LPL Financial - Jon Rienstra CRPC

03/06/2026

Joint airstrikes against Iran targeting high-value military installations to hinder Iran’s nuclear development efforts and degrade its military capabilities while removing the Iranian regime from power are ongoing. The death of Iran’s Supreme Leader, Ayatollah Ali Khamenei, marked a significant escalation in the conflict. Iran retaliated by launching a broad series of missile attacks directed at Israel and multiple Gulf states, including Qatar, the United Arab Emirates, Bahrain, and Saudi Arabia. The repercussions have been felt across the region as global energy flows were disrupted and oil and gas prices surged. Tanker traffic in the Strait of Hormuz — through which roughly 20% of the world’s oil supply moves — is at a standstill. A sustained spike in energy prices would likely require evidence of a more prolonged disruption, something not evident at this time and not our base case.

Despite the severity of these events and the uncertain path forward, a historical stock market perspective is helpful. History shows that markets often recover quickly once conditions stabilize, typically within days or a few weeks, as long as the U.S. economy doesn’t slide into recession. Geopolitical shocks can elevate volatility, as this one has, but they do not typically derail longer‑term market trends unless the economic impact becomes both deep and persistent.

Our broader stock market outlook for 2026 remains constructive. A growing economy, bolstered by fiscal stimulus from the One Big Beautiful Bill Act and artificial intelligence (AI) investment, provides a supportive backdrop for stocks despite concerns about AI disruption. Earnings growth, particularly in technology, remains quite strong, powering S&P 500 earnings per share growth of 14% in the fourth quarter. The Federal Reserve remains likely to cut rates in the second half of the year, when inflation pressures are expected to ease. Despite the initial sell-off in Treasuries after the Iran strikes, interest rates remain at comfortable levels for the economy. In February, mortgage rates dipped below 6% for the first time since 2022, helping to support the important housing market. These dynamics suggest that any weakness related to geopolitical volatility may present a buying opportunity.

Our message for investors is to remain patient and be diversified. Staying the course during volatile and uncertain geopolitical environments can be difficult, but the stock market’s track record suggests it’s the right approach. Don’t let short‑term uncertainty obscure long‑term opportunities.

Last and certainly not least, we wish our service men and women in harm’s way a safe return home. Let’s all pray the world will be a safer place on the other side of this conflict.

As always, please reach out to me with any questions.

12/05/2025

Stock investors were rewarded for staying the course in November as broad stock market averages recovered from a mid-month dip to end near record highs. The comeback extended the S&P 500 Index’s streak of monthly gains to seven – something to be thankful for alongside the arrival of the holiday season. Increasing confidence in Federal Reserve (Fed) rate cuts was a key driver, but renewed confidence in the economic and corporate profit outlook and artificial intelligence (AI) investment certainly played a role, in our view.

As December begins, markets will continue to take directional cues from the job market, which will be key to preserving consumer spending during the important holiday shopping season. We expect slower but still positive job growth as government data delayed by the recent shutdown fills in. The approximately $130 billion in annualized incremental consumer tax cuts from the One Big Beautiful Bill Act (OBBBA) will start flowing in February 2026, not far off. The White House has also pivoted toward tackling affordability challenges. The K-shaped economy — where upper-income folks enjoy rising asset values while those living paycheck-to-paycheck struggle — remains a challenge. Policies to help lift the bottom half of the “K”, perhaps through the housing market, may help shore up the overall consumer spending picture.

As U.S. consumers hang in there, corporate America is thriving. The just-completed third quarter earnings season underscored companies’ ability to clear a higher bar. More than 82% of S&P 500 companies beat consensus earnings targets, the highest rate since at least 2009. Earnings grew 13%, extending the streak of double-digit increases to four quarters. Profit margins unexpectedly expanded despite increased tariff costs, supported by disciplined cost management and productivity gains. And management teams generally signaled confidence in demand, causing analysts to lift earnings estimates for 2026. Corporate America’s resilience reinforces the case for maintaining equity exposure in line with long-term targets.

As we prepare to turn the page to 2026, several factors warrant close attention. The Fed’s policy trajectory remains central, with inflation trends and the labor market guiding the central bank. While a rate cut is now fully anticipated in December, the number of cuts beyond that will hinge on incoming data. Other factors to consider as investor attention shifts to the year ahead include increasing scrutiny around AI investment, midterm elections, the U.S. dollar, and ongoing geopolitical threats.

Against this backdrop, investors may benefit from prioritizing diversification and risk mitigation in 2026. Bouts of volatility are likely and may present attractive entry points for disciplined investors. Opportunities exist in sectors aligned with growth drivers such as AI, fiscal stimulus from the One Big Beautiful Bill Act (OBBBA), and changes in regulatory policy, but investors will want to maintain flexibility. We believe corrections are a price we must pay to pursue compelling returns over the long term.

08/08/2025

The last few days of July and the beginning of August have brought a flurry of key economic data, central bank activity, company earnings results, and tariff news. Here are some takeaways from the week of July 28:

Slowing U.S. economy. Second-quarter gross domestic product grew at a 3% annualized rate, though much of the growth stemmed from a sharp drop in imports after companies rushed orders ahead of tariffs. July’s jobs report showed a slowdown in hiring, signaling a labor market losing some steam. While this could support the Federal Reserve’s (Fed) case for easing, it also introduces concerns about consumer spending. Though we see no signs of an imminent recession, we believe the U.S. economy is unlikely to grow faster than 2% in the second half.

Resilient corporate earnings. Earnings season has been better than anticipated, showing that corporate America has more earnings power than previously thought. Analysts called for S&P 500 earnings per share to grow 4–5% year over year when earnings season began. We expected some upside, perhaps to around 8%, but companies are collectively on track to grow earnings by over 10% (source: FactSet). Big tech companies have been the key driver, accounting for half of earnings growth amid big investments in artificial intelligence (AI).

Stage set for a September rate cut. The Fed held rates steady on July 30, but Fed Chair Powell’s comments were less definitive than markets had hoped. The weak jobs report on August 1, however, revived expectations for a rate cut in September, which may help mitigate the magnitude of any stock market pullbacks. Two cuts of 0.25% each are likely this year, if not three, which should help support the bond market.

Don’t dismiss trade risks yet. The August 1 negotiation deadline passed, with several countries slated for tariffs well above the apparent floor at 15%. Only about half of the presumed tariffs have been implemented, meaning more upward pressure on prices and company profit margins lies ahead — after more tariffs take effect on August 7. Meanwhile, negotiations are continuing with China and several other key trading partners.

What this means for you. The market is navigating a complex landscape, with several economic and policy crosscurrents. A slowing economy, tariff implementation, and seasonal stock market weakness point to potential bouts of volatility ahead. Expected rate cuts, AI investment, and impending stimulus from tax and spending legislation passed last month may help buoy investor sentiment.

Pullbacks, when they inevitably come, can refresh bull markets and set them up for their next leg higher. So, we believe it’s important to stay invested and well-diversified, while looking for opportunities to add equities on a dip. Economic and corporate fundamentals remain in great shape.

05/07/2025

The latest recovery is another reminder that periods of turmoil can often create opportunities. Although stocks may pull back after their strong rally since the April 8 lows — especially if trade deals and tariff reductions don’t materialize soon — the lesson is clear: in our view, staying the course during downturns is almost always the best strategy.

Several factors are at play in the market’s recent recovery:

1. Optimism about trade and tariffs. The White House has signaled progress on deals with several countries, including India, South Korea, Japan, and the U.K. President Trump has also hinted at reductions in China’s tariffs, while Treasury Secretary Scott Bessent will meet with senior Chinese trade officials in Switzerland this week.

2. Resilient economic fundamentals. The U.S. economy added 177,000 new jobs in April, keeping unemployment low at 4.2%. Consumer spending grew 1.8% in inflation-adjusted terms in the first quarter, while business investment surged over 20% annually — bright spots that were overshadowed by concerns about the 0.3% dip in gross domestic product (GDP) caused by surging pre-tariff imports. A rebound in second-quarter GDP should prevent consecutive quarters of contraction.

3. Easing inflation delayed but still coming. While tariffs may slow further improvement, we and the markets expect inflation to resume its downward trend toward the Federal Reserve’s (Fed) 2% target by 2026. Falling oil prices and declining long-term Treasury yields since January are also helping.

4. Strong corporate profits. S&P 500 firms are on track for over 13% first-quarter earnings growth, roughly double expectations when earnings season began. Leading technology companies have reaffirmed or increased capital spending plans despite trade uncertainty, committing to a more than 30% increase in 2025 over 2024, underpinned by confidence in the potential payoffs of artificial intelligence.

Looking ahead, stocks may need a bit of a breather after making up so much ground quickly. Stagflation risks cannot be dismissed as growth slows and tariffs loom. While the U.S. economy and corporate America remain in excellent shape, we suggest investors maintain exposure to equities and fixed income in line with long-term targets. Better entry points to add equities may present themselves with trade uncertainty still very high.

Despite periodic short-term disruptions, markets are inherently resilient. History shows they may recover regardless of the threat. Stocks tend to reward disciplined, long-term investors. Few exemplify this discipline better than Warren Buffett, who stepped down as CEO of Berkshire Hathaway (BRK/A) this week after 60 years in that seat (he remains Chairman). His track record — 16% annualized return for BRK/A since November 1987 compared to 10.9% for the S&P 500 — will be tough to beat. We wish him well in his “retirement” at the age of 94.

As always, feel free to reach out to me if you have any further questions.

03/07/2025

As spring approaches and the weather warms, the U.S. economy has begun to cool. After a sizzling recovery from the pandemic, followed by a period of surprisingly solid and steady growth on the back of resilient consumer spending, the economy finally seems poised to downshift to its pre-pandemic trend near 2% growth. Recent confidence surveys suggest consumers may pull back some and jobs are a bit tougher to get. But consumers remain in good shape financially overall — particularly upper-income folks who drive most of the spending. In fact, the top 10% of income earners are now responsible for about half of all spending.

Slower growth may be good for stocks because it helps ease some of the inflation pressure and can pave the way for more Federal Reserve (Fed) rate cuts. We’re talking about a slight cooldown, not a collapse. Reaccelerating inflation is probably a bigger risk than recession, even after weak economic data last month. We’ll take our chances with a gradual slowdown from last year’s unsustainable pace near 3% growth.

Slower growth and easing inflation pressure will keep Fed rate cuts in play and prevent big up moves in interest rates that could weigh on stock and bond returns. With bond yields down this year but still attractive, 2025 is shaping up to be a good year for fixed income investors. Although stocks are off to a slow start on tariff concerns, cooling inflation and stable yields are key ingredients for the bull case.

Another key ingredient for the bull case for stocks is strong earnings. Corporate America delivered in the fourth quarter, as S&P 500 companies grew earnings per share by over 18% year over year. Although strategists’ expectations for double-digit earnings growth in 2025 may be too high, especially if tariffs stick and prompt more retaliation, the earnings outlook is good enough to support stock gains.

This year has brought new stock market leadership. The average “Magnificent Seven” stock — the largest seven technology companies — has fallen about 9% so far this year, while the average S&P 500 stock is up slightly. As some doubt the staying power of the artificial intelligence-fueled rally in the big tech stocks, others are finding opportunities rotating to other areas — the normal evolution of a maturing bull market.

Tariffs remain a near-term threat. Although exceptions, reductions, delays, or complete reversals may come, some tariffs will stick. Retaliation by trading partners will likely weigh on U.S. economic growth. Prices on some items will rise, as foreign producers and currency adjustments can only absorb so much, making the Fed’s job tougher. Expect some impact on importers’ profits in certain industries, such as autos, food and beverages, and certain segments of retail. But don’t expect tariffs to derail corporate America’s AI-driven earnings gains.

Expect a positive year for stocks on the back of steady growth in corporate profits, but likely with more bumps along the way as the economy slows and policy uncertainty remains elevated.

As always, please reach out to me with questions.

Call now to connect with business.

01/10/2025

Stocks had another very strong year in 2024. In fact, 2024 marked the first time the S&P 500 has enjoyed a +20% gain in back-to-back years since 1997–98. Last year didn’t start out so optimistically though. The list of worries among stock-market bears included high valuations, narrow leadership by the largest technology stocks, rising long-term interest rates, election uncertainty, deficit spending, and more. Stocks rallied through all of that without so much as one 10% correction.

The stock market’s surprising ascent in 2024 offers some important lessons for investors:

• The herd is often wrong. Wall Street underestimated the S&P 500’s price at year-end by about 15%. Remember, positive years for stocks are about three times more likely than declines.
• The trend is your friend. Employing technical analysis can help investors avoid mistakes. In an upward-trending market, don’t take a detour because of some bearish narrative the market may not care about.
• Bull markets typically run for a while. They last more than five years on average and rarely end when the U.S. economy is growing, especially when the Federal Reserve (Fed) is cutting interest rates. The current bull market is about 27 months old.
• Earnings drive stock prices. The fundamental value of stocks comes from a company’s earnings. S&P 500 companies will likely grow earnings 10% in aggregate in 2024 and may do so again in 2025.
• Focus on the long term. Don’t get scared out of the market by the headlines if you’re a long-term investor. “Time in the market” beats “timing the market.” Waiting it out through down periods is the best approach for nearly all investors. Since 1980, the annualized return for the S&P 500 is 12.1%.

The U.S. economy also offered investors another lesson — that betting against the U.S. consumer is often a losing bet — especially an employed U.S. consumer. Mortgage refinances during the pandemic and the wealth created by higher stock prices added fuel for more spending, particularly from upper-income consumers.

These are good lessons to tuck away as 2025 gets underway. The coming year may not bring quite as much joy to your portfolio as 2024, given how much good news is being priced into the stock market currently. Inflation pressures may re-emerge, and geopolitical threats could upend rallies. But, with steady economic growth, a healthy job market, growing corporate profits, and continued investment in artificial intelligence, the ingredients for another profitable year are in place.

As always, please reach out to me with questions.

11/14/2024

10/03/2024

Finally! For the first time in more than four years, on September 18, the Federal Reserve (Fed) cut interest rates. While the debate over how big the cut would be was settled (a half point, not a quarter), questions about where the Fed will go from here and what it might mean for the economy and markets will continue.

The Fed matters, but let’s consider the possibility it’s been getting too much attention. Since the Fed’s announcement, the 10-year yield has risen, not fallen. This move reflects the fact that the bond market had already priced in an aggressive rate cutting cycle — one that may take the Fed’s target federal funds rate from its current 5% down to 3% by the end of 2025. Unless a recession drags rates lower, which we don’t expect anytime soon, the boost to the economy from lower borrowing costs (e.g., on mortgage rates, auto loans, etc.) may be mostly behind us.

Stocks also factor in rate cuts in advance. The S&P 500 stock market benchmark gained 24% during this latest Fed rate pause (from the last hike on July 27, 2023, until September 17, 2024). That marked the best stock performance during a Fed pause in at least 50 years, covering nine cutting cycles. But now that rate cuts have begun, history tells us more modest returns may be in store. On average, during the year after initial rate cuts, stocks produced only mid-single-digit returns.

The economy is the key to better potential returns. During the first year of a rate-cutting cycle accompanied by a growing economy, (e.g., no recession) stocks tend to generate above-average gains. The S&P 500 gained 14% on average during those 12-month periods. If a soft landing is achieved — perhaps more likely than not, but not assured — further gains for stocks could lie ahead.

Even if recession risk is low, policy risk is high with the November election just a month away. The uncertainty around policy outcomes has historically caused market volatility in the weeks leading up to elections. Stocks did just fine this September, gaining 2% during the historically weak month. The steady rise suggests markets are focused more on the still-growing economy, falling inflation, and rising corporate profits. However, with several trillion dollars of expiring tax cuts to be negotiated next year, unsustainable deficit spending as far as the eye can see, and tense trade relations with China, don’t be surprised if market volatility picks up — regardless of what happens on November 5.

The bull market will likely continue as the economy expands, but a pullback is likely overdue. Stocks reflect a lot of good news. The policy and geopolitical backdrops remain challenging. Job growth is slowing, and the cumulative effects of inflation have taken a toll.

As always, please reach out to me with questions.

09/06/2024

With fall upon us and students back in classrooms, it seems like a good time to reflect on the various tests that the U.S. economy and stock market have passed recently. When the economy and markets are tested, the foundation for future growth and capital appreciation gets stronger.

The Federal Reserve (Fed) engineered one of its most aggressive rate-tightening campaigns ever in 2022 and 2023, providing a tough test for the U.S. economy. Amid widespread calls for recession, the economy chugged right along, powered by consumers who continued to spend, even as rates rose. How did consumers do it? Stimulus helped, though we probably got more than we needed. So did low fixed-rate mortgages. Regardless of how it happened, and despite the Fed’s mixed track record, the economy passed this test.

The economy also seems to have passed its inflation test. The widely followed Consumer Price Index, which peaked at 9.1% year over year in June 2022, dipped below 3% last month. Same with the Fed’s preferred inflation measure (core personal consumption expenditures excluding food and energy). In response, the 10-year Treasury yield is down nearly a full percentage point since its April 2024 high, and mortgage rates are down even more. Call that a passing grade, though one could still argue for an incomplete.

The stock market also passed a tough test recently. On August 5, the combination of a weaker-than-expected jobs report for July and too much borrowing from some overly complacent traders (much of it in Japanese yen currency) caused a sharp market sell-off. Stocks have since bounced back on subsequent evidence that the economy continues to grow steadily. In fact, U.S. gross domestic product grew at an impressive 3% annualized rate in the second quarter. Despite that bout of volatility, major stock market benchmarks from both Russell and S&P produced modest positive returns in August. Gains weren’t just among the big tech companies, as performance has broadened out.

Perhaps the toughest tests for markets lie ahead. The upcoming election and related policy uncertainty could be a catalyst for a correction. A tougher geopolitical test could come from China, Russia, or Iran. Eventually, if the U.S. debt pile continues to grow, bond vigilantes will demand higher Treasury yields. Valuations are high despite even considering the double-digit earnings growth corporate America is generating. These are tough tests that may cause more volatility near-term, but markets and the economy have stellar long-term track records. Expect this bull market to continue to bring home excellent report cards.

As always, please reach out to me with questions.

06/05/2024

April showers brought May flowers as markets placed greater importance on economic growth and corporate profits than the “higher for longer” interest rate messages from the Federal Reserve (Fed). In fact, the S&P 500 ended May above where it ended March. So, as you prepare for summer vacations, how much should you worry about your stock portfolios?

First, based on history, stocks tend to do just fine between Memorial Day and Labor Day, with the S&P 500 rising 1.8% on average between holidays with gains 70% of the time (source: Bespoke). Also consider stocks tend to do better the rest of the year when they rise in May, with an average June–December gain of 5.4% with positive returns 73% of the time. Seasonality is not particularly worrisome.

Investing involves much more than seasonality. Looking at the U.S. economy, slower growth in the first quarter of about 1.3% is expected to be followed by a slight pickup in the second quarter. Consumer spending did slow in April as inflation remains elevated and may slow further now that excess savings from the pandemic have generally been spent. However, business investment — particularly in artificial intelligence — is helping pick up the slack. The Fed’s preferred inflation measure held steady in April at 2.8% annually but is likely to come down further over the balance of the year as the economy slows and higher interest rates continue to impact big-ticket purchases.

Corporate America has done its part in keeping the stock market well-supported, even underneath elevated valuations. Earnings for S&P 500 companies in aggregate grew about 10% during the fourth quarter, excluding losses incurred by a Bristol Myers Squibb acquisition. Guidance was mostly upbeat. Some retailers, such as Walmart and Target, even announced price cuts, helping fight inflation.

Political uncertainty has ratcheted higher following former President Donald Trump’s conviction. The potential market impact of the election is extremely difficult to predict, but we do know the differentiation between Trump and President Biden is widest in foreign policy, immigration, regulation, taxes, and trade, so stocks tied to those issues could see big swings. We also know from history that volatility tends to pick up in the early fall before rallying after the results, and that the economy is usually the deciding factor, so watch inflation, employment, and consumer confidence closely.

We continue to follow global headlines. The possibility of China’s military aggression toward Taiwan remains perhaps the biggest potential geopolitical shock to the global economy, given Taiwan’s strategic importance to global semiconductor production. Tariff increases are likely no matter who wins in November. Finally, we cannot dismiss potential oil shocks as the war in the Middle East rages. These risks seem manageable for the diversified global economy and financial markets at this point.

As always, please reach out to me with questions.

05/02/2024

After a strong first quarter for stocks, some April showers rained down as the S&P 500 fell about 4% last month. Hopefully those showers will bring some flowers in May, despite the widely cited stock market adage, “Sell in May and go away.” There is some merit to this old adage because the S&P 500’s best six-month returns have, on average, come from November through April, and its worst between May and October (recall bear markets often end in October). Still, historically the index has gained an average of 1.8% from May through October — hardly worth avoiding.

While stocks have delivered solid gains this year, the steady growth of the U.S. economy alongside rising corporate profits increase the chances of more gains ahead. Last week’s data on gross domestic product looked soft on the surface, as the U.S. economy grew just 1.6% in the first quarter. But inventories and trade masked strong underlying consumer and business demand. Consumer spending rose at a solid 2.5% pace, while capital investment rose 2.9%. Economists looking for a slowdown keep asking: are we there yet? The economy may slow later this year, but we’re not there yet.

So, what caused stocks to dip? Beyond some digestion of strong gains through March, stubborn inflation and higher interest rates were the main culprits. As the downtrend in inflation has stalled recently, expectations for the start of the Federal Reserve’s rate-cutting campaign have been pushed out. With the Fed’s preferred inflation measure stuck near 3%, markets now expect one, or possibly two rate cuts this year, down from near six at the start of the year. Expect inflation to ease later this year as demand likely slows, but patience will be required.

If you’re concerned about a bigger slide, the numbers during corporate earnings season — now more than half complete — may be reassuring. A solid 80% of S&P 500 companies have beaten earnings estimates so far this quarter, with more than 8% average upside relative to estimates. Results from the big technology companies have mostly exceeded high expectations. And perhaps the most important earnings measuring stick, estimates have moved higher and provide evidence of upbeat guidance from corporate managements.

With the economy growing steadily and corporate profits rising, the near-term outlook for stocks still looks supportive. As always, there will be rainy days. Sticky inflation remains a thorn in the market’s side and geopolitics are a potential stumbling block. But for markets, expect more flowers than showers in May and potentially beyond.

As always, please reach out to me with questions.

Call now to connect with business.

02/07/2024

Stocks are off to a solid start in 2024. January gains are particularly enjoyable because of the old adage from the Stock Trader’s Almanac, “As goes January, so goes the year.” Nearly 75 years of historical data shows that when the S&P 500 has risen in January, the average gain for the remainder of the year has been about 12%. This January, the S&P 500 was up 1.6%.

Stocks have also historically fared well after the broad index has reached a new all-time high, as the S&P 500 did last month for the first time in over two years. The average 12-month gain after a new high, with more than a 12-month wait between those highs, has been nearly 12%, with gains 13 out of 14 times.

Those new highs have prompted some to wonder if stock valuations are too rich. They’re elevated, no doubt, but they still look reasonable considering today’s interest rates. Interest rates and price-to-earnings ratios tend to move in opposite directions when rates are elevated. Big tech companies, like Alphabet, Meta, and Microsoft, are another justification for high valuations. Their impressive earnings power is the reason why earnings growth is poised to accelerate and should help prevent valuations from getting too stretched.

A soft landing for the U.S. economy, though not assured, may also help push stocks higher despite full valuations — assuming inflation continues to ease. The job market remained surprisingly strong in January, adding over 350,000 jobs as wages rose. Although that could possibly contribute to a delay in Federal Reserve (Fed) rate cuts until summertime, markets may have adjusted to fewer cuts already. Good news may be good news.

We see a lot of merit in the bull case, but the bears have plenty to support their case as stocks attempt to continue to climb the proverbial “wall of worry” and build on year-to-date gains. Presidential elections bring uncertainty, which may add some volatility even though stocks usually rise during election years. Commercial real estate continues to plague some regional banks.

A treacherous geopolitical climate cannot be dismissed, particularly a potentially wider conflict in the Middle East. Shipping goods around the world is taking longer and costing more. Military aggression by China toward Taiwan cannot be ruled out, nor can some spillover from China’s soft economy.

In reviewing the full picture of what to expect from markets this year, a resilient U.S. economy, easing inflation pressure, and growing earnings create a favorable backdrop for both stocks and bonds. But with high valuations and mounting geopolitical risks, modest positive returns appear most likely.

As always, please reach out to me with questions.