining or even enhancing returns.
2. Illiquidity Premium - Most alts come with lock-up periods, meaning you can't easily cash out. Investors are generally compensated with potentially higher returns for this inconvenience.
3. Higher Returns - Talented alt managers can exploit market inefficiencies in the less-regulated alt universe, aiming to outperform public markets.

But these investments are often complex, opaque, and expensive. That's why many are only available to "accredited investors"--those with certain levels of wealth, income, or professional expertise. For years, this exclusivity allowed wealthier investors to reap the benefits, especially in private equity.

Devil's Brew
Then in 2022, everything changed. As the Federal Reserve hiked interest rates from 0.25% to 4.25%, the private equity machine sputtered. Funds couldn't sell their portfolio companies, valuations fell, and investor enthusiasm dried up. So private equity fund managers started looking for a new source of capital: your 401(k).

Over the past year, major firms like Blackstone and Vanguard, Apollo and State Street, and KKR and Capital Group have all announced partnerships to develop private equity or private credit funds aimed at employer retirement plans. Currently, regulatory hurdles prevent most plan providers from offering these options, but the White House is reportedly considering an executive order to pave the way.

My Stand
If by alts, you mean the well-managed, diversifying complement to a balanced portfolio, then certainly I am for them. But if by alts, you mean the illiquid leftovers being repackaged and sold to retail investors after wealthy clients have passed, then certainly I am against them.

Maybe these partnerships will bring more transparency, better pricing, and wider access to an asset class long reserved for the wealthy. But I worry they'll just lead to overly risky, high-fee investments that leave everyday investors worse off in retirement.

I believe in freedom of choice. But when the average retirement saver becomes the target for complex products they don't fully understand, the balance shifts.

Whiskey Speech - Noah S. Sweat
"My friends, I had not intended to discuss this controversial subject at this particular time. However, I want you to know that I do not shun controversy. On the contrary, I will take a stand on any issue at any time, regardless of how fraught with controversy it might be. You have asked me how I feel about whiskey. All right, this is how I feel about whiskey:

If when you say whiskey you mean the devil's brew, the poison scourge, the bloody monster, that defiles innocence, dethrones reason, destroys the home, creates misery and poverty, yea, literally takes the bread from the mouths of little children; if you mean the evil drink that topples the Christian man and woman from the pinnacle of righteous, gracious living into the bottomless pit of degradation, and despair, and shame and helplessness, and hopelessness, then certainly I am against it.

But, if when you say whiskey you mean the oil of conversation, the philosophic wine, the ale that is consumed when good fellows get together, that puts a song in their hearts and laughter on their lips, and the warm glow of contentment in their eyes; if you mean Christmas cheer; if you mean the stimulating drink that puts the spring in the old gentleman's step on a frosty, crispy morning; if you mean the drink which enables a man to magnify his joy, and his happiness, and to forget, if only for a little while, life's great tragedies, and heartaches, and sorrows; if you mean that drink, the sale of which pours into our treasuries untold millions of dollars, which are used to provide tender care for our little crippled children, our blind, our deaf, our dumb, our pitiful aged and infirm; to build highways and hospitals and schools, then certainly I am for it.

This is my stand. I will not retreat from it. I will not compromise."

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Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@lefleurfinancial.com.

Josh Norris, CPA, CFP, CFA is the managing member of LeFleur Financial, a wealth management and tax advisory firm.

Unknown Unknowns

In February 2002, Secretary of Defense Donald Rumsfeld infamously explained, "[T]here are known knowns… We also know there are known unknowns… But there are also unknown unknowns--the ones we don't know we don't know." It wasn't the most eloquent delivery, but the point stands: It's dangerous to be unaware of what you don't know, and that certainly applies to investing, primarily in the assessment of risk and opportunity.

Risk
Before the world shut down in March 2020, investors weren't regularly assessing the risk of a worldwide pandemic. Very few were weighing the potential economic consequences of such an event or its effects on capital markets. Afterall, the last pandemic was the Spanish Flu in 1918. Investors were, however, at least mildly aware of risks like war and natural disasters because, unfortunately, these are regular occurrences.

Opportunity
It's easy to miss out on returns when you focus only on a handful of stocks that are regularly covered in the news. For example, this week NVIDIA made headlines (again) after crossing $4 trillion in market value, which has never been done before. However, NVIDIA isn't even among the top 50 of S&P 500 year-to-date returns, not to mention the fact that international developed equities have outperformed the S&P 500 itself by over 10% over the same period.

Solution
How do you plan for these "unknown unknowns"? Diversification. Your portfolio should be designed with these risks and opportunities in mind. Unfortunately, that means there will always be positions in your portfolio you wish you didn't own, as some positions outperform others. But over the long-term, you will come out ahead.

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Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@lefleurfinancial.com.

Josh Norris, CPA, CFP, CFA is the managing member of LeFleur Financial, a wealth management and tax advisory firm.

Same, Girl. Same.

In the last season of White Lotus, Parker Posey's character, a privileged southerner, shamelessly admits, "I just don't think at this age I'm meant to live an uncomfortable life. I don't have the will." This candid confession, delivered with Posey's comedic flair, struck a chord with Americans on social media who collectively thought, "Same, girl. Same."

Americans don't do austerity. So it's no surprise that we have avoided the uncomfortable reality of dealing with our national debt. We don't have the will to implement requisite policy change, even though it's been a nagging fear for quite some time. In 1989, real estate developer Seymour Durst even installed the first National Debt Clock just off of Times Square to bring awareness to its rising level--then at a quaint $3 trillion.

It's now over $36 trillion, and this nagging fear has come to the forefront. This week, Philadelphia Federal Reserve President, Patrick Harker, said of our national debt, "There is a tipping point that once passed will weigh down the economy, and whether or not that weight can be lifted by actions of monetary policy alone is a question we should rather not want to deal with."

No one knows where that tipping point may be, but recent developments have heightened concern:

Debt Level
Since 2000, the national debt has grown from $10 trillion to $36 trillion. Over that period, the US financed several wars, the Great Recession recovery, COVID stimulus, and recurring annual budget deficits. And this week, the Congressional Budget Office (CBO) released estimates that the current tax bill would increase that debt by yet another $2.4 trillion.

Interest Rates
In 2020, US interest payments were $523 billion, and the average interest rate was 1.8%. In 2024, US interest payments were $1.1 trillion, and the average interest rate was 3.3%. So our interest payments have essentially doubled in four years because not only is our debt level higher, but it's financed at a higher rate.

Weaker Dollar
Typically, when US interest rates rise, the dollar strengthens as foreign investors pour money into US Treasuries seeking higher yield. However, in April, when tariffs were announced, this trend diverged. The dollar weakened even though interest rates were rising. Not a promising sign. Presumably, foreign investors think tariffs may limit growth in the US.

These developments are concerning, and I hope that these headlines influence policy. But the US dollar still maintains its reserve currency status, and US Treasuries are still the most liquid bond market in the world. Further, the US is still the clear leader in the financial world, and that status won't be lost overnight. But we cannot ignore this problem indefinitely. Sooner rather than later, policy-makers need to show their will to make uncomfortable decisions.

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Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@lefleurfinancial.com.

Josh Norris, CPA, CFP, CFA is the managing member of LeFleur Financial, a wealth management and tax advisory firm.

A Drunken, Erratic Mess

In season four of Mad Men, Don Draper goes on a bender and forces Peggy, his protege, to pull an all-nighter on her birthday. Throughout the episode, he berates her and acts like a drunken, erratic mess. Finally, she confronts him about his behavior, and, annoyed by her audacity, he angrily responds, "That's what the money is for!"

So far this year, the stock market has acted a lot like Don Draper and we, as investors, are Peggy--confused and helpless. We see self-inflicted volatility and uncertainty coursing through the stock market and wonder if staying the course is really worthwhile. But, when you work for Don Draper or invest long-term in the stock market, you sign up for both the money and the chaos.

For better or for worse, that's just the way it works. In fact, the direct relationship between risk (i.e. volatility) and return is a feature of the stock market, not a bug. If the stock market delivered consistent returns year-after-year, everyone would remain invested all the time and no one would make any money. Returns would dwindle, and the stock market would resemble the Treasury market.

Instead, we get the opportunity to endure erratic months like April, where the S&P 500 average daily spread between the highs and lows was 3.13%, which was enough volatility to make many investors sell. But if you missed just one day, April 9, which was the best day of the month, your portfolio was down 7% instead of roughly flat on the month. It's been chaos, but that's what the long-term returns are for.

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Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@lefleurfinancial.com.

Josh Norris, CPA, CFP, CFA is the managing member of LeFleur Financial, a wealth management and tax advisory firm.

Investing is Hard

The great philosopher Mike Tyson once said, “Everybody has a plan until they get punched in the mouth.” After two years of 20+% gains in the S&P 500, this week's drop after sweeping tariff announcements feels like a knockout punch. How did you react? Did you stick to your investing plan? Did you even have one?

Successful investing requires a plan—a portfolio allocation that meets your long-term risk and investment objectives. But you have to stick to the plan, which has been a challenge so far this year. Your ideal allocation can certainly change over time with age and evolving financial priorities, but market moves should not drive that decision.

Unfortunately, emotion and cognitive biases related to changes in the market can cloud judgement and cause investing missteps. Most notably, loss aversion, which is a cognitive bias that causes individuals to feel the pain from loss more than pleasure from gain, makes many investors buy high and sell low—a recipe to lose money 100% of the time.

We’ve all collectively forgotten that investing is hard. Stocks don’t always go up, and you can lose money. Yes, over the long-term stocks have historically provided great returns for investors, but that long-term narrative gets lost when companies like NVIDIA deliver parabolic returns over such a short period.

Warren Buffett once said of his company, Berkshire Hathaway, “Our favorite holding period is forever.” That doesn’t mean you should never sell--even Buffett sells some of his positions from time to time. But it does mean that you should buy a portfolio you are comfortable keeping for a long-term duration, riding out the ebbs and flows of the market.

Every investor should be aware of what’s going on in the stock market. But day-to-day obsession will lead to poor investment decisions. Check you emotion and remember that investing is a long-term endeavor.

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Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@lefleurfinancial.com.

Josh Norris, CPA, CFP, CFA is the managing member of LeFleur Financial, a wealth management and tax advisory firm.

What Have You Done for Me Lately?

On February 26, NVIDIA announced record quarterly revenues with a 78% increase from the previous year. It beat analysts' expectations and issued relatively positive forward guidance, yet its stock still fell by 8.5% the next day.

Similarly, S&P 500 companies reported 18% year-over-year earnings growth for Q4 2024, but the index is down 2% for the year. Since investors' primary concern is future earnings growth, the past quickly becomes irrelevant. As a result, even positive reports can lead to market declines when investors ask, "What have you done for me lately?"

This counterintuitive quirk makes investing frustrating, but the underlying economics make sense. When you buy a stock, you are only entitled to future earnings--last year's earnings went to the seller. So if the prospect for future earnings growth declines, so will the stock's price.

Investors are already wary of high US market valuations (forward 12-mo P/E is 20.7 versus 18.3 10-yr average), so they are looking for any potential weakness in earnings growth. Add tariffs and sweeping federal layoffs to that uneasiness and you get a selloff.

Notably, international developed markets have a much lower valuation (forward 12-mo P/E is 14.3), and the MSCI EAFE index (international developed) is up 11% for the year.

Fortunately, the market can reverse just as quickly. In 2020, the S&P 500 went from down 30% in March to up 16% by year-end. If unemployment remains low and earnings continue to grow, the market can recover and return to positive territory, especially if the White House can find a compromise on tariffs.

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Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@lefleurfinancial.com.

Josh Norris, CPA, CFP, CFA is the managing member of LeFleur Financial, a wealth management and tax advisory firm

Unexpected Events

At the end of January, DeepSeek unveiled its AI model, a lower-cost Chinese version of ChatGPT that performed comparably to its US counterpart. This unexpected development caused the S&P 500 to drop by 1.5%.

Fortunately, the market corrected within a few days as more came to light about DeepSeek's development process. Investors also realized that more affordable AI is actually a good thing. While short-lived, this incident highlights a recurring theme in the stock market: unexpected events drive economic and market disruptions.

Most often, we associate these unexpected events with negative developments:

• October 2002 (S&P 500 -49%) - Coming out of the 1990s, the world worried potential Y2K fallout while internet companies without profits flew under the radar.

• March 2009 (S&P 500 -57%) - Throughout 2007 and 2008, oil prices and conflict in the Middle East dominated headlines while the housing bubble was believed to be contained.

• March 2020 (S&P 500 -34%) - Going into 2020, there was general concern about global slowdown in economic growth and inflation below the Fed's 2% target while COVID-19 was making its way across the globe.

But the same effect applies to positive developments:

• mRNA Vaccines - These vaccines allowed us to come out of the pandemic and re-start the global economy.

• Artificial Intelligence - When ChatGPT became a household name, the practical use for AI became real, paving the way for NVIDIA and other tech companies to unleash a new wave of earnings potential.

• GLP-1 Medications (Ozempic, Wegovy, Mounjaro) - These drugs created a breakthrough in the ongoing battle against obesity and diabetes.

Investors spend a lot of time and mental bandwidth worrying about inflation, interest rates, tariffs, and every other headline that dominates financial news. In reality, the true market drivers, both positive and negative, won't come where we expect.

So how do you prepare? You proactively create a balanced portfolio with an investment allocation that matches your individual risk tolerance and time horizon. Then you stick to it. You don't reactively chase returns or sell in fear. Instead, you keep time on your side and let markets do the rest.

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Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@lefleurfinancial.com.

Josh Norris, CPA, CFP, CFA is the managing member of LeFleur Financial, a wealth management and tax advisory firm.

Inflation FAQ

Inflation has been a hot topic since 2021, but its causes, solutions, and broader implications remain unclear to many. So let's clear up some common misconceptions:

What is inflation?
Inflation is the rate of price increases for goods and services in an economy, primarily measured by the Consumer Price Index (CPI) and the Personal Consumption Expenditures Price Index (PCE). While the CPI gets more attention, the PCE is the Federal Reserve's preferred measure, differing mainly in the weight given to various categories.

However, these indices only provide general trends; individual experiences vary based on personal consumption habits. For instance, housing costs significantly impact both indices, but homeowners with low mortgage rates won't feel the effect of this category. On the other hand, if you consume a lot of eggs, you've definitely felt it in your spending.

What causes inflation?
Inflation can stem from several sources: demand-pull (e.g., Millennials buying houses), cost-push (e.g., COVID-19 supply chain disruptions), monetary policy (e.g., Quantitative Easing), and fiscal policy (e.g., stimulus checks and tax cuts). Typically, there is a combination of these factors at play, but primary drivers are a common debate among economists.

If inflation has come down, why are prices still high?
As inflation has moderated recently, people still complain about high prices, mistakenly thinking lower inflation means lower prices. In reality, lower inflation only means the rate of price increases has slowed.

If prices were to decrease overall (i.e. go back to 2019 levels), it would indicate deflation, which is harmful to the economy. Deflation suggests reduced demand and economic stagnation, creating a vicious cycle where expectations of lower future prices further decrease demand and shrink the economy.

Is inflation always bad?
Contrary to popular belief, inflation isn't always bad. Before 2020, the Federal Reserve was more concerned about deflation, with nearly a decade of inflation below the 2% target, leading to prolonged low-interest rates. While low rates benefit borrowers and stimulate economic activity, they also encourage speculative investments and limit future stimulus options through rate cuts.

What is the natural rate of interest?
The natural rate of interest, or r-star (r*), is the rate that neither stimulates nor restricts the economy. The Federal Reserve adjusts the federal funds rate (FFR) above or below this natural rate to control inflation or boost the economy, respectively.

However, the natural rate can't be calculated or observed in real-time, only estimated after the fact. This uncertainty complicates the Federal Reserve's task. If the Fed overestimates the natural rate, it may keep rates too high, stifling economic activity. Conversely, underestimating it could lead to premature rate cuts, exacerbating inflation.

Why Are Mortgage Rates Still High?

The Fed has cut interest rates twice since September, and it's widely anticipated that they will cut again in December. Yet according to Freddie Mac's weekly Primary Mortgage Market Survey, the average 30-year fixed rate mortgage has risen from 6.2% to 6.81% over the same period.

Mortgage rates rose when the Fed raised rates in 2022, so why aren't they falling now? For context, mortgage rates are loosely based off 10-year Treasury yields. So the real question is--why aren't 10-year Treasury yields dropping in lock-step with the Fed funds rate? There are a couple of primary reasons:

First, long-term rates are predictive. They are based on projections for future short-term rates--not current short-term rates. Before Covid, we were in a roughly 10-year period where inflation was running below the Fed's 2% target, so rates were historically low across the board.

And while we are still in the last mile of the battle, inflation and interest rates are slowly normalizing. So while the 10-year yield feels high, it has actually reached a more healthy level, even though it feels punitive after a deflationary decade with ultra-law rates.

Second, the national debt continues to grow as the government increasingly depends on borrowing to fund its budget. During Covid, the government borrowed to provide many fiscal stimulus programs that allowed for a relatively quick rebound. But they were expensive. And we continue to operate at a deficit.

Like any other security, there are only so many buyers for US Treasuries, so it comes down to basic supply and demand. With a greater supply (more Treasury issuance) and a relatively fixed demand, prices fall and yields rise--prices and yields have an inverse relationship.

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Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@lefleurfinancial.com.

Josh Norris, CPA, CFP, CFA is the managing member of LeFleur Financial, a wealth management and tax advisory firm.

Negativity Only Sounds Smart

As children, we love the ever optimistic Winnie the Pooh, in his undersized shirt with no pants, even if he’s not the brightest. And while we feel bad for Eeyore, he is certainly not our favorite. But in adulthood, something shifts–we start gravitating toward negativity and exalting it as intelligence.

In the world of investing, negativity often comes from “permabears,” which is a euphemism given to analysts, commentators, and forecasters who always (permanently) have a bleak (bearish) market outlook. Here’s how to spot them:

• They always think the market is about to drop,

• Incite fear with technical and scary statistics, and,

• Most importantly, paint anyone who disagrees with them as naïve.

Unfortunately, they typically are quite intelligent, have the loudest voice in the room, and sometimes do get it right. And even when they’re wrong, they still claim intellectual high ground by explaining why they “should” have been right.

But here’s the only thing that matters. Pull up a chart of the Dow and zoom out as far as you can–it goes up and to the right, making money for anyone along for the ride. Obviously, I’m not endorsing blind optimism–if you zoom in there are some scary cliffs in 1929, 1987, 2008, and 2020.

However, you shouldn’t let the fear of market dips drive investment timing decisions. If you did, you would have missed double digit returns in 2023, a year in which there was plenty of reason to be fearful: inflation, high interest rates, war in Ukraine, bank failures, renewed conflict in the Middle East, potential government shutdown, escalation of tension with China, etc..

Instead, if you have a short investment horizon (e.g. older investor) or lower risk tolerance (e.g. market volatility keeps you up at night), then lower your equity exposure on the front end, not in response to negative market forecasts.

Allocation is key, and trying to time the stock market is a fool’s errand. Don’t try to outsmart the market, just hop on and settle in for the long haul.

Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@lefleurfinancial.com.

Josh Norris, CPA, CFP, CFA is the managing member of LeFleur Financial, a wealth management and tax advisory firm.

Don't Play It Safe

Higher interest rates are tough for homebuyers, but if you’re fortunate enough to have a little money in the bank, they also mean you can earn a return on cash. And in a post-pandemic world, contending with conflict in Israel and Ukraine, it makes sense that investors want to play it safe on the sidelines with money market accounts and CDs.

But to protect long-term returns, it’s important to fight that urge. A guarantee of 4-5% in a money market account is great for short-term savings, but that’s not where long-term investments belong. Remember, the long-term average for the stock market is about 10%, but that’s only if you stay in the market.

You may be thinking, “I’ll take advantage of these higher interest rates now and just get back in the market later when interest rates have gone down.” That sounds logical on the surface. But think about what that really means when considering the effect of interest rates on stocks–”I’ll sell stocks when they’re cheap and just buy them back when they're more expensive.” Not a great strategy.

Consider interest rate and stock moves last week. The two-year treasury yield dropped from over 5% to 4.8% while the S&P 500 surged 5.9%. Granted, you had to endure a 10% drop from July highs, but after last week, the S&P 500 is still up over 13% year-to-date. It’s a bumpy ride, but that’s what we sign up for as long-term investors.

In 2008, during the height of the Global Financial Crisis, Warren Buffett said, “Be fearful when others are greedy, and be greedy when others are fearful.” Unfortunately, this strategy never feels comfortable at the moment. But it captures the counter-intuitive action necessary for long-term, successful investing.

Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@lefleurfinancial.com.

Josh Norris, CPA, CFP, CFA is the managing member of LeFleur Financial, a wealth management and tax advisory firm.

Reasonable Predictions, Poor Returns

In 2016, sports personality Max Kellerman boldly predicted, “Tom Brady’s just about done. It could be his next game, it could be a year from now, but he is going to fall off a cliff.” Brady then played another six years, winning three more Super Bowls.

That’s a tough call to live down. Kellerman’s prediction has since caused him endless ridicule and internet trolling. Likewise, if investors predicting a market drawdown decide to sit on the sidelines, they could pay the ultimate price with their portfolio–lower returns.

In a recent study by Putnam Investments, investors who put $10,000 in the S&P 500 on December 31, 2007 had over $35,000 by December 31, 2022. However, investors who missed the best ten trading days during that period only had a little over $16,000–less than half their disciplined counterparts.

So when the market goes up, it really goes up. And if you’re on the sidelines, while you may sidestep a few drawdowns, you are more likely to miss out on big market gains. Over the long term, these timing missteps can deeply impact long term returns. In other words, it pays to stay invested.

But investors are nervous, and reasonably so. According to economists polled by the Wall Street Journal, there’s still a 54% chance of a recession in the next twelve months. The primary concern is that the cumulative effect of recent credit tightening may not have fully materialized yet in the economy.

However, investors have anticipated a recession for months. Since October 2022, the market has endured: continued Fed rate hikes, the collapse of FTX , a regional bank crisis, a debt ceiling crisis, and two consecutive quarterly declines in S&P 500 earnings. Yet, the S&P 500 is still up over 20%. So, again, it pays to stay invested.

Not every bull market is a Tom Brady–this one very well may fade after a reasonable run like Peyton Manning. But you can’t win if you don’t play, and we know that the market rewards long term investors.

Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@lefleurfinancial.com.

Josh Norris, CPA, CFP, CFA is the managing member of LeFleur Financial, a wealth management and tax advisory firm.

Invest. Don't Believe.

In the 1991 classic Hook, we root for Robin Williams, who plays an old Peter Pan, to shed the hardened corporate shell of his adulthood and regain the innocence of his youth. And while believing in fairies and thinking happy thoughts may help you fly and defeat Captain Hook in Neverland, such nonsense has no place in investing.

Sam Bankman-Fried, or SBF as he is commonly known, is the Tinker Bell of the FTX collapse, convincing all his Peter Pan-like investors to believe in his magic. They flew high for a while, but when the fairy dust settled, FTX was in bankruptcy and SBF was indicted for fraud.

Despite the bankruptcy and fraud. I think there’s a bigger lesson to learn than just the importance of basic due diligence (FTX had a hole in its balance sheet the size of the Grand Canyon). That lesson is the importance of detachment from emotion when making investment decisions.

You don’t invest in a stock because you “believe” in the company founder or “love” its corporate mission—you invest in a stock because you think it will make money. The internet, especially Twitter, is dominated by very charismatic people, like SBF, whose followers become evangelists, spreading their leader’s word as gospel.

SBF became the quirky but all-knowing face of crypto, even appearing before Congress and bailing out crypto lender BlockFi just months before FTX’s collapse. The public was enamored with his confidence and intellect, which allowed him to attract investors from across the spectrum–from the smallest retail trader to venture capitalist heavyweights, including Sequoia Capital and BlackRock.

Everyone got duped because they simply “believed” in SBF and FTX without properly evaluating them like any investment should be. FTX was sexy and dominated the zeitgeist, so investors were quick to overlook important but boring things like audited financial statements and internal controls.

But sexy and profitable aren’t synonymous, a lesson I actually learned in 11th grade English class. We had to interview someone we admired and write a short biography, so I chose an entrepreneurial family friend. He told me, “I would run a business shoveling pig slop if I thought it would make money.” Not sexy but profitable.

Good investments stand on their own merits—not belief in a charismatic leader. Apple has done just fine after the death of Steve Jobs. His successor, Tim Cook, while not nearly as animated and passionate as Jobs, has successfully led Apple to continued growth and profitability. It’s about fundamentals–not charisma.

Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@LeFleurFinancial.com.

Josh Norris, CPA, CFP, CFA is the managing member of LeFleur Financial, a wealth management and tax advisory firm.

Who Cares About Bonds?

If the stock market is Paul McCartney, then the bond market is Ringo Starr. It’s traditionally seen as boring and stable, but this year, it might as well be Harry Styles selling out his 15-night residency at Madison Square Garden. Every day, headlines are filled will stories about Treasuries, interest rates, the yield curve, and a myriad of other bond related issues.

So what does it all mean? And why should you care? It all comes back to inflation. Interest rates are one of the Fed’s primary tools to bring it back under control—in August the consumer price index was 8.3% while target inflation is 2.0%. Higher interest rates make borrowing more expensive, reducing the appetite for spending and thereby curbing inflation.

While the Fed can only directly influence the Fed Funds Rate (the rate banks pay to borrow money overnight), that rate indirectly influences every other rate from Treasuries and corporate bonds to mortgages and car notes. In other words, there’s a trickle-down effect from the rate banks pay to every other rate in the market.

The most obvious example is mortgage interest rates. Through September of this year, the Fed Funds Rate has increased from 0% to 3.25%, and average mortgage rates have risen from 3.22% to 6.70%. While it may not seem like a huge difference, for a $300,000 mortgage, that creates a $635 increase in monthly payments.

But higher interest rates also affect your portfolio—both stocks and bonds. For stocks, the direct effects are twofold. First, companies must borrow at higher rates, which creates higher interest expenses and lower earnings. Second, higher interest rates lower the present value of future earnings, decreasing the value of the corporate stocks. Indirectly, lower consumer spending also lowers earnings.

For bonds, higher interest rates are good for new bond purchases, but bad for bonds already in your portfolio. For example, if you own Bond A from a company that pays 3%, but the same company later issues Bond B that pays 5%, Bond A will drop in value because it’s paying less in interest. This reality is why bond yields and bond prices move in the opposite direction, which can be counterintuitive to the casual observer.

Bonds are far from boring, and actions by the Fed and other central banks along with reactions from pension funds and major financial institutions can create tremendous volatility in both the stock and bond market—something we observed in the last week of September with the UK. Unfortunately, this volatility will likely continue as the Fed battles inflation, the war in Ukraine disrupts the European economy, and tensions between China and Taiwan create uncertainty.

However, investing is an endurance endeavor, and bad news won’t last forever. A recent poll from the American Association of Individual Investors showed that expectations that the stock market will fall over the next six months recently reached its highest level since March 2009. Interestingly, March 2009 was also the bottom after the 2008 Global Financial Crisis.

Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@LeFleurFinancial.com.

Josh Norris, CPA, CFP, CFA is the managing member of LeFleur Financial, a wealth management and tax advisory firm.