Financial Market Update: Key Events Shaping Your Portfolio in 2025

Foreign.

To another episode of the Dental Boardroom podcast, it's Wes Reed with a couple of my colleagues on the line today. We are doing or continuing what has been a quarterly conversation about the stock market and what's happening and the moving forces and influences at play right now. I feel like in the multi dimensional universe we have slipped into a place that is a bit uncharted before. I think there's a lot going on with geopolitical tension. I think there's a lot going on with legislation having just passed. There's incredible amount of divisiveness in the political scene right now. AI innovation is coming out. There is just so much newness and it's all coming together to make a confluence of really interesting experiences for the market and for investors in the market. So on the call today, I have our Chief Investment officer, Brandon Hobson on the line and also one of our committee members, Paul Lipschiss. Welcome, guys. Looking forward to a great conversation today.

Hey, Wes, thanks for having us.

Yep, looking forward to it as well.

All right, so what I want to do in this quarterly market update is start from a 30,000 foot view and just throw it out there. How would you summarize the current state of the markets mid-2025? Brandon, kick us off.

I would say the current state of the markets, you know, if we back up and, and asked ourselves what the market was going to look like in January, I would say that it's probably better than most people expected. It's certainly better than I expected at this point. There's a lot of unknowns still out there and it looks like there will be a lot of unknowns to continue into the future. Obviously, the quicker some of those get removed and it becomes clear what we're going to do, whether positive or negative, the unknown typically is worse than, than having a little bit of a negative impact or negative news in the market. So I prefer to have the negative news than the unknown out there because that just allows for a lot of speculation on what's to happen and things like that. And so with the trade agreements, a lot of those are getting worked through at the moment, but there's still a lot of unknowns there. August 1st, we should have a little bit of a clearer picture as to what that looks like. And if we continue moving in the direction we are now, ideally some agreements get done, the US Stock market will benefit as well as the international markets which have this far throughout the year.

Awesome. Paul, what's your take?

Oh, yeah, this year is exactly like we drew it up you know, you start pretty, pretty Modest. Gains down 15% on the S and P. And now we're back up to about 7% on the year. Obviously a hint of sarcasm in that. Volatility has been, been the name of the game as of late. It's been to the upside and to Brandon's point, just sifting through the data, what investors are latching onto, what they're emotionally attached to, how much they're pricing in some of these new technologies you discussed, the knowns are starting to come through, it seems. You never know, but it seems that the knowns are starting to outweigh those unknowns. And so it's a little bit of a quiet time over the last couple months. But yeah, been a wild ride to get here.

So we manage here at practice CFO for our listeners. We are a CPA firm. We do accounting, tax and payroll. But most importantly, why people hire us is, is cause we're a cfo, both business and personal. And most of our listeners will know a CFO stands for chief financial Officer, which means we're heavily involved in the real critical decisions around their cash flow in and out of the practice. Well, a part of our role is an investment advisor and so we manage with discretion. Around 400 million in assets for our doctors, mostly 401ks IRAs, some brokerage accounts, what are called defined benefit plans. Brandon is our day to day boots on the ground, Wall street reader overseer of these portfolios and our investment decisions. Now we make these decisions as a committee and all three of us are some of the members on this committee. But Brandon, right now with our allocation, we have assets in small stocks, small company stocks, large company stocks, blue chips, we have them in value stocks and growth stocks, international stocks, emerging market stocks, alternatives like commodities, bonds. So this whole sort of various categories of investable spaces in the market, we're accessing these and we don't make any wholesale movements into one or the other. We're all into cash and all out of cash. That's not our style at all because statistics show in the long run you generally lose. The vast majority of both professional investors and especially individual investors lose when they're constantly trying to play that game. It's incredibly complicated and difficult and sometimes makes no rhyme or reason in the short run at all. Doesn't follow patterns and there's so many new emerging elements into the movement of markets that it's just very difficult to do that. But we will make strategic changes by shifting some out of one asset class and into another asset class. Because of our outlook over the next 6, 12, 18, 24 months. Talk to us about what we're doing right now. Help our listeners understand some of the things that we're focusing on or maybe subtle changes that we're making in our portfolios and which asset categories are really doing well this year and which ones aren't Are you looking to buy or sell a dental practice? If you're a seller, how do you find a strong list of potential buyers? There's no MLS or Zillow for dental practice sales in such a fragmented market, many dentists selling their practice field discouraged. That's why I built practiceOrbit.com practice orbit is modernizing how dental practices are bought and sold. It's a platform technology. Y' all know them Zillow, Airbnb, Uber, and OpenTable, just to name a few. These technologies do two things. First, they help match buyers and sellers by centralizing the marketplace. Second, once the match between buyer and seller is made, these technologies help them navigate the sale to a successful close. Here are a few of the features inside a Practice Orbit Users can determine a reasonable sale price for practice in just minutes. All they need is the most recent business tax return. Practice owners can use the directory to find important service providers like practice brokers, attorneys, accountants and bankers. Practice owners and their brokers can invite those service providers into the platform so all parties are coordinating the sale together. Practice owners will have a beautiful digital listing of their practice like a home on Redfin. And importantly, the listing will be anonymous and personal information like your address, name and pictures are only released after an NDA is signed and approved by you or your broker. Practice buyers can create saved searches to be auto notified when new listings come on the platform that fit their desired specialty and location. And hey, dental practice brokers, you can list all your practices on the site for free. By doing so, you'll get access to Practice Orbit's large pool of buyers, all of whom have created profiles and saved searches to be auto notified when new listings come for sale. You can use the platform to introduce your listings to a targeted set of buyers. Additionally and optionally, you can use the platform tools such as a built in NDA, a customizable loi, and a workflow tool to get navigate the sale from LOI to closing. In fact, you can manage all your listings on the system from listing the practice to NDA to loi, and finally to closing the deal. Create your free account today at www.practiceorbit.com.

Yeah, it's a really good point. And to that Point timing the market is really what you're referring to there. And going in and out of cash like that, it proves to be detrimental to the long term investment performance of the portfolio. And so with that said, we do make tactical tilts and we may change the way that we invest based on what we perceive a certain asset class to be undervalued relative to others, things like that. So for example, small caps have performed pretty badly over the last several years. As we expect rates, short term rates specifically to get cut by the Fed, you would expect some small cap out performance. So we do have a large part of our portfolios allocated into small caps. Not any one stock of course, but a broad diversified small cap allocation to benefit from any, any, any benefits would come from decreasing those short term rates. Another example is staying up in, in quality. So I think right now, you know there, there's been a little bit of, of a momentum shift where tech has really rebounded and that, that happens a lot of times. You'll go through periods of outperformance and underperformance performance between growth and value. But at this point and where we're at in the economy and the market cycle, we're definitely more tilted towards value staying up in quality, knowing that something could potentially set the economy back. Growth has slowed. Obviously there are some concerns about unemployment and inflation. Those two things could be negative for any, any future stock market movements. And value tends to outperform when, when that unknown is inserted into the economy. So I would say high quality small caps are attractive and then of course staying diversified. International, both developed and emerging markets. International markets have done extremely well this year. Developed is up roughly 20%, emerging markets over 15% which have both outperformed the US market. And, and so we have a very healthy allocation to international stocks and maintain our discipline there. And over the last 10 years international has not worked. But when that shift happens, in hindsight, it's hard to make an allocation adjustment when it's happening. So we've been allocated to international stocks for a long time now and it just happens that we're benefiting from that this year.

Yep. One of our clients you and I met with yesterday, one of our largest investment clients has about 20 million. We looked at his returns and he's a mostly stock portfolio, a little bit of bonds in there, mostly stock, and he was up 10% for the year where the S and P is up about 6 or 7%. So the reason why we're exceeding the S and P this year is our exposure to international which is Just so high this year. Would you agree? That's the main reason why a lot of our clients portfolios are outperforming this year relative to the S and P, number one. And number two, why is international doing so well this year?

Certainly to number one, that's, that's exactly why. And if we can get some small cap outperformance, that would be a second contributor to our outperformance. But right now it's primary, primarily international, that's, that's pulling our portfolios higher that outperformance over I think over half of that, if not slightly under half of that. So like 10% of that international outperformance is due to currency fluctuations. So as the US dollar has weakened, obviously most international currencies have strengthened relative to the dollar. And so you have currency exposure in these international ets. And that's really the purpose of diversification and keeping your eggs kind of spread out international and not putting all of them in one basket in the US is because the markets tend to move very differently. And so when the US is lagging, the international markets can outperform and pick up that performance. And that's what we're seeing in our portfolios this year.

Paul, you were gonna mention.

Yeah, I mean it's buy low, sell high. Right. It's something everyone can say and say they want to do. And when we have large cap US stocks outperforming everything else for 5, 6, 10 years comes a lot more difficult to do. In practice you get a lot of people saying, well, why not just park it in spy? Well, in here we're talking six months. So you know, six months isn't enough to develop a trend on. But the last six months are a great example. That's not always the case. In fact, historically, even within US equities, small caps have outperformed large caps and value has outperformed growth in large swaths of history. So people get caught up in recency bias. No one's immune to it, but really it's about buy low, sell high. So when there's good value, it tends to be because it's underperformed. And so we mechanically believe in the efficiency of the markets over the long term. You can very naturally exploit those and if nothing else, hedge against potential risk. Brandon mentioned currency. It's a great risk to hedge against that many of our high net worth clients should and are concerned with.

Yeah, and we've been a value tilted investor since the beginning. And it's been interesting though over the past decade, as you said, Paul Growth. These tech companies, especially these magnificent seven or know they were five for a while and six, but those sort of companies that are accounting for a third of the S and P return have just lifted sort of everything up. A rising tide lifts all boats and they've seem to have done that and kind of bucking a longer term trend where value typically outperforms growth. And I, I don't know exactly why. I suspect because growth has a lot of emotion in it and in the long run it's actually the intrinsic earnings of that company that ultimately drive the, the returns. And value companies are longer established, slightly boring companies issuing dividends but they're servicing critical needs and therefore are very resilient. And so we've always sort of invested based on longer term statistical trends. And my research shows that still most investors, I mean even like Warren Buffett still is a big believer in, in the value style companies and not necessarily the tech companies. He had Apple for a while, although he did get out of that as one of his exceptions to his standard rule.

Yeah, and I do think, you know, we have to decouple. So value. Everyone says they're a value investor, any esteemed investor says they're a value investor. They just redefine value differently. Whether they know, whether they claim to know of a trend that maybe hasn't been priced in into a 50, 60 times earnings multiple company or if they're buying blue chips, they're going to tell you they're a value investor. So I think when we categorize growth versus value, there's some nuance to that. But typically Wes, you had said why? Well, economic growth has been okay, but a lot of this has been driven by easy money. And so when we have easy money, that's where we get valuation expansion versus true growth of the underlying earnings. And I think that's a big player in this by the way.

Yeah, I think you're right. You know, I want to do, I do want to talk about the dollar a little bit and we continue to be, and I don't foresee this changing with the dollar, but we have reserve currency status. Brandon, can you just explain what reserve currency status is? Why that does make us quite resilient as a country. Even if the dollar is weakening, as you mentioned, which is part of the reason why International is doing so well. And even though we have an astronomically high debt, which I've been very open with with people saying that that's a concern for me is the level of our debt, it's gone up 50% since 2017 where it was 24 trillion. Now we're at 36 trillion accounting. And the new bill that passed is going to probably add somewhere between, who knows, 3 to 6 trillion over the next 5 to 10 years. And the more that that debt goes up, the more the concern that investors have about the risk return trade off. And if there's more of a concern about risk, typically interest rates go up, which makes the borrowing costs higher and it can spiral out of control if it's not managed carefully. But at the same time, the dollar, I don't think is at jeopardy of ever, at least not in the near term, losing the status as the world reserve currency, which makes us incredibly resilient to fluctuations and risks and concerns. Talk to us about that. Do you foresee that maintaining us, maintaining that status and what does that mean for the investable market and our clients who have money invested in the investable market?

Yeah, it's definitely a topic of hot concern right now, or at least a hot topic. And what's a world reserve currency? The US Dollar makes it the reserve currency. The fact that it's used to price things all around the world, like for example, oil is pricing US dollars. And in a reserve currency, what you're looking for is something that is highly liquid, that trades a lot. And the US dollar trades far more than any other currency out there. And so that liquidity is one of the main reasons that the US Dollar works very well for to be the world's reserve currency. And another, another thing is a lack of volatility. And so a lot of countries like China will peg their currencies to the US Dollar because if they didn't, their currency would be even more volatile. And so the US Dollar is the bedrock of foreign currencies for the most part because a lot of them are pegged to the US dollar. As far as concerns on whether or not the US may not be the world's foreign, you know, reserve currency going forward, if, if you think about everything that I just said, how things are priced in US Dollars, how there's high liquidity due to the number of dollars being exchanged, things like that. In order to get away from the US dollar being the world's reserve currency, you would have to pick some other currency and get it to the point to where it had more benefits than the US dollar does. So higher liquidity, less volatility, things like that, there's just nothing on the market, nothing out there right now that could ever compete with the US Dollar in that regard. And so I don't see that being an issue in the short term. However, there are a lot of incentives for countries in the long term to try to get off the US dollar standard for many reasons. And that's why you have things coming up like brics where countries are trying to come together and establish another currency, you know, to be, to, to be their reserve. I don't think it's going to be successful. There are things that the US can do to make sure that it's not successful. Those steps are being taken. And so all of that said, the debt issue, how does that impact all of this if the US continues to act like children and not rein in their spending and not realize that at some point we have to pay off our debts just like every US House payer does or every US taxpayer does, every household in the country. We can't run deficits forever. Our credit cards eventually max out and we have to pay those bills. And until the US government comes to the realization on that, they're going to continue to seek funding by issuing bonds which is going to drive up long term rates. Because the more bonds that you put out on the market, the more supply goes up. Obviously the more supply demand has to go up to fill it or even if it stays steady now you've increased supply. And so what's going to happen is long term rates go higher and at some point the country is going to be forced to deal with this issue. And I don't think it's going to be something that's dealt with until the country's forced to deal with the issue, just because that's the nature of our politics. But at some point there's going to be no other option but to fix it. And I think that's going to be when long term rates rise to a point to where it's impacting the whole economy. Not only the US economy, but to foreign economies as well.

Do you ever feel lost in your practice finances? And how about your personal finances? Ever wonder where your hard earned money goes and why you're not seeing the financial progress you work so hard hard for? If so, listen up. As a dental CPA and financial planner, I've created our company Practice CFO just for you. With almost two decades of experience, Practice CFO integrates great CPA services like accounting and tax with customized financial planning, both business and personal. Think of it this way. Our dental focused CPA services give us the x rays we need to clinically plan your global finances and be effective financial planners. It's a highly customized approach. We Call the CFO model. Historically, having a CFO or chief financial officer was an advantage of large corporations only. But today, practice CFO gives that same advantage to private dental practice owners. As a client of practice cfo, you'll be assigned one of our dedicated CFO advisors. You'll receive insightful financial reports each month, have regular financial review meetings, reduce taxes, grow your wealth, and feel more in charge of your numbers. Because we believe that in the competitive landscape of dental practice ownership today, you have to be an effective business owner, not just a capable clinician. Reach out to learn more at www.practicecfo.com.

This has been an area of, I think that our political system has so many strengths, but I think one area of weakness is it does cause a lot of marginal thinking because term limits, term limits is four years. You just want to make everything look great for the next four years. And that marginal thinking has long term consequences if those decisions are made at the expense of the future. And a lot of our spending has done just that. And as that interest rate rises and the debt balance rises, it sort of soaks up money because the government has to pull money in, borrow money, it soaks up money out of the economy, which could slow down investments, innovation. And our sort of entrepreneurial, innovative economy that we have is sort of getting less gas or less fuel on that fire. Paul, what's your take on all this?

Well, I mean what you said is, is absolutely right on the marginal thinking. And I'll add to that there's a delay too from output.

Right.

Policy doesn't impact economic realities immediately. Most of it takes at a minimum a couple quarters to flush through to see what really happened with this new policy or new bill or new tax code or whatever. And so when we go 4, 4, 4, you know, on the political spectrum, a lot of times the next person's just dealing with policy from either the person prior or the person prior to them. And so there's this real decoupling. And so it's a lot of this kind of running around, pendulum swinging. And so I do think that's the debt crisis. There will be a point where we call it a crisis or Brandon mentioned some people are, but when we all call it that, that's probably when it gets fixed. Now the positives on our reserve currency status is Americans are great consumers, a lot of, a lot of businesses around the world, their gold standard market entrant is coming to the US and so that is a positive to take away. Is that the American.

Such a huge portion of US GDP is based on consumer spending. And I don't foresee that changing. And a lot of countries want to get into that market because of the opportunity, because of the demand. And so they do have a vested interest to say, hey, I don't want my currency to, you know, gain or lose 30 basis points every, every minute of every day, because I can't, I can't forecast my own, you know, production output and so on and so forth. So there are some positives. But, yeah, what you guys are saying is undeniably big risks.

Well, and we've got new legislation coming out. We have the one big beautiful bill that just passed last week, I think. And I just did a podcast on the tax updates coming out of that bill. If you haven't listened to that and you're interested, go listen to that. But I'll comment on that and then really quickly comment on this bill that's currently in the House that was just passed by the Senate called the Genius act, which relates to stablecoin. I think it's worthy of a few minutes of our time to talk about that for listeners. What does that mean? That the government is stepping in behind an actual cryptocurrency formally. But let's talk about the one big, beautiful bill that just passed. So this was highly contentious as, as, as, as you both know.

And I would say my take on this is that in the short run, this bill is very much a, a stimulus. If anything, it's the prevention of the opposite of a stimulus. Because the lower tax rates are now made permanent, they were about to sunset and therefore increase. And most Americans, not all, but I think most Americans would see some increase in their tax rate, particularly at the upper end of the tax curve, where the higher income earners would be paying significantly more of their, of their income going to taxes. But because it's now maintained at this 2017 tax cuts and Jobs act, from Trump's first bill, we're not going to see an increase in the tax rates. And from that standpoint, that keeps more money in corporate pockets and in investor pockets and consumer pockets to be able to spend and kind of keep the economy strong. So that was kind of the biggest provision coming out of, I think the bill from a tax standpoint is just the fact that we're no longer going to see the sunset of the lower tax rates. Now, when Congress says the tax rates are made permanent, nothing is permanent. For all you listeners, the congressional definition of permanent just means it's staying that way until somebody comes in and changes it later, which always Happens inevitably, but at least there's no sunset. And that's the definition of permanent. Now, there were some other provisions in here that I think were important for our listeners around the SALT deduction, getting a tax deduction for paying your state income tax. Some important changes there that require really good financial and tax planning to optimize the tax reduction from that strategy. The SALT deduction that we can, we can get. Other than that, there were some nuance changes, but a lot of things were held stable for the most part. And so if anything, I see the bill having passed, helping the markets in the short term because it's not adding any new friction to, to, to taxes and consumer income. Any comments on the one big beautiful bill and how you see that playing into the markets right now?

Yeah, I mean, I think, I think you got it right there, Wes. Basically, we're status quo, right? On tax rates. If, if this didn't pass, rates would have moved higher, ultimately would have been a negative for corporate earnings, obviously, because those come down as tax rates go up. And so, you know, I felt like that was kind of priced into the market the whole time, meaning that everyone was pretty confident the tax rate piece of the legislation was, was going to get through. It was just the other stuff that held the bill back or at least created some friction in Congress. And so the stock market didn't react too much to the bill. I think the whole time it, the market kind of was pricing in this idea that rates weren't going to go up. With that said, there's a couple things in the bill that I, you know, again, unknowns, and it's hard to tell how this is going to impact the stock market, but the funding, significant funding for, you know, immigration enforcement and stuff like that, who knows what impact this is going to have? If you, if you, it depends on the speed of deportations, how they're going to use the funds, and that could definitely cause things like unemployment and inflation, inflation to adjust as well. And so we'll just have to keep an eye on how those different parts of the legislation filter through the economy. But right now I think the biggest focus was those tax rates stay in status quo.

Paul, any thoughts on the one big beautiful bill?

No one likes taxes, first of all, and they've stayed low. Top marginal Fed rates, 37%. It hasn't been that low since, since I think it was the 80s, like late 80s, kind of the Reagan era is high 20s.

I could be wrong on that, but it's been a while. And so I think status quo the general thought is hey, less taxes, less governmental friction, the more corporate earnings, the better the performance.

So to Brandt's point, market didn't really react. We've been living in that reality since the 2016 tax code and we're going to be there for the time being. They also maintained a lower corporate tax rate at 21% whereas throughout the 90s and early 2000s that was up at 35%, the highest corporate rate. So that's been good for stocks as well. It's increased buybacks and dividends indirectly.

I do think there's been some role, I know there's been some rollbacks and some of the green energy stuff and to Brands Point, immigration enforcement. And so I do think there's been a breadth movement that that's sort of underneath the hood. What I mean by that is there's been some strong performance in infrastructure and in materials and metals, things like that that are more kind of touch and feel asset classes and those stocks have performed well with sort of, we'll call it easier fiscal policy as far as taxation is concern in some of these sort of tangent policies around reshoring, you know, we, I, I would expect that to continue as well so long as the economy stays on solid footing. But like I said, assets you can touch and feel, manufacturing, stuff like that is shown some relative strength.

Two quick comments on the bill before we move on. Number one is, number one is that a lot of the provisions in the bill are things like child tax credit deductions, things like qualified business interest or qualified the QBI qualified business income deduction for flow throughs which almost all of our clients are flow throughs. The this, some salt deductions. A lot of these are phased out once for a married filing joint. Single is about half of this number but married filing joint somewhere around 4 to 600,000. And this is, this is why, and I emphasize this in my, in my podcast on the bill itself, that good tax planning is a part of good cash flow planning. It's a subset of broader cash flow planning and whenever we meet with our clients we do this and every dentist listening. If you're not a client to practice cfo, I recommend forcing your CPA to sit down and do kind of a forecast of your cash flows and a tax plan for you. Because if you can get your, let's say your taxable income normally is around 6 to 700,000. If you can get that down $100,000 or so, not only are you going to save the taxes on that reduction, but you're Also going to recapture lost credits and deductions like those ones I mentioned. And so you get a double effect by any tax planning at the top of your bracket to get it down to underneath those phase out limits. So that's why I practice CFO. We put so much emphasis on good 401k and defined benefit planning because if done right, not only are you going to save that say 40, 45% deduction on the money you put in there, but you're going to get back those credits which could end up giving you a 50 to 55% deduction on that dollar. Go ahead, Paul.

Well, Wes, one of the first things you taught me too, which is counterintuitive, is don't be a current year hero. Because sometimes when you do that and you get your client down to 2, 250 in AGI this year, but next year they're going to be back up at six or seven. Well yeah, you were great this year, but next year you phase everything out. And so I think too, just to add to that. Absolutely. Those deductions create a much bigger efficiency than just the marginal bracket. But you have to be looking in next year too. Where is the client's income going? And don't take it all in this year because as you know, even with defined benefit plans we can front load a lot of it. But where does that leave us next year? Probably with less funding. And so I would just add to that. Don't just look at one year, which we don't. We tend to look two to three years out, particularly with those DB funding plans.

Yep, agreed. Good tax planning. A lot of times people think good tax planning is some single strategy, some unique trust that's set up, some legal interplay between new tax IDs that you swish money around and it comes out all in your pocket and nothing to the irs. Usually those are tax evasion and tax evasion is illegal. And we see a lot of clients presented with things where the person presenting that strategy gets paid a bunch of money up front and then they walk and you're left with any risk associated with that strategy. For us, good tax planning is a really wide net of very legitimate, even if sometimes gray tax deductions. Things like putting your kids on payroll, spouse on payroll, car deductions, figuring out how to deduct certain travel costs and entertainment and vacation costs. We get pretty aggressive on that stuff. We, as I always say, we toe the line, we don't cross it. But when you add sort of stack up all these quarters and dollars they end up being significant and for many clients it gets them back underneath those phase out limits and then they recapture these credits, which are really, really fantastic things. And good tax planning could really cut down your taxable income by 50% if it's all at your top tax bracket that we're sort of reducing those taxes by. The second thing I was just going to say about that bill is just be sure to meet with your CPA to talk about your SALT deduction, the state, local tax deduction. There's going to be a lot of people leaving a lot of money on the table by not getting that one. That one.

Right.

All right, let's move into really quickly. There's a bill that was just passed in the Senate, I think it's in the House right now, called the Genius Act. And this is all about a cryptocurrency called stablecoin. And I think most of us have heard of stablecoin, maybe have it followed it closely. I frankly have not followed it closely. But here's my understanding. The stablecoin is the first coin that the government is saying we are going to put some legislation around this to formally endorse and adopt this as a government sort of monitored cryptocurrency. Now what's been happening is stablecoin has been marketing itself as being stable because it pegs itself to, to the US treasury, to the, to the dollar, sort of indirectly through the treasury, meaning that if you hold a stable coin, that stable coin could be converted into a Treasury at any time and therefore it's back just like back before feet when we went into fiat currency and we, we unpegged from gold. At that time you could only print new dollars if you found and had new gold. And in a way the stable coin is saying we have this gold that backs this coin and the gold is actually the, is the U.S. treasury. Now I think what was happening is there was a lot of scams around the stable coin and there were a lot of people believing that it was a legitimate government backed entity that was convertible. And the reality is it often wasn't and it was getting out of control. There's almost 300 billion of stablecoin in circulation right now. And so the government steps in and says, all right, we're gonna, we're gonna make sure that this thing is actually regulated, which means it actually is tethered to the treasuries and any issuers of, are under our, our governing laws. And yeah, that, that it has to be backed up by the Treasury. Those are the main Things that I'm thinking of with Stablecoin. The interesting thing that I found was as this looks like it's going to pass, because it passed in flying colors through the Senate, we're actually seeing this huge rise in Bitcoin and Ethereum and all crypto right now. And, and Brennan, you and I were talking about this. Why would that be if, if Bitcoin is, is a competitor, it's, it's a different digital currency than Stablecoin.

It's almost the opposite. Like it's, it's properties are. It's not the dollar.

Right.

It's not Stablecoin.

Yeah, yeah. And so I'm wondering if just the government backing a cryptocurrency in general is a good thing for the entire space now. They're very different. Where Stablecoin has the potential to be actually used as currency and it is being used more and more as a way to transact the buying and selling of something. And so it's a currency where I think a lot of people are viewing Bitcoin as a digital gold. It's not really used to buy and sell things, it's used as a longer term investment. So I think their purpose is very different. But there seems to be a lot of bullish thinking right now in, in the crypto space as this happens. Do you guys have any thoughts on how this could play into kind of market returns and kind of the broader market as it rolls out?

Yeah, I mean it's definitely creating more noise. Right? That's one thing for sure. As, as we move and kind of digress in the currency backdrop, I mean there becomes more data to sit through, more speculation, more, more thoughts on why that might be impacting Bitcoin. Because they pretty much are the opposite. One is its entire pitch is it's deregulated, it's decentralized, it has nothing to do with the US dollar.

Anonymous. It's anonymous.

It's a ledgerless currency system. It has nothing to do with anyone governing. That's the pitch. Whereas this one's like, hey, this is the US's government backed crypto. It probably just barriers to entry. If you think about it, the premise is probably loosely created around. All right now there's this functioning money market. The plumbing is laid where we've cut out a step from going to dollars to Bitcoin. And so there's a premise that demand might rise as just more appetite for digital assets increases with more liquidity in the space. I don't even know if you call it liquidity. It's probably got a different word. How do I think it impacts stocks? Probably not a lot. Honestly, I just really don't see the correlation. I could be dead wrong. And new industries find unique ways of impacting.

Economics in ways no one could have predicted. So, in fact, I probably am wrong, but I don't personally see a lot of impact on traditional assets. Brandon, what are your thoughts?

Yeah, not so much on traditional assets. I mean, just a couple of thoughts here is, you know, for, for any currency to be considered a good currency, and this ties into our discussion of the US Dollar really being the world's reserve currency. You need stability, right? And so when you look at a cryptocurrency, that's always been the, the, the argument against it is who wants to, you know, if you're really looking for a currency, not a speculative investment and you want to put your money into something safe, that's what a currency is there for. It's not, it's not to rise 40%, you know, in six months. If that's what you're looking for, then bitcoin is not a very good alternative to the dollar. Now, the stablecoin is a way that I believe the US Government is trying to create some stability in a cryptocurrency, right? It's going to make it less volatile, obviously, for speculative reasons. It's not going to be as attractive for certain investors because by nature it's less volatile. And that's the purpose. So I think that the real goal, if you look at the intention of the US Government here, is to get in early because if they don't do it, another foreign government is the US Is the world's reserve currency, like we talked about. So in a way, what they're trying to do here is become the reserve currency for crypto by tying a stable coin to the US Dollar. This embeds the US Dollar even deeper into the world's use, makes it more liquid. Think about the liquidity, liquidity that's going to come from this. So all of those things that we talked about, what strengthens the, the world reserve currency, this, this seems to be a move that's going to make the US Dollar even stronger.

It seems defensive on that. Like what, that dialogue we were having before, huh? Like trying to get ahead of that risk.

So if you think about it from a U. S. Government strategy perspective, I do believe that that's the ultimate play on, on the chess table here. And, and we'll see where it goes. I mean, again, everything is just getting settled. We'll we'll have to look back in a year or two and, and see where, how it develops. But that, that seems to be the way things are going.

Well, it's almost not a nonpartisan issue judging by the vote in the House. I'm sorry, in the senate it was 68 to 30 at it passed and I think the forecast is the House will be similar from that regard. So this is one of the few areas where there seems to be mostly an alignment across the parties in, in this thing. So very different than other bills obviously that have lately. All right, let's move on to just the final thought here over the next six months. We are, we're July 11th today as we're doing this podcast. So we've got half the year behind us and half the year ahead of us. Brandon, take point on this question. How without pulling out that magic crystal ball that I know you have on your desk, just, just forecasting out, obviously we are not going to, we will never claim to be able to predict short term results. There's just too many complications. Who knows what's going to come out tomorrow about tariff deals, for example, or interest rate changes. We're all trying to prognosticate on these things, but at the end of the day there's so many factors that it becomes impossible. But over the next six months, what's your advice to investors?

My advice is to stay the course. Like we talked about. You don't want to make any emotional decisions based on, for example, an executive branch decision or a Supreme Court ruling. Remember that we're invested for the long term and you want to stay invested because at the end of the day, the dividends that you're getting and the things that you're going to accumulate while the market's volatile during that time, you're still getting a return and eventually the market always recovers. And so stay disciplined, stay focused on those long term objectives. One other thing that I would say is probably the biggest thing that I have my eye on right now is trade. And so with the, with the tax law being passed behind us.

That'S the main focus, I think, or the main unknown left for the market to kind of hash out here, at least the primary one that, that I see driving the market in the short term, if everything works out good, what's going to happen is some trade agreements will, will take place. The average tariff rate will, will be, you know, below 20%, which is not going to be too catastrophic for the economy to absorb, meaning it's probably not going to have a Big impact on inflation. And, and if some of those trade deals happen and especially with some of the biggest trading partners, we get to take some of those chess pieces off the table that, that some of that unknown goes away. And, and then we got to look at what the tariff rate is on those countries that don't have these agreements. And, and that's going to drive, I think that'll be your primary driver for where the market goes in the future. So I do think it's going to be a positive. I think that you're going to see some trade agreements being announced soon. I don't think we're going to come to August 1st and have a hard deadline. If you don't have an agreement then we're, this is your rate and we're done with it. I think there's going to be continued negotiations to try to, to get to an agreement even if it's after the August 1st deadline. And as some of that friction gets removed for them from the market, I think that we will see some, some positivity there.

Paul, final thoughts?

Yeah, it's been, it's been quiet and Brandon brings up a lot of material data that the market's going to digest around trade deals and we could hit volatility again depending on those. We're one deal away from it being, you know, either up or down but, but volatile nonetheless. And so Wes, I, I go back to, I think you said it on the last one and I've been using it too much. But you know, time your circumstances, not the market or don't time the market, time your circumstances. That's brilliant. Brilliant. And so just talk to your advisor. You know, how does a 2030 drop make you feel? How does a 2030% increase make you feel? And make sure the portfolio is aligned to that. Because risk is a spectrum. It's not all in, all out. You don't go stocks versus cash. There's ways to balance it and if you have that tied into your needs.

Who cares? But Brandon's right, there is the market's going to digest. We're going to see and the trade deals are probably the biggest market mover from here on out.

Yep. Time your circumstance. Which means if you're going to need a lot of your investment cash in the near future to say buy a house or fund your kids college education or because you're moving into retirement, you're going to need to start pulling from that pretty aggressively. You want to be more conservative, you want to be more in bonds, you want to be a little Bit more in cash, maybe dividend paying stocks and not high growth tech stocks. And so your circumstance is the primary driver of investment strategy. Where are you in your life and your needs of the liquidity in the investment portfolio that you've accumulated over time? Here's my final thoughts, everybody. We are very much a firm that tries to keep investment expenses low. That said, we manage a lot of 401ks, a lot of IRAs, a lot of defined benefit plans. And these things all have a lot of rules around them. And so they require pretty consistent oversight, especially 401k and defined benefit plans with their year end testing. And how we invest these is really, really important. And, and so they come with the cost. And as an investment advisors, you know, we charge for the services that we provide because of that regular need for oversight, particularly on the regulatory side. But on these specific positions, the specific stocks and bonds, we're always seeking really low cost. We do a lot of index based investing and from that standpoint, there is an element of passiveness in that we'll buy an index and sort of hold that index for a given category within our pie of, of allocation. That said, even the person who coined index investing, essentially Jack Bogle, founder of Vanguard, has always said that asset allocation, which is the biggest driver of returns, is always an active decision. You have to decide how much is going to be domestic, how much is going to be international, how much is going to be small cap, how much in bonds, corporate bonds versus government bonds. That decision invariably is going to end up being an active decision. And so we are always closely analyzing the different segments of the market, I. E. These asset classes to try to gain a strong return. But then we don't do wholesale buying and selling. We're not timing the market. And this is the same advice for any investor is find that strategic allocation that matches your risk level and then remove the emotions. Don't get concerned about the market up and down and when something is done really well, shave off a little bit and buy what, what hasn't done well. And so if the market were to drop 10, 20, 30, 60% over the next year, and I'm not saying it is, I'm saying simulate that in your mind, how are you going to feel? Just remember the following. Number one, that you still hold this exact same number of shares in whatever that position is, that hasn't changed at all. Number two is that the cost for those shares is now significantly less. And so now is the time to be buying. And that's where the discipline comes in. Because that's when it feels the most painful to come out of pocket money and go buy this asset class or this stock or this bond or this mutual fund when it's been falling like crazy. It's the hardest thing mentally to do for investors because they don't know when is that fall and going to finally bottom out and start to move its way back up. And you'll never get it exactly right. But that's what rebalancing is, systematic rebalancing that removes the emotion and enforces a buy low, sell high strategy. I will say that the markets tend to be very resilient in spite of the trade questions, bombing Iran, the divisiveness in politics. We have this incredibly resilient market and even though it may fall and fall dramatically, it will almost, it always has and I believe will continue to recover and recover in time and just be disciplined and you'll, you'll be rewarded for that discipline over time. Thanks, guys. Until next quarter. I appreciate your commentary. Looking forward to following the markets and tuning back in here in three months.