December 14, 2025

My Thoughts on
the Market

Weekly Edition

How did the markets do?

• Stocks had a mixed week as the S&P 500 finished down slightly negative. The Nasdaq ended the week down -1.7% whereas the Dow closed up a little over 1%.
  • Investors have become increasingly jittery about tech/AI stocks and are rotating out of that sector and diversifying into others, hence the difference in return this week between the Nasdaq and the Dow.
• Bonds were flat despite the 0.25% rate-cut this week, because the expectation of a rate-cut was already priced into the market.
  • Markets move based on expectations reconciling with reality. If investors are expecting something to happen, then prices will adjust prior to the event. If the event meets expectations, then prices will stay the same.

What headlines moved the markets?

• The Federal Reserve cut interest rates by 0.25%, bringing the target range to 3.50% - 3.75%.
  • This marks the third rate-cut this year, but Fed Chair Powell signaled a more cautious approach going forward.
  • This lowers borrowing costs for businesses and consumers, but I’m keeping an eye on inflation that has remained above the 2% target.
• Chair Powell pointed to tariffs as a key driver of current inflation overshooting the Fed's target.
  • This reinforces why I’ve advocated for a balanced strategy in portfolios - trade policy has continued to create uncertainty.
• Market concentration in tech stocks is a growing concern as AI investments drive valuations higher.
  • Over 30% of market gains have been concentrated in a handful of tech companies.
  • Lofty stock valuations create a fear of heights mentality where investors look for excuses to sell and justify their belief that the rally is ending. The higher prices go, the more amplified the effect.

Quote of the week
“It's sort of like a teeter-totter; when interest rates go down, prices go up.” - Bill Gross, legendary bond investor and founder of PIMCO

• Lower interest rates means cheaper access to capital, leading businesses and consumers to borrow more and thereby spend more. Increases in spending causes prices to go up as demand rises while supply stays the same.
• Inflation is defined as too many dollars chasing too few goods, therefore cutting interest rates will increase inflationary pressure on prices.

Personal Finance: Inherited IRA Required Minimum Distributions (RMD)
Disclaimer: taxes are complicated and unique to each individual. Consult with your advisor before making any major tax decisions. This is general educational information and not intended as financial advice.

• Most folks are familiar with required minimum distributions (RMDs) from their own qualified accounts, such as an IRA or 401k, however there have been changes to the rules for Inherited IRAs in the past several years.
• Prior to 2020’s SECURE Act, non-spouse beneficiaries who inherited an IRA could take their RMDs over their lifetime, a process referred to as the stretch IRA.
  • The IRS publishes a Life Expectancy Table with a divisor factor assigned to each year of someone's life. Your 2025 RMD amount is calculated by dividing the closing value of your IRA on Dec 31, 2024 by your age divisor.
    • Here’s a link to the Single Life Expectancy Table
• However under the new SECURE Act 2.0 rules, non-spouse beneficiaries who inherit an IRA must withdraw ALL of the funds from the IRA by the end of either the 5th or 10th year from the date of the original owner’s death. Beneficiaries can no longer stretch the RMDs out over their lifetime.
  • If the original IRA owner passed away before beginning their own RMDs, then the beneficiary doesn’t have to take an RMD annually, but they must deplete the account by the end of the 5th year after the original owner’s death.
  • Alternatively if the original IRA owner had already started RMDs, then the beneficiary must continue to take an RMD annually and deplete the account by the end of the 10th year after the original owner’s death.
• When the original owner passes away, the RMD divisor is based on whoever is younger, the original owner or the beneficiary. In each subsequent year (years 2 - 9), you use the divisor based on the beneficiary’s age in year 2, but subtract 1 from the divisor each year.
  • Example: It’s 2023 and you inherited an IRA at age 65. The original owner already took an RMD that year, so you don’t have to take one. The following year, you turn 66 so your age divisor is 22. Your 2024 RMD amount is the value of the IRA on Dec 31, 2023 divided by 22. The next year, your RMD is the value of the IRA on Dec 31, 2024 divided by 21. The year after, it’s the value on Dec 31, 2025 divided by 20. This continues until the 10th year (2033) when you must withdraw the entire remaining balance.
• Here’s a tip: Withdrawals from IRAs are taxed as income. Income taxes are progressive, meaning the higher your income in a year, the greater the percentage that goes to taxes. RMDs are the required minimum withdrawal, so you cannot take out less than that amount (Uncle Sam wants his tax money). However, you can take out more than the RMD. If you only take out the minimum amount, then you will likely have a very large balance remaining at the end of the 10th year. This can spike your taxes into a higher bracket. Instead, if you take out a proportion based on the number of years remaining in the 10 year schedule (1/10th the first year, 1/9th the second year, 1/8th the third, etc.) you will significantly smooth out the taxes over the 10 year period.
• Here’s a link to a helpful breakdown of the rules from the IRS website

Conclusion

• Rates are coming down, but inflation isn’t, so don’t expect prices to decline.
• Tech/AI stocks are at a very high valuation relative to earnings (P/E ratio) and that is making investors nervous. Any bad news may be enough to cause folks to panic and sell. It would be wise to take profits and diversify while you still can.
• If you inherited an IRA, don’t forget to take your RMD before year-end. And think several steps ahead when considering how much to take out.

Have a nice weekend!

Kevin