BayTrust Financial, Author at BayTrust Financial

Jan 26

Mitch Zacks – Market Strategy Report – January 2026

By BayTrust Financial Weekly Market Commentary

What to Expect from This Report MARKET STRATEGY REPORT

We’re holding a constructive outlook for both economic growth and corporate earnings in 2026. Equity markets should benefit from this fundamental strength, in our view. But there are two more reasons stocks could feel tailwinds in 2026: accommodative fiscal and monetary policy.

The Federal Reserve already resumed rate cuts in late 2025, and we think the conditions—moderating inflation, weak jobs market data—for additional cuts are becoming evident. On the fiscal side of the ledger, the One Big Beautiful Bill Act (OBBBA) is poised to deliver near term stimulus in the form of refunds/credits for both businesses and households, which lift disposable income, capex, and margins. In a midterm election year, we could also see additional fiscal stimulus to ‘juice’ the economy, and those proposals are already being floated by the Trump administration.¹

In this report we’ll also address the Venezuela issue, separating Venezuela’s geopolitics from investable math, showing why sub-1% global output and slow-to-scale oil capacity argue for limited, slow-moving effects on prices and Energy earnings. Lastly, we’ll zoom out to earnings: Tech remains a powerful engine, but the setup favors broader participation in 2026, with revisions and cash-flow dynamics doing more heavy lifting than headlines.

How Fiscal + Monetary Policy Could Form a 2026 Tailwind

2026 is setting up for what we’re calling a “policy one-two”: lagged effects of Fed easing with the potential for more rate cuts on deck, combined with a visible fiscal impulse from the One Big Beautiful Bill Act (OBBBA) and additional f iscal stimulus proposals that the Trump administration seems poised to pursue.

Let’s start with monetary policy.

December’s employment report capped a weak year for hiring, with total job gains in 2025 averaging fewer than 50,000 per month—the slowest pace outside of recessions since the early 2000s. While the unemployment rate edged lower to 4.4% in the latest jobs report, other indicators point to softening beneath the surface. Average weekly hours declined, temporary help employment fell, and long-term unemployment rose. Job growth became increasingly concentrated in healthcare and leisure, while manufacturing employment continued to contract.

In our view (assuming inflation doesn’t reaccelerate), this should open the door for further easing in 2026. Markets broadly expect additional policy support.

The Fed has already cut rates at the last two meetings, and financial conditions have been easing. We think this will continue to serve as a positive tailwind for stocks.

On the fiscal side, the OBBBA is designed to arrive in 2026 in a way households will actually feel. Rather than mid-year paycheck withholding changes, the bill channels relief through tax filing season. Some estimates call for an aggregate 44% jump in 2026 tax refunds versus this year, roughly $150 billion flowing to consumers.

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¹ Wall Street Journal. January 13, 2026. https://www.wsj.com/politics/policy/in-pivot-on-affordability-trump-unveils-barrage-of-proposals-to-address-costs961e4343?mod=article_inline

DISCLAIMER

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research.

Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly bluechip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index. The Russell 1000 Growth Index is a well-known, unmanaged index of the prices of 1000 large-company growth common stocks selected by Russell.

The Russell 1000 Growth Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaqlisted stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Dow Jones Industrial Average measures the daily stock market movements of 30 U.S. publicly-traded companies listed on the NASDAQ or the New York Stock Exchange (NYSE). The 30 publicly-owned companies are considered leaders in the United States economy. An investor cannot directly invest in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Russell 2000 Index is a well-known, unmanaged index of the prices of 2000 small-cap company common stocks, selected by Russell. The Russell 2000 Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The S&P GSCI is the first major investable commodity index. It is one of the most widely recognized benchmarks that is broad-based and production weighted to represent the global commodity market beta. The index is designed to be investable by including the most liquid commodity futures, and provides diversification with low correlations to other asset classes. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Russell 1000 Value Index is a well-known, unmanaged index of the prices of 1000 large-company value common stocks selected by Russell. The Russell 1000 Value Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot directly invest in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Nikkei 225 is a price-weighted equity index, which consists of 225 stocks in the 1st section of the Tokyo Stock Exchange. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The CBOE Volatility Index (VIX) is a calculation designed to produce a measure of constant, 30-day expected volatility of the U.S. stock market, derived from real-time, mid-quote prices of S&P 500 Index call and put options. On a global basis, it is one of the most recognized measures of volatility — widely reported by financial media and closely followed by a variety of market participants as a daily market indicator. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.

Jan 26

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Mitch Zacks – Stock Market Outlook Report – January 2026

By BayTrust Financial Weekly Market Commentary

Apart from the sharp selloff tied to the “Liberation Day” tariff announcement, U.S. stocks posted a banner year in 2025—largely driven by Technology stocks and the ongoing AI trade.

The strong performance has many investors concerned. The phrase “AI bubble” made the rounds in the second half of last year, with comparisons to the late 1990s tech boom becoming increasingly common. It’s a fair position to bring up for debate—valuations are elevated, enthusiasm is widespread, and capital spending tied to artificial intelligence is accelerating.1 Market bubbles happen when asset prices become untethered from underlying fundamentals, and importantly, from free cash flow. So the question for investors today is, have we reached that point in this cycle? To answer that question, it is useful to look back to the late 1990s to understand what other forces were at work in creating bubble-like conditions. In that period, we saw soaring valuations like we do now, but those valuations were also accompanied by dramatic economy-wide distortions: an unprecedented investment surge, declining corporate profitability, rising leverage, widening credit spreads, and growing financial imbalances that eventually helped tip the economy into recession.

In our view, many of those warning signs are not yet visible today, but it’s important for investors to continue to look for them. Let’s start with the investment piece. Capital expenditures (business investment) from hyper-scalers have surged since generative AI went mainstream in late 2022, and AI-related investment is now a key component of total investment across the economy. But the scale and persistence of that spending remain well below what defined the late stages of the tech bubble. Relative to GDP, AI investment is smaller than the telecom and technology buildout of the late 1990s, and it has not yet been sustained for the multi-year stretch that ultimately proved destabilizing back then.

Profitability also tells an important story. In the 1990s, corporate profit margins peaked in late 1997 (see chart below) and then quietly eroded as wages rose and unit labor costs climbed. As corporate profitability fell, the Nasdaq continued to soar. Today, the opposite dynamic is in place. Corporate margins remain elevated, earnings growth has been resilient, and wage pressures have eased rather than intensified. Productivity growth has improved recently, though it is still too early to attribute most of that gain directly to AI. Crucially, there is no clear evidence yet that AI-related investment is undermining profitability at the macro level, as seen on the chart below.

Balance sheets further differentiate this cycle from the last one. During the tech bubble, investment increasingly relied on debt, pushing the corporate sector into financial deficit and weakening balance sheets. Today, most large AI-linked companies are funding expansion primarily through internal cash flows. Leverage has risen modestly, but from historically strong starting points, and the corporate sector as a whole remains in surplus.

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¹ Haver Analytics, Goldman Sachs Global Investment Research, November 9, 2025.

² Fred Economic Data. December 23, 2025. https://fred.stlouisfed.org/series/A446RC1Q027SBEA

DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The Russell 1000 Growth Index is a well-known, unmanaged index of the prices of 1000 large-company growth common stocks selected by Russell.

Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The FTSE 100 is a market-capitalisation weighted index of UK-listed blue chip companies. The index is part of the FTSE UK Series and is designed to measure the performance of the 100 largest companies traded on the London Stock Exchange that pass screening for size and liquidity. FTSE 100 constituents are all traded on the London Stock Exchange’s SETS trading system. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Nikkei Stock Average, the Nikkei 225 is used around the globe as the premier index of Japanese stocks. More than 60 years have passed since the commencement of its calculation, which represents the history of Japanese economy after the World War II. Because of the prominent nature of the index, many financial products linked to the Nikkei 225 have been created are traded worldwide while the index has been sufficiently used as the indicator of the movement of Japanese stock markets. The Nikkei 225 is a price-weighted equity index, which consists of 225 stocks in the 1st section of the Tokyo Stock Exchange. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Russell Midcap Index is a well-known, unmanaged index of the prices of approximately 800 mid-cap company common stocks, selected by Russell. The Russell Midcap Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

DAX tracks the performance of the 40 largest companies listed on the Regulated Market of Frankfurter Wertpapierbörse (FWB, the Frankfurt Stock Exchange) that fulfil certain minimum quality and profitability requirements. Constituent selection is based on free float market capitalization. An investor cannot invest directly in an index.

The S&P Municipal Bond Index is a broad, market value-weighted index that seeks to measure the performance of the U.S. municipal bond market. An investor cannot invest directly in an index. The MSCI Emerging Markets Index captures large and mid cap representation across 24 Emerging Markets (EM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country. An investor cannot invest directly in an index.

The S&P MidCap 400 provides investors with a benchmark for mid-sized companies. The index, which is distinct from the large-cap S&P 500, is designed to measure the performance of 400 mid-sized companies, reflecting the distinctive risk and return characteristics of this market segment. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The S&P SmallCap 600 seeks to measure the small-cap segment of the U.S. equity market. The index is designed to track companies that meet specific inclusion criteria to ensure that they are liquid and financially viable. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The S&P SmallCap 600 Value measures constituents from the S&P SmallCap 600 that are classified as value stocks based on three factors: the ratios of book value, earnings and sales to price. An investor cannot invest directly in an index.

The S&P SmallCap 600 Growth measures constituents from the S&P SmallCap 600 that are classified as growth stocks based on three factors: sales growth, the ratio of earnings change to price, and momentum. An investor cannot invest directly in an index. The Russell 2000 Value Index measures the performance of the smallcap value segment of the US equity universe. It includes those Russell 2000 companies with relatively lower price-to-book ratios, lower I/B/E/S forecast medium term (2 year) growth and lower sales per share historical growth (5 years).

The Russell 2000 Value Index is constructed to provide a comprehensive and unbiased barometer for the small-cap value segment. The index is completely reconstituted annually to ensure new and growing equities are included and that the represented companies continue to reflect value characteristics. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Russell 2000 Growth Index measures the performance of the smallcap growth segment of the US equity universe. It includes those Russell 2000 companies with relatively higher price-to-book ratios, higher I/B/E/S forecast medium term (2 year) growth and higher sales per share historical growth (5 years). The Russell 2000 Growth Index is constructed to provide a comprehensive and unbiased barometer for the small-cap growth segment. The index is completely reconstituted annually to ensure new and growing equities are included and that the represented companies continue to reflect growth characteristics. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The MSCI United Kingdom Index is designed to measure the performance of the large and mid-cap segments of the UK market. The index covers approximately 85% of the free float-adjusted market capitalization in the UK. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The MSCI Germany Index is designed to measure the performance of the large and mid-cap segments of the German market. The index covers about 85% of the equity universe in Germany. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The MSCI Japan Index is designed to measure the performance of the large and mid-cap segments of the Japanese market. The index covers approximately 85% of the free float-adjusted market capitalization in Japan. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The MSCI World Index captures large and mid-cap representation across 23 Developed Markets (DM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The MSCI EAFE Index is an equity index which captures large and mid cap representation across 21 Developed Markets countries around the world, excluding the US and Canada. The index covers approximately 85% of the free float-adjusted market capitalization in each country. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.

Jan 26

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Mitch Zacks – Weekly Market Commentary: “Buying the Dip” is a Flawed Long-Term Investment Strategy

By BayTrust Financial Weekly Market Commentary

Stocks have been on a roll over the past few years, with high double-digit returns from 2023 through the end of last year. But strong performance also has many investors concerned, especially those with extra cash on the sidelines. With elevated valuations and noisy headlines, I often hear investors say: “At these levels, I’d rather wait for a pullback before investing.”

In stock market parlance, this approach is commonly referred to as “buying the dip.” But recent quantitative research shows that such a strategy is flawed, and it can actually hurt investor returns over time.

To be fair, I understand the appeal of a ‘buying the dip’ approach. By waiting for markets to pull back, investors hope to capitalize by buying at a better entry point. It makes sense. But the issue is that historically, markets do not offer these types of opportunities as often as investors might think they do. Indeed, equities spend far more time near highs than in deep or prolonged drawdowns, and when pullbacks do occur, they tend to be short, sharp, and unpredictable. They also tend to follow strong rallies, which “buy-the-dip” investors often end up sitting out.

New quantitative research puts this all in perspective.

A recent study¹ tested nearly 200 different “buy the dip” rule sets across long market histories. The findings: more than 60% of the strategies produced worse risk-adjusted outcomes (expressed as a Sharpe ratio) than buy-and-hold strategies. The shortfall wasn’t trivial: across the full sample, the average Sharpe ratio for dip-buying strategies was about 0.04 lower than buy-and-hold.

Notably, the results were even less forgiving in the modern era. Using a post-1989 sample through late 2025, the same research found the average dip-buying strategy delivered a Sharpe ratio about 0.27 lower than staying invested, roughly cutting the dip-buying strategy’s risk-adjusted effectiveness nearly in half. Put another way, over the past 35 years, systematically “buying the dip” created more risk for less return. Most investors don’t want that.

Why did the dip-buying strategies often underperform? Because of the structural cost of waiting.

Dip-buying strategies require investors to sit in cash while markets move. During strong periods, equities compound returns through earnings growth and reinvestment, while cash earns little by comparison. Missing even a handful of strong days can have a meaningful impact on long-term outcomes, particularly when earnings growth remains robust, as it did in 2025. As seen in the chart below, missing even just the 10 best days in the market over a long stretch can seriously impact returns to the downside.

For investors who might be waiting to “buy the dip” today, it’s important to reckon with the fact that earnings growth remains strong, while fiscal and monetary policy are factoring as tailwinds. Stocks are due for a pullback, sure. But how much longer could stocks potentially rally before that meaningful correction arrives? That brings up the question of opportunity cost, which “buy the dip” investors must consider.

Remember, waiting for a pullback is not a neutral decision. It is a timing call, and it’s one that history suggests is very difficult to execute successfully. What tends to work better than waiting for the perfect entry is participation with discipline. Dollar-cost averaging can reduce timing risk, while diversification and rebalancing allow investors to manage valuation concerns without stepping entirely to the sidelines. These approaches acknowledge the uncertainty without requiring precision or perfection.

Bottom Line for Investors

I do not want to dismiss investor concerns about valuation. The S&P 500 index trades near 22 times forward earnings, which is close to recent cycle highs. But valuation alone rarely determines short- or intermediate-term returns. In 2025, earnings growth was the primary driver of stock market returns, with roughly two-thirds of the S&P 500’s total return coming from earnings growth. The remainder was split between dividends and only modest changes in valuation multiples. Another strong year for corporate earnings could deliver a similar result.

At the end of the day, in environments where fundamentals remain supportive, the cost of waiting often outweighs the benefit of buying slightly lower—which again, is very difficult to execute.

¹ AQR. 2025. https://advisor.zacksim.com/e/376582/ernative-Thinking-Hold-the-Dip/5v2174/1441912980/h/rVHo_N8aURIj0_1HQaqWyx2BKqSk_mdfwJanN_IynG8

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.

The Russell 1000 Growth Index is a well-known, unmanaged index of the prices of 1000 large-company growth common stocks selected by Russell. The Russell 1000 Growth Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Bloomberg Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The ICE Exchange-Listed Fixed & Adjustable Rate Preferred Securities Index is a modified market capitalization weighted index composed of preferred stock and securities that are functionally equivalent to preferred stock including, but not limited to, depositary preferred securities, perpetual subordinated debt and certain securities issued by banks and other financial institutions that are eligible for capital treatment with respect to such instruments akin to that received for issuance of straight preferred stock. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The MSCI ACWI ex U.S. Index captures large and mid-cap representation across 22 of 23 Developed Markets (DM) countries (excluding the United States) and 24 Emerging Markets (EM) countries. The index covers approximately 85% of the global equity opportunity set outside the U.S. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The S&P 500 Pure Value index is a style-concentrated index designed to track the performance of stocks that exhibit the strongest value characteristics by using a style-attractiveness-weighting scheme. An investor cannot directly invest in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Jan 20

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Mitch Zacks – Weekly Market Commentary: How Investors React to Headlines is the Biggest Risk

By BayTrust Financial Weekly Market Commentary

The start of the year has brought no shortage of headlines. Developments in Venezuela, renewed debate around Federal Reserve independence, rising rhetoric involving Iran, and ongoing discussions around domestic policy have kept the news cycle busy. For many investors, it can feel like a lot to process.

But it’s worth remembering that markets do not become unsettled simply because the news is active. Markets have always operated alongside geopolitical tension, policy debate, and political change. What matters more is whether those developments meaningfully alter the outlook for economic growth, corporate earnings, or financial conditions.

And so far, the evidence suggests the broader expansion remains intact as we look toward 2026.

In fact, noisy news cycles often serve as a useful reminder of how resilient markets can be. Uncertainty does not automatically translate into poor outcomes, and history shows that investors who remain focused on fundamentals tend to fare better than those who allow headlines to drive decisions.

Last year provided a timely example. The market’s selloff near the end of the first quarter was steep and sudden, particularly following the April 2 “Liberation Day” tariff announcement. Sentiment deteriorated quickly as investors attempted to price in worst-case scenarios. At the time, I urged patience and cautioned against knee-jerk reactions. Within roughly twelve weeks, the S&P 500 had recovered and moved back to all-time highs. The episode reminded us that headline-driven pullbacks can happen quickly, but so can recoveries when fundamentals remain sound.

That experience also highlights why investor behavior matters most during active news cycles. Headlines can temporarily pull attention away from earnings, growth, and positive fundamentals, creating openings for emotional responses that aren’t always aligned with long-term goals. The challenge isn’t staying informed—it’s staying disciplined.

One common pitfall is recency and availability bias, which is the tendency to overweight what is most recent or emotionally charged. When a specific event dominates coverage, it can feel disproportionately important to markets even when its economic footprint is relatively small. Venezuela is a good illustration. While the situation is complex and evolving, the country represents a tiny share of global economic output; any potential effects on global oil markets would likely take years to materialize, not months. Markets tend to recognize quickly that scale matters more than narratives.

Confirmation bias can also creep in during periods of policy debate. Investors naturally gravitate toward narratives that reinforce their existing views, treating headlines as validation rather than data points to be weighed objectively. The discussion around Federal Reserve independence is a case in point. While the debate has drawn attention, markets have historically focused less on commentary and more on institutional credibility, policy transmission, and economic outcomes. Separating narrative from impact remains essential.

Then there is action bias, which is when investors equate “doing something” with positive progress. In fast-moving environments, trading can feel like regaining control. But excessive, emotionally driven activity has long been one of the most consistent drags on returns. Successful investing often means allowing a well-constructed strategy to work, rather than trying to respond to every development along the way.

What tends to serve investors best in moments like this is not predicting the next headline, but reaffirming their long-term plan. Remember, markets do not require calm conditions to function, and perfect foresight has never been a prerequisite for success. Over time, markets have rewarded investors who remain invested, maintain perspective, and avoid letting emotions dictate strategy.

Bottom Line for Investors

Periods of heightened uncertainty are not necessarily periods of heightened risk.

More often, noisy news cycles are remembered as moments when investor behavior plays a larger role in determining outcomes. Today’s headlines—whether geopolitical, monetary, or political—may feel prominent, but markets ultimately respond to earnings, growth, and fundamentals. As last year’s tariff-driven volatility demonstrated, markets can adapt to new information far faster than emotions can recalibrate.

Maintaining discipline, sticking to a plan, and staying focused on what truly drives long-term returns remain among the most effective ways for investors to navigate any environment, including the current one.

¹BEA. 2025. https://advisor.zacksim.com/e/376582/-files-2025-12-gdp3q25-ini-pdf/5v183t/1436327421/h/N69zY3FcAZk7lWfLtCPDsNYah7NrxAbYE-6zvnFYnFc

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Jan 12

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Mitch Zacks – Weekly Market Commentary: U.S. GDP Growth Looks Strong, But Here’s What Matters More

By BayTrust Financial Weekly Market Commentary

The latest U.S. GDP numbers brought a ‘wow’ factor with them.

At the headline level, the number was by all accounts impressive. Real GDP grew at a 4.3% annualized pace in Q3 2025, up from 3.8% in the second quarter and well above expectations that growth would decelerate to 3%. On its face, the economy clearly regained some momentum.

For investors, though, the read on GDP data lies less in the headline and more in the details beneath the surface. You must also remember that markets priced-in the growth long ago, so the print is more about confirming last year’s market strength being grounded in solid fundamentals. There are also signposts in the data that can tell us what to look for in 2026.¹

The clearest area of strength remains the consumer. Personal consumption expenditures grew at a 3.5% annualized rate in the third quarter, up from 2.5% in Q2 and just 0.6% in Q1. Given that consumer spending accounts for roughly 68% of U.S. GDP, this acceleration did much of the heavy lifting for headline growth. That’s a critical point, as it reinforces the view that households have remained willing and able to spend despite policy uncertainty.

Business investment is the factor I think investors should focus on the most heading into the new year. Nonresidential fixed investment slowed to a 2.8% annualized pace in Q3, down from 7.3% in the prior quarter. Residential investment declined for a second consecutive quarter, falling 5.1%. Together, these figures offer a different narrative than the one we see with U.S. households in aggregate. Companies are not pulling back aggressively, but they are also not leaning into expansion. Whether this slowdown in investment proves temporary or persistent will be an important signal as 2026 begins.

Government spending also contributed to Q3 growth, adding roughly 0.4% to the headline figure. That increase was driven largely by national defense spending and state and local outlay, the former of which could be a meaningful factor in 2026. Military expenditures rarely move in isolation, and they often coincide with heightened uncertainty elsewhere in the global system.

Enter the Venezuela issue. There is plenty of commentary circulating about the geopolitical and energy market impacts, but I’d like to set those aside for now to focus on the broad market perspective, where scale is the key factor to focus on. Venezuela represents roughly 0.07% of global GDP and produces less than 1% of the global oil supply. While leadership changes and geopolitical developments there warrant monitoring, any meaningful shifts in production, investment, or trade would take years to materialize—not quarters.

For investors, that timeframe is important. Markets tend to react quickly to uncertainty surrounding regional conflict, but they also tend to move on just as quickly once the economic footprint becomes clear. Put another way, geopolitical events can influence short-term sentiment, but they rarely alter the core economic inputs that matter most for markets over the next year (growth, earnings, interest rate policy, and capital allocation).

Which brings me to the final component of the GDP report that stood out: trade. Exports rose at an 8.8% annualized pace, adding roughly 0.9% to GDP, while imports declined—pushing net trade’s contribution to about 1.6%. In Q1 2025, imports surged 38% as businesses ‘front-ran’ tariffs, and inventories alone added about 2.6% to growth. Since then, the process has been unwinding, with imports cooling and inventories being drawn down. In a normal cycle, falling imports could hint at softer domestic demand, so I think investors should be watching this metric closely in 2026.

Bottom Line for Investors

Taken together, the Q3 2025 GDP report paints a picture of an economy that is growing, but not accelerating uniformly beneath the surface. Strip out government spending and trade distortions, and growth in core private demand looks broadly similar to Q2 2025. That consistency helps explain why markets didn’t exhibit much volatility, up or down, in the second half of last year.

Looking ahead to 2026, three questions stand out:

Does business investment rebound as policy and trade uncertainty begin to clear, or does caution persist?
Do trade flows normalize as inventory dynamics settle, or do imports continue to weaken as new frictions emerge?
Can consumers continue to support growth if hiring remains subdued and wage gains slow further?

How those three dynamics unfold in the early 2026 data will be key in shaping the growth outlook for the year.

Q3 2025 GDP data was released on a delayed schedule, due to the government shutdown last year.

¹BEA. 2025. https://advisor.zacksim.com/e/376582/-files-2025-12-gdp3q25-ini-pdf/5tz7v4/1429247784/h/9Km46p6PBv5mbSJ6bxeEkHy_I2XCMl9xzaOg-x0tt9Q

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Dec 30

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Mitch Zacks – Weekly Market Commentary: Important Tax Planning Information and Insights for 2026

By BayTrust Financial Weekly Market Commentary

Tax planning in 2026 is poised to look a lot different than it did in 2025. With the passage of the One Big Beautiful Bill Act (OBBBA), provisions of the tax code are now either indexed, extended, or evolving in ways that could shape longer-term decisions for high-net-worth families, retirees, and business owners.

In my view, that makes the turn of the year a good moment to step back and assess the shifting landscape.

Before getting into planning considerations, it’s worth starting with a quick reset on where things stand. Income tax brackets continue to be adjusted for inflation, as do standard deduction amounts, meaning many households will see higher thresholds before moving into higher marginal brackets.

Source: The Wall Street Journal ¹

The standard deduction has also risen meaningfully compared with pre-pandemic levels, reducing the number of taxpayers who itemize and changing the relative value of certain deductions.

For high-net-worth individuals, one of the most consequential developments involves estate and gifting rules. In 2026, the federal estate and gift tax exemption is scheduled to rise to $15 million per individual, or $30 million for married couples. These are historically elevated levels and materially expand the amount of wealth that can be transferred without triggering federal estate or gift taxes.

Charitable planning is also becoming more closely integrated with estate and income planning. For charitably inclined families, donor-advised funds (DAFs) are an increasingly tapped structure because of how they work. DAFs allow an individual to make a charitable contribution and receive the associated income tax deduction in the year of the contribution, while retaining flexibility over when grants are ultimately made to charities over time. Assets contributed to a DAF can remain invested.

For those still in their working years, higher contribution limits afford the opportunity to save more in 2026. Here are the max deferrals:

Source: Internal Revenue Service ²

High income earners also need to take note of a key change next year. Beginning in 2026, employees whose prior-year wages exceed $145,000 (indexed for inflation) will generally be required to make 401(k) catch-up contributions on a Roth basis rather than pre-tax, provided their plan offers a Roth option.

That’s a very important rule change.

This change effectively shifts tax on those catch-up dollars into the current year but allows the funds to grow and be withdrawn tax-free in retirement if the usual Roth rules are met. To note, retirement plans that do not offer Roth contributions may be unable to accept catch-up contributions for affected employees until they add that feature. For high-income earners who rely on catchups, your tax advisor can help determine whether your employer plan is prepared for this change and how to best balance pre-tax, Roth, and taxable savings given your circumstances.

Finally, small business owners also have new tax provisions to weigh. New rules affecting pass-through entities are now more durable, including the 20% qualified business income deduction. Bonus depreciation has returned to 100%, and Section 179 expense limits remain above $1 million. These provisions are best viewed as capital-allocation incentives rather than short-term tax benefits. They influence decisions around reinvestment, succession planning, and income timing, and they often overlap with personal and estate planning in ways that merit a coordinated approach.

Bottom Line for Investors

In my view, there’s plenty of unique opportunities ahead as it relates to tax planning.

Changes to brackets and deductions set the baseline, while estate exemptions, charitable structures, retirement income rules, and business incentives shape longer-term outcomes.

¹Wall Street Journal. October 9, 2025. https://advisor.zacksim.com/e/376582/ome-tax-brackets-2026-bbd1863d/5ty927/1420776786/h/f3n21rJfxeBrplA4XZ7tiuxLvzzfHlu1nFzXyeDNtaQ

² IRS.gov. November 13, 2025. https://advisor.zacksim.com/e/376582/26-ira-limit-increases-to-7500/5ty921/1420776786/h/f3n21rJfxeBrplA4XZ7tiuxLvzzfHlu1nFzXyeDNtaQ

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Dec 16

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Mitch Zacks – Weekly Market Commentary: The Story Isn’t the Rate Cut, It’s What Comes Next

By BayTrust Financial Weekly Market Commentary

The Federal Reserve delivered another 25-basis point rate cut at its December meeting, bringing the federal-funds range down to 3.50% to 3.75%. I would argue that the markets had priced in the outcome for weeks, and most investors already viewed it as a continuation of the Fed’s gradual effort to transition from “restrictive” toward something closer to neutral.¹

The data heading into the meeting gave the Fed enough cover to ease, in my view. The latest inflation update, the September PCE report², showed core prices rising 0.2% month-over-month and 2.8% year-over-year. Those aren’t perfect numbers, but they’re stable, and importantly, not accelerating meaningfully despite tariff pressure.

The labor market, meanwhile, has been showing signs of moderating but not collapsing. The most recent JOLTS³ report from the Bureau of Labor Statistics showed job openings easing to roughly 8.8 million, with quits rates drifting down—signs that both workers and employers are hanging tight. Employers are not on hiring or firing sprees, and workers are not switching jobs at a high rate. In short, there’s balance in the labor market, but it may be softer than what the Fed wants to see.

At the end of the day, concerns about the labor market appeared to outweigh concerns over inflation making downward progress towards the 2% target. Fed officials were divided over these two factors, but the compromise was what appeared to be a “cut-and-cap” approach: deliver the rate cut now, but make it clear that the bar for further easing is higher from here. That was my read from Chairman Powell’s posturing after the meeting.

In terms of where we go from here, investors often overestimate the economic impact of a quarter-point adjustment in the fed funds rate. Few long-term business projects suddenly become viable because the policy rate moves 25 bps lower. And markets also tend to price in anticipated Fed actions ahead of time, with mortgage, auto, and business-loan rates rarely moving one-for-one with the Fed.

Still, saying the impact is limited doesn’t mean it’s zero.

The first area where rate cuts can help is the yield curve, which has been flat for an unusually long stretch. While the curve has steepened slightly in recent months (see chart below), it remains close to flat. Lowering short-term rates generally encourages some natural steepening, which historically supports forward economic growth.

Source: Federal Reserve Bank of St. Louis⁴

The second area is bank lending, where the backdrop is already healthier than headlines imply. Growth in loans and leases has improved meaningfully over the past year, as seen on the chart below. Part of this comes down to simple economics. The average savings deposit rate at banks today is roughly 0.4%, while long-term lending rates—mortgages, commercial loans, consumer credit—are several percentage points higher. That spread gives banks strong incentives to lend, and a modest rate cut only reinforces that dynamic.

Source: Federal Reserve Bank of St. Louis⁵

Taken together, I think this modest rate cut will help at the margin, but I would not frame it as a catalyst that will all of a sudden drive a surge in economic activity. The economy is in relatively fine shape, and already being supported by steady lending, improving real wage trends, and corporate earnings that continue to exceed the more pessimistic forecasts from earlier this year. 25-basis points is not likely to move the needle dramatically, in my view.

Bottom Line for Investors

Investors often look to Fed decisions for clarity, but the more important takeaway from this meeting is what hasn’t changed, in my view. The expansion remains intact, even if it is slower and more uneven beneath the surface. A small rate cut is not going to change the economic narrative, but it may add a tailwind at a time when credit creation and corporate fundamentals still provide a reasonable foundation for continued growth. The Fed’s shift toward a “cut-and-cap” posture simply returns the focus to data rather than expectations, which is exactly where long-term investors should keep their focus as well.

¹Wall Street Journal. December 9, 2025. https://advisor.zacksim.com/e/376582/-cut-ef7118b8-mod-hp-lead-pos5/5tx571/1410802305/h/ZyUzHu-s3Ip9AAT83WrhDvgFCNCQXIyzPqdQDIIIkkA

²CNBC. December 5, 2025. https://advisor.zacksim.com/e/376582/ion-report-september-2025-html/5tx574/1410802305/h/ZyUzHu-s3Ip9AAT83WrhDvgFCNCQXIyzPqdQDIIIkkA

³BLS. 2025. https://advisor.zacksim.com/e/376582/news-release-jolts-nr0-htm/5tx577/1410802305/h/ZyUzHu-s3Ip9AAT83WrhDvgFCNCQXIyzPqdQDIIIkkA

⁴Fred Economic Data. December 5, 2025. https://advisor.zacksim.com/e/376582/series-TOTLL/5tx57b/1410802305/h/ZyUzHu-s3Ip9AAT83WrhDvgFCNCQXIyzPqdQDIIIkkA

⁵Fred Economic Data. December 5, 2025. https://advisor.zacksim.com/e/376582/series-TOTLL/5tx57b/1410802305/h/ZyUzHu-s3Ip9AAT83WrhDvgFCNCQXIyzPqdQDIIIkkA

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Dec 09

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Mitch Zacks – Weekly Market Commentary: How AI Spending is Lifting U.S. Economic Growth, and What That Means for Investors

By BayTrust Financial Weekly Market Commentary

There is little question about the impact the artificial intelligence boom is having on S&P 500 earnings and total return.¹ According to my colleagues at Zacks Investment Research, the “Magnificent 7” group of mega-cap technology stocks is on track to bring in 26% of all S&P 500 earnings this year, up from 23.2% of the total in 2024 and 11.7% in 2019. The group also made up roughly 35% of the index as of the end of the third quarter.²

But what about the impact the AI spending boom is having on the U.S. economy?

In short, it’s been significant.

By some estimates, first-half 2025 GDP growth was substantially powered by spending on data centers, information-processing equipment, and software. Excluding these categories, economic growth would have been more modest. To grasp the scale of AI’s impact, consider that the dollar value of AI data-center investment has exceeded total consumer-spending contributions to GDP in 2025. The chart below also demonstrates data centers’ contribution to total fixed private investment. It’s pretty remarkable.

Wall Street Journal³

Without the lift from AI capex, economic growth may have been more modest, closer to 1.5% perhaps, in the first half. Growth is growth, but I think it’s a fair argument to frame the broader economy’s performance as more ‘steady’ than ‘booming.’ The impact of AI spending doesn’t dilute growth elsewhere, it just moves the needle in the booming direction.

Outside of the AI theme, investors can find soft patches in the economy. Retail sales in September (delayed due to the shutdown) rose just 0.2%, with noticeable pullbacks in tariff-sensitive categories such as vehicles, electronics, and clothing.⁴ Spending on services remained firm, however, which suggests consumers are still spending selectively and with more emphasis on value. It’s a pattern consistent with an expansion that continues, but with less broad-based momentum.

Sentiment surveys show similar nuance. The Conference Board’s confidence index fell in November to 88.7 from 95.5, while the share of households reporting plentiful job opportunities also stepped down. The University of Michigan’s survey has hovered near historical lows for months. As I wrote in a recent column, I think this is symptomatic of a “K-shaped” economy, which is relying more on high-income consumers and wealth effects than on job creation or broad wage gains. This is not a negative setup, it’s just a read on where the economy largely is today.

Does this all mean that a slowdown in AI spending would cause an economic downturn by itself? At this moment, I don’t think so. But I think it could meaningfully trim the growth rate, such that the U.S. economy would be posting more modest growth than the 2% to 3% headline rate that signals overall strength. This possibility does not suggest crouching in defensive mode and waiting for AI spending to pullback substantially—it argues for positioning in solid companies with earnings growth momentum outside of the AI trade.

Bottom Line for Investors

I think it’s clear that AI spending has provided a boost to headline GDP this year. When you strip out the sizable capex numbers, what you see is a modestly positive expansion versus a boom. I want to be clear—this is not a bad backdrop for long-term investors. But it does leave the cycle more sensitive to a potential shift from a single, powerful growth engine (AI capex).

I think that’s the real takeaway here. The economy is in fine shape, but it’s more dependent on one theme than usual. If AI investment keeps flowing, the expansion can keep chugging along. If it downshifts, the underlying modest growth pace may become more visible. Rather than trying to forecast when or if that happens, investors are better served maintaining balance across sectors, styles, and regions so portfolios aren’t tethered to any one story. If AI capex deflates, I could see assets rotating into under-valued areas of the market that are still seeing strong earnings growth.

¹Wall Street Journal. November 24, 2025. https://advisor.zacksim.com/e/376582/ng-4b6bc7ff-mod-article-inline/5twbjh/1402707083/h/Xd24NqpfuxBTxb20ypIcpZPxo_W4o4kOOMs0GnDkLxY

²Zacks.com. November 22, 2025. https://advisor.zacksim.com/e/376582/outlook-improves-a-closer-look/5twbjl/1402707083/h/Xd24NqpfuxBTxb20ypIcpZPxo_W4o4kOOMs0GnDkLxY

³Wall Street Journal. November 21, 2025. https://advisor.zacksim.com/e/376582/ng-4b6bc7ff-mod-article-inline/5twbjh/1402707083/h/Xd24NqpfuxBTxb20ypIcpZPxo_W4o4kOOMs0GnDkLxY

⁴Wall Street Journal. November 25, 2025. https://advisor.zacksim.com/e/376582/ons-536756d2-mod-hp-lead-pos11/5twbjp/1402707083/h/Xd24NqpfuxBTxb20ypIcpZPxo_W4o4kOOMs0GnDkLxY

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Dec 02

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Mitch Zacks – Weekly Market Commentary: The “K-Shaped” U.S. Consumer Landscape

By BayTrust Financial Weekly Market Commentary

In looking closely at the U.S. consumer, I see 2025 shaping up to resemble the “K-shaped” pattern we saw earlier in the decade. The “K” refers to higher-income households continuing to spend comfortably, while lower- and middle-income consumers show more strain and even pull back from certain categories of purchases.

This divergence matters for investors, but not because it signals an imminent recession. Instead, it helps explain the mix of economic data we’re seeing at a time when broad sentiment continues to sink.¹

Recent shutdown-delayed data showed retail sales slowing toward the end of the third quarter, rising just 0.2% in September. Categories tied closely to tariffs, such as vehicles, electronics, and clothing, all showed noticeable pullbacks. But there were also bright spots, with service-oriented spending, particularly in restaurants and personal care, remaining firm. This data reinforces the argument that we’re in a “K-shaped” consumer environment, where different income groups are spending in different directions.

On the sentiment side, the Conference Board’s confidence reading dropped sharply in November to 88.7 from 95.5, and the University of Michigan’s survey fell to 51 (see chart below). That’s one of the lowest readings for consumer sentiment on record. In that same survey, 44% of middle-income households said their financial situation was worse than a year ago, compared with just 23% who said it had improved. U.S. households have been weary of higher prices for years, but we might be starting to see a wider group ‘throwing in the towel’, especially those who expected prices to reverse under the new administration.

Lower- and middle-income households have been the most affected by higher living costs, depleted savings, and a cooling labor market. The ADP reported that private employers shed an average of 13,500 jobs per week in the four weeks ending November 8. That sort of softening understandably weighs on sentiment.

But the other side of the “K-shaped” ledger shows higher-income households continuing to show much more resilience. Spending in discretionary service categories rose 0.7% in September, and wealth effects remain meaningful. Household net worth has surged in recent quarters, rising at nearly a 15% annualized rate, which has acted as an important counterweight to softer job creation. Even with frustrations about inflation, this level of wealth growth historically supports consumer spending for some time.

The divide is showing up clearly in behavior.

Many households at the lower and middle end of the income spectrum are trading down, hunting for value, and cutting discretionary purchases. Some surveys show the middle class reporting near-decade lows in financial comfort, despite relatively stable employment. Meanwhile, the upper-tier consumer, who accounts for a disproportionately large share of overall U.S. consumption, has continued to spend. On balance, it’s been enough to keep the broader economy moving forward.

This brings up an important acknowledgment investors should make, and also be watching closely: consumer sentiment has become sensitive to market swings. The S&P 500’s roughly 5% pullback from late October highs coincided with a noticeable dip in upper-income sentiment surveys. But when markets strengthen, confidence tends to rise as well.

Taken together, these dynamics matter for investors because they help explain why consumer data can appear mixed without signaling recession. A softening labor market, persistent inflation pressures, and fading confidence among lower earners are all legitimate concerns. But as long as employment continues to grow modestly, wealth effects remain supportive, and higher-income households continue to spend, the overall expansion can persist, even if it feels uneven on the ground.

Bottom Line for Investors

A “K-shaped” U.S. consumer environment is not synonymous with a weakening economy. Many consumers are feeling pressure, but it’s also true that we’re still seeing upward movement in real wages (see chart below). I take this to mean that consumers broadly are feeling frustrated, but they’re not retrenching.

That said, the expansion is increasingly reliant on those with the healthiest balance sheets. Higher-income households continue to spend because equity gains, rising home values, and strong net-worth growth give them the capacity to do so. This helps offset softness elsewhere and has been a stabilizing force.

But it also highlights a key vulnerability. When spending becomes concentrated at the top, the economy becomes more sensitive to anything that chips away at wealth effects. A deeper equity-market pullback, a cooling in housing, or an AI-related shift in white-collar labor demand could have an outsized impact on the very group carrying overall consumption.

For now, the expansion appears durable, supported by ongoing job creation, real wage gains, and strong household balance sheets at the upper end. But the reliance on those dynamics is exactly why investors should stay attuned to them. Because if they begin to turn, the broader economy may feel it more quickly than usual.

Sources:

¹Wall Street Journal. November 24, 2025. https://advisor.zacksim.com/e/376582/36756d2-mod-economy-lead-story/5tvhp8/1393518193/h/KJKzQMvgS0fGlD3cEpUGfIfgGE8OQ-b9JSI00gZJdU8

²University of Michigan. 2025.

³Fred Economic Data. July 22, 2025. https://advisor.zacksim.com/e/376582/series-LES1252881600Q/5tvhpc/1393518193/h/KJKzQMvgS0fGlD3cEpUGfIfgGE8OQ-b9JSI00gZJdU8

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Nov 18

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Mitch Zacks – Weekly Market Commentary: Investors Should Expect More Volatility in the Tech Sector

By BayTrust Financial Weekly Market Commentary

In early November, some of the biggest names in technology experienced sharp volatility, with the Nasdaq posting its steepest weekly drop since April. The correction was short-lived, and the warning headlines faded the following week.

But in my view, investors should not simply move on. There’s a lesson from the volatility that I think will help investors navigate the months and quarters ahead.

The lesson is this: when one sector dominates returns for as long and as strongly as technology has, investors should expect turbulence, even if the earnings and free cash flow remain positive.

I’m referring, of course, to the AI-related trade. The biggest names in technology have been the market’s clear leaders this year, but the rally has also produced the kind of concentrated leadership that tends to invite corrections. In many cases, the issue is not that the companies’ business models will eventually collapse. It’s that valuations eventually stretch faster than earnings can keep up. When enthusiasm clusters in a single theme, price moves can disconnect from fundamentals, and short-term volatility becomes inevitable.

In early November, some key industry executives made comments about intensifying competition and soaring capital costs, which may have incited some profit-taking after an extraordinary run. It leaves the door open for even the slightest disappointment to trigger an outsized drawdown.

We’ve seen this pattern before.

The late 1990s’ “Nifty Fifty,” the post-financial-crisis tech boom, and the pandemic-era rally all followed a similar script: rapid outperformance, stretched valuations, then a period of cooling or rotation. Importantly, those pauses did not signal the end of innovation or waning long-term opportunities. In my view, they simply reflected the markets’ way of redistributing excess. Corrections often unfold not through broad crashes, but through leadership shifts from one sector to another. This is how I’m increasingly viewing Tech dominance today.¹

So, rather than viewing recent weakness as a warning to flee stocks, investors might see it as a reminder of why diversification is the real opportunity, and the hedge at hand. Concentration risk can quietly build up in bull markets, especially when a single narrative (AI) captures both headlines and capital flows. A diversified portfolio, spanning multiple sectors, market caps, and geographies, helps cushion against those inevitable air pockets.

History shows that investors who stayed balanced through tech-driven selloffs fared far better over time than those who chased performance or tried to time their exits.

I would also argue that it is worth acknowledging that parts of today’s AI boom carry a whiff of excess. The technology itself is transformative, but the financial structures supporting it are becoming increasingly creative, and in my view, potentially risky. Building out data centers, chips, and infrastructure powering AI requires extraordinary amounts of capital, and Wall Street has responded with equally extraordinary financing.

I’m going to mention specific companies below, but I want to be clear to readers that I do not make specific security recommendations in columns. My mention of companies here is only to highlight the aforementioned financing structures that I believe investors should be watching.

All the deals involve data centers. Meta’s Hyperion project in Louisiana and OpenAI’s Stargate data centers in Texas and Wisconsin both blend elements of private equity, project finance, and long-dated corporate debt. Some arrangements even promise equity-like returns on what are effectively fixed-income risks, with the companies selling equity in a data center and guaranteeing a payout if they want to exit a lease. This sort of financial ‘innovation’ evokes memories of past cycles when easy money and optimism blurred investors’ perception of risk.

I am not forecasting that the AI bubble is about to burst. But I do want investors to remember how much future growth is already being priced in and how leveraged some of those expectations have become. Even within tech, capital intensity is rising, competition is intensifying, and returns on incremental investment are likely to normalize. Markets will adjust accordingly, and those adjustments can feel abrupt after long periods of one-way momentum.

Bottom Line for Investors

Given what I’ve argued above, last week’s volatility should probably be viewed as healthy. It reminded investors that market leadership never lasts forever and that portfolio balance is the best safeguard against hype cycles. Diversification does not eliminate risk, but it does reduce the impact of any one theme’s unwinding, whether it’s AI today or some new innovation tomorrow.

¹Wall Street Journal. November 11, 2025. https://advisor.zacksim.com/e/376582/reet-896e0023-mod-hp-lead-pos1/5tt438/1380628309/h/kUo8x2x4lsl3zazuK6cQyXnggPjz2KiA42GT1XWYTIs

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

BayTrust Financial

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Mitch Zacks – Weekly Market Commentary: U.S. GDP Growth Looks Strong, But Here’s What Matters More

Mitch Zacks – Weekly Market Commentary: Important Tax Planning Information and Insights for 2026

Mitch Zacks – Weekly Market Commentary: The Story Isn’t the Rate Cut, It’s What Comes Next

Mitch Zacks – Weekly Market Commentary: How AI Spending is Lifting U.S. Economic Growth, and What That Means for Investors

Mitch Zacks – Weekly Market Commentary: The “K-Shaped” U.S. Consumer Landscape

Mitch Zacks – Weekly Market Commentary: Investors Should Expect More Volatility in the Tech Sector

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