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SEPTEMBER 28, 2025

My Thoughts on
the Market

Weekly Edition

How did the markets do?

• Stocks finished slightly negative for the week, down -0.25%.
• Bonds also had a slightly negative week, down -0.25% as well.

What headlines moved the markets?

• Nvidia’s $100B investment in OpenAI helped boost tech stocks.
  • The “AI trade” has been one of the primary drivers of tech stocks this year, however one well performing sector cannot support a bull market forever.
  • I’m keeping an eye on how AI innovation supports long-term growth, not just short-term excitement and speculation.
• The Fed signaled it may wait before cutting interest rates further.
  • While that was disappointing to some investors, steady rates are helping keep inflation under control - which is a good thing.

Personal Finance: how to calculate your taxable income this year
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.

1. Sum up all of your income from employment received so far this year from salary, part-time work, consulting projects, any bonus/commissions, and rental income.
   1. Although it’s not considered income from employment, also add in any pension or annuity income received so far this year.
2. Approximate how much more income you will receive from those sources between now and December 31st.
   1. Be aggressive with this estimate - it’s better to assume more income than less for tax estimation purposes.
3. Factor in any distributions from pre-tax accounts such as non-Roth retirement accounts. Withdrawals from these accounts are treated as taxable income.
4. Tally up your dividends and interest already received plus any expected for the remainder of the year.
   1. It’s important to delineate between taxable vs non-taxable interest (muni or treasury bonds) and qualified vs non-qualified dividends (preferred vs common stocks).
   2. This can be challenging, but if you use Schwab or Fidelity as your custodian, you should have a tab on your home page that displays received and projected income from your portfolio.
5. If you have started taking Social Security, then up to 85% of it is taxable as income, depending on what your total income is for the year.
   1. If you file single and made more than $34k this year or file jointly and made more than $44k this year, then assume 85% of your Social Security income is taxable.
6. Net out your realized capital gains for the year (capital gains minus capital losses).
   1. The key term here is realized gains - do not count unrealized gains.
   2. Also don’t forget about “phantom capital gains”, which are gains realized by mutual funds or ETFs that get passed through to shareholders at the end of the year. You can owe capital gain taxes even if you didn’t sell the fund.
   3. You can also research how much in gains each fund has passed through to shareholders in years prior to help plan ahead.
7. This should get you to your total income. Now subtract any adjustments to income, such as SEP/Traditional IRA contributions or student loan interest. The result is your adjusted gross income (AGI).
8. Lastly, if you plan to itemize your deductions and have the data available (better keep those receipts!) then subtract your deductions from your AGI. For the sake of simplicity though, you can use the standard deduction when doing preliminary calculations. This final number, AGI minus deduction(s), is your estimated taxable income for 2025.
   1. Keep in mind that the standard deduction increased this year due to the recent “Big, Beautiful Bill” and seniors age 65+ get an additional deduction as well.

Right now you are probably thinking, “But Kevin, why would I want to go through the process of calculating my taxable income now? Why not wait until April next year when my taxes are due?” The answer is much simpler than the calculations - if you know your taxable income before year-end, then you can take advantage of tax strategies like Roth conversions or tax loss harvesting. Do this over multiple years and the tax savings can be substantial. When it comes to taxes, you want to be playing chess, not checkers.

Quote of the week:
“Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria.” Sir John Templeton, legendary American-British investor and founder of the Templeton Growth fund.

• Investors were pessimistic when the market crashed on the tariff announcements in April.
• They remained skeptical over the summer after the tariffs were paused for 90 days.
• Now investors are optimistic that the impact from tariffs won’t be as bad as expected.
• We haven’t gotten to euphoria yet…

Conclusion:

• Stock prices are based on current plus future expected earnings and the belief that AI will increase companies’ future earnings continues to push stock prices higher.
• Barring some sort of black swan event, the Fed will likely continue to cautiously lower rates through the end of year (two more 0.25% cuts expected).
• If you haven’t begun your year-end tax planning yet, start working on it now so you can take advantage of tax strategies in November and December.
  

Have a nice weekend,

Kevin