Informed decision-making is the cornerstone of successful investing. That’s why we at DMKC Advisory Services provide insightful, quarterly briefings on the latest trends and developments in the economy, the markets, and more. These updates are designed to help our clients understand the opportunities and risks in the current environment—and how we help their investment strategies adapt.

We invite you to reach out to us for more information or personalized investment guidance. Contact us at any time with questions.

January 2026: A Look Back—and a Look Ahead

The past year rewarded discipline. Despite headline-grabbing volatility—including April’s tariff announcements and an extended government shutdown in October and November—the underlying economy remained resilient.

The S&P 500 posted its third consecutive year of double-digit gains, led by large- and mega-cap names, while international markets surprised to the upside with many foreign indexes gaining over 30%. Bonds also delivered strong results as moderating interest rates pushed the Bloomberg Aggregate Index up 7.3%.

Opportunities and risks ahead

Looking ahead to 2026, economic indicators are encouraging. Inflation has cooled to 2.7%, and unemployment (while ticking up to 4.6%) is still below historical averages. The Federal Reserve is dovish, signaling readiness to support the economy. Overall, the backdrop is positive. In fact, analysts expect earnings on the S&P 500 to grow a whopping 16% in 2026.

However, risks remain with valuations stretched. The S&P 500 P/E ratios are at levels reminiscent of the late 1990s and 2021, both of which preceded market corrections. And market concentration in technology and communications—fueled by AI-driven enthusiasm and fear of missing out—adds another layer of vulnerability.

Focused on capital appreciation and resilience

Against this backdrop, our portfolio remains anchored in high-quality companies with rising dividend streams. We see areas of excess in the current market but also compelling opportunities in value-oriented and low-volatility names. This approach is designed to capture capital appreciation during bull markets while providing resilience in periods of uncertainty.

Contact us with questions

As always, we appreciate your trust and partnership. If you have any questions, we’re happy to talk with you. Contact us at 800-998-9773. 

Data Sources: Koyfin, Black Diamond, FRED, S&P Global, Allied Calculations

October 2025: Focused on the Fundamentals

The stock market rallied in recent months, led by technology, AI, and meme stocks. Since the correction bottom in early April (-18.9% from the high), the S&P 500 gained more than 30%, bringing year-to-date performance to +14.8%.

The wide trading range this year, with sharp swings and reversals, underscores just how volatile conditions remain. We expect this to continue.

Strength in bonds

Meanwhile, bonds quietly delivered strong results. The Bloomberg Aggregate Bond Index is up +6.1% through quarter-end, on pace for its best annual return since 2020. Higher coupon income and a modest decline in interest rates fueled gains. 

A mixed economic outlook

Economic data is mixed heading into year-end. Employment is softening. Whether this signals an economic slowdown or simply normalization after the unusually tight 2021-2023 labor market remains to be seen.

The Fed began cutting rates to counter weakness. But with inflation still near 3%, the extent of easing is uncertain. AI and data centers continue to drive remarkable economic growth, though valuations now resemble late-1990s “tech bubble” levels.

A steady hand

At DMKC, our approach remains steady. We don't chase areas of market euphoria. Instead, we focus on attractive valuations, durable business quality, and reliable earnings power—so we’re prepared whether the next market leg is higher or lower.

 As we approach year-end, keep the following in mind:

• Required minimum distributions (RMDs) for those 73+, and qualified charitable distributions (QCDs) must be processed by year-end. If you haven’t completed yours, please call us by Dec. 15 to finalize.

• If you have a taxable account and would like to review tax-loss harvesting opportunities, we’d be happy to run an analysis.

• We can also help coordinate contributions, distributions, Roth conversions, and tax planning as year-end approaches.

If you have any questions, we’re always happy to talk with you. Contact us at 800-998-9773.

Data Sources: Koyfin, Black Diamond, FRED, Allied Calculations

July 2025: Quite a Ride

The first half of 2025 brought no shortage of volatility, driven by trade wars, geopolitical conflict, and sweeping tariff changes. Following the tariff announcements in early April, the market sold off sharply, and the S&P 500 fell as much as -18.9% from its February high.

However, beginning with the tariff pause on April 9, the market reversed course and finished the first half in positive territory (S&P 500 +6.2% YTD). Steady inflation and a healthy labor market supported the rebound. The Consumer Price Index (CPI) declined to 2.4%, just above the Fed’s 2.0% target. The unemployment rate sits at 4.2%, well below its average of 6.1%.

Defensive sectors—including quality, low volatility, and value—performed well, holding up better during the downturn in March and April. While they didn’t rebound as aggressively as higher-risk segments, they continue to track the market on a year-to-date basis.

We’re monitoring inflation, the labor market, and more

 Heading into the second half, we’re watching:

• Inflation: Many economists expect an uptick in the coming months as tariff effects flow through. Is this a temporary bump—or the start of a new inflationary wave?

• Labor market: We see (very) early signs of rising unemployment. Is this a sign of broader economic weakness or simply a normalization after an unusually tight labor market?

• Interest rates: The market expects the Fed to begin cutting rates later this year. Will that be enough to stimulate growth? How will the long end of the yield curve respond—especially amid rising debt and spending concerns?

• Valuation: The market is currently trading at 25x earnings, near the highest levels of the past 40 years. Can earnings growth justify these valuations?

The best offense is a good defense

With signs of economic deceleration and euphoric valuations in some corners of the market, we continue to emphasize defensive, attractively priced stocks and bonds in our portfolios. If you have any questions, we’re always happy to talk with you. Contact us at 800-998-9773.

Data Sources: Koyfin, FRED, S&P Global, Allied Calculations

April 2025: A (Very) Good Time for Quality Holdings

The first quarter of this year was an especially good time to have the reassurance of high-quality holdings. Growing recession fears weighed on investor sentiment, leading to the first negative quarter for the market since 2023.

 The S&P 500 entered correction territory in mid-March with a loss of -10.1% from its high and ended the quarter down -4.3% year-to-date. The more volatile Nasdaq saw a -14.3% correction during the quarter, finishing March down -10.3%. The Magnificent 7 ETF (MAGS), the market leader in recent years, fell -15.7% by quarter end.

Boring stocks prove their value

Boring stocks that garner little attention during the excesses of a bull market prove their value in volatile times. Low-volatility names, dividend aristocrats (companies that have raised their dividend every year for 25+ years), and stocks with a margin of safety built into their price may not be glamorous. But they often hold up well when the market sinks. Historically, they’ve also outpaced the broader market over full cycles (we’re happy to share the data if you’d like to see it).

The more value-focused areas of the market—health care, consumer staples, utilities, and even energy—remain overweight in our active strategies, at the expense of what we view as fully (or even over-) valued technology and communications names.

Bonds did, too

Bonds also demonstrated their defensive qualities in early 2025 as falling interest rates drove bond prices higher. Unlike 2022, when both stock and bond prices declined, bonds have served their role as a hedge against stock market volatility so far this year—while also providing an attractive income source thanks to yields exceeding 4%.

Contact us with questions

If you have any questions about your portfolio, your goals, or our investment philosophy, we’re always happy to talk with you. Contact any of our team members at 800-998-9773 to set up a meeting.

Data Sources:  Koyfin, S&P Global, Allied Calculations

January 1, 2025: Reassessing the Market—and Your Comfort with Risk

The stock market has been on an amazing run. Over the last 15 years, the S&P 500’s average annual return was in the mid-teens, well above its long-term average of around 10%. The last two years extended this climb, leaving most major indexes near all-time highs.

Greed is on the rise

Signs of euphoria have emerged. Valuations are stretched, with the market trading at over 28 times trailing earnings versus a long-term average of 18 times. After the election, just eight stocks accounted for 85% of the market’s increase in November and December, while the other 492 members of the S&P 500 did little to help performance. If you weren’t in the eight BATMMAAN* stocks, 2024 may have ended on a sour note.

Not surprisingly, we don’t think chasing returns is a good idea. As Warren Buffett quipped, “be greedy when others are fearful and fearful when others are greedy.”

Review your risk tolerance

With signs of greed in everything from AI stocks to bitcoin, now is a good time to reassess your risk tolerance. An average bear market for stocks is a -34% drop, with the full bear cycle lasting on average 35 months. If your stock investments fell by this amount, would it affect your ability to sleep at night? If so, it may be time to reassess your allocation between stocks and bonds (we can help).

We see opportunities

Even with euphoria in some sectors, we still see opportunities. There are attractive valuations in health care, industrials, consumer staples, and energy. While these industries may not have the growth prospects of some technology names, they have defensive characteristics should the market decline, they pay solid dividends, and many of their valuations are one-half or even one-third the general market.

We're always happy to discuss your portfolio, your goals, or our investment philosophy. Contact any of our team members at 800-998-9773 to set up a meeting.

Data Sources: Koyfin, Shiller Online Data Set, FRED, S&P Global, MarketWatch, Allied

*The BATMMAAN stocks are: Broadcom, Apple, Tesla, Meta, Microsoft, Amazon, Alphabet, and Nvidia

October 1, 2024: A Soft Landing?

So far this year, markets rose on the narrative that we’re on course for a soft landing. Inflation continued to moderate, with the consumer price index (CPI) down to +2.5% year-over-year—closing in on the Fed’s 2.0% target. Unemployment rose to 4.2% from 3.4%. While still a low absolute level, there’s some concern that the upward trend may indicate a weakening employment picture.

The Fed cut the overnight rate by 0.50% in September, as they feel inflation has made further progress toward their target. The market expects the Fed to continue cutting rates in the coming months.

Both stocks and bonds are up

Stocks are up, with most of the major indexes in the upper teens to low twenties percentage gains. The technology sector (+30.3%) continues to do well, but not as well as the often boring (but defensive) utilities sector (+30.6%), which is surging on rising energy demand from artificial intelligence (AI).

Bonds are up as interest rates fell (there’s an inverse relationship between bond prices and interest rates). After being at or near 5% earlier this year, much of the Treasury curve is now in the mid 3s, with the two-year at 3.62% and the 10-year at 3.77%. For investors who took advantage of higher cash and T-Bill yields, things are starting to change. You may want to review your positioning.

We prepare for good times and bad

Will the Fed engineer a soft landing for the economy? Or is the weakness in employment the beginning of an economic downturn? We’ve worked to position portfolios for either scenario—quality value stocks with price recovery potential in a strong economy but with the defensiveness and low volatility to do well in a market pullback.

Of course, the election looms in the coming weeks. We’re comfortable no matter the outcome thanks to the quality and positioning of our portfolios.

Contact us with questions

We’re always happy to discuss your goals and answer your questions. Just call us at 800-998-9773.

Data Sources: Koyfin, FRED, S&P Global, Black Diamond, Allied Calculations

July 1, 2024: It’s Halftime

In the first half of the year, markets rose—with the S&P 500 and Nasdaq both gaining more than 10%. But it was an incredibly narrow market.

Nvidia (NVDA), the poster child of the artificial intelligence (AI)-led rally, accounted for roughly one-third of the S&P 500’s return. Without NVDA and its AI peers, most stocks aren’t rallying. The S&P 500 Equal Weight Index, which shows how the average stock in the index is doing, is up a modest 4.1% through June.

We know enough market history to not get caught up in the euphoria. From the Nifty-Fifty of the 1970s to the late 1990s Tech Bubble, these cycles have a way of coming undone—often in devastating fashion. The Nasdaq fell -78% when the Tech Bubble popped in 2000 and -60% in 1974 after the Nifty-Fifty peaked.

We invest for the long term

Valuations matter. While the big tech names trade at over 30x earnings, the rest of the market trades at a somewhat reasonable 18x earnings, providing a margin of safety.

We’re comfortable with the long-term prospects and defensiveness of our more conservative, blue chip-focused holdings. Low-volatility strategies like ours have a history of shining during bear markets.

What to watch in the second half

As we head into the back half of the year, a couple of big events are on the horizon:

• Interest rates: The Federal Reserve (Fed) is hinting at making at least one rate cut before year-end. Will this dovish step keep the market rally going or cause a second wave of inflation?

• The presidential election: The market may see more volatility heading into November’s election. Contrary to popular opinion, historic data says the market impacts politics more than the other way around. People vote their pocketbooks—so as the election approaches, you may want to watch the market instead of the polls.

Contact us with questions

We’re comfortable with the quality and positioning of our portfolios, no matter what the market throws at us. If you have any questions, please call us at 800-998-9773.

Data sources: Koyfin, FRED, Barrons, Yardeni Research, S&P Global Markets, Allied Calculations

April 1, 2024: Keeping an Eye on the Horizon

The stock market rallied in the first quarter, fueled by a healthy economy, easing inflation, and excitement around artificial intelligence (AI). Even amidst this sunny market, however, we always keep a watchful eye for storm clouds.

Watching for risks

With that in mind, here are the primary risks we see on the horizon:

1. An AI frenzy: There are signs of euphoria in certain technology sectors. Anything related to AI is being bid up, with some companies trading at price-to-sales ratios of over 30 times. Historically, such exuberance led to sharp corrections, such as the NASDAQ’s -77.9% plunge when the tech bubble burst in 2000. It took 15 years for the NASDAQ to recover its 2000 peak.

2. A slowing economy: Potential early signs of an economic slowdown, including rising unemployment and deteriorating consumer confidence, need to be monitored. Unemployment ticked up to 3.9%, which is still low but moving up.

3. A second wave of inflation: While inflation is continuing to trend down, many price trends remain sticky and could reaccelerate—similar to the second wave of inflation in the 1970s.

4. The election looms: Regardless of your political affiliation, elections bring the one thing markets hate—uncertainty. Watch for increased volatility as we approach November.

Investing for risk-management and growth potential

Thankfully, we see a solution that addresses all of these risks: low-volatility, high-quality value stocks. As a group, they’re trading at a discount to the broader market and offer several advantages, including:

• Defensiveness in downturns (low-volatility stocks walked right through the tech bubble burst in 2000)

• Steady year-on-year growth

• Built-in inflation hedges (pricing power, commodity reserves, etc.)

Our portfolios tilt toward these stocks to hedge against the risks while still offering steady growth. If you’d like to discuss this strategy or anything else related to your investments and financial goals, please call us at 800-998-9773.

Data sources: Koyfin, FRED, S&P Dow Jones Indices, Allied Calculations