Frederica Focus - December 15, 2025

I always love this time of year.  Christmas music is playing, Amazon deliveries are getting wrapped, and I am thinking about RMDs and tax loss harvesting.  Yes, nothing says the holidays like tax efficiency.

While it is December, the markets are still quite active and we will be riding out the rest of the year watching the markets, double-checking everyone's RMDs, and looking for more tax efficient ways to end the year.

Markets finished the week mixed. A widely expected Fed rate cut and a rotation out of tech lifted the Dow, while the S&P 500 and Nasdaq lagged.

The S&P 500 fell 0.63% and the Nasdaq dropped 1.62%. The Dow gained 1.05%. Overseas markets were stronger, with developed international stocks up 0.89%.

The story of the week was rotation. After the Fed cut rates by a quarter point, investors moved out of high-growth tech and into more cyclical, value-oriented areas. Financials, healthcare, and industrials led, while some AI names cooled. Small-caps joined the party, with the Russell 2000 hitting new highs.

Translation: leadership shifted, but the market didn’t fall apart.  

^{Source: YCharts.com, December 13, 2025. Weekly performance is measured from Monday, December 8, to Friday, December 12. TR = total return for the index, which includes any dividends as well as any other cash distributions during the period. Treasury note yield is expressed in basis points.}

No Shock. Just Signal-Reading.

The Fed’s rate decision last week didn’t surprise anyone. The market priced it in weeks ago. The move wasn’t the news: Powell’s tone was.

Reading the tea leaves: Powell made it clear rate hikes are off the table for now but also raised the bar for additional cuts.  

The vote told its own story. A 9 to 3 split isn’t nothing. By Friday, the dissenters were out explaining themselves, debating whether inflation or the job market is the bigger risk. When Fed officials start publicly disagreeing, that’s your signal the easy consensus phase may be over.

In other words: the cut was backward-looking. The messaging was the tell.

Harvest the loss. Keep the winner.

Before December 31, review taxable investment accounts for tax-loss harvesting opportunities. Selling positions at a loss can offset capital gains and up to $3,000 of ordinary income, without changing your long-term investment strategy.

Done right, you can:

• Reduce this year’s tax bill

• Reinvest immediately (without triggering wash-sale rules)

• Bank losses for future years

The mistake? Waiting until January. Losses only count if they’re realized this year.

Takeaway: Good planning doesn’t predict markets. It uses the tax code while it’s available.

A Team Meeting

This week's picture is a little self serving.  At the end of the year, I get a bit reflective but also look forward to the next year.  This has been an amazing year and I am very happy that I get to work with my family.  

In this section, we highlight common and not-so-common questions that we find worthy to share:

"Should I be worried about the markets right now?"

I have gotten this question for 30 years.  The short answer is "No."  Unless you don't have a plan.

Markets are always climbing a wall of worry. Headlines change weekly; long-term goals don’t. If your portfolio is built around a clear plan: cash flow, time horizon, taxes, and risk tolerance, short-term market moves are noise, not signals.

Good planning assumes markets will be volatile. It plans through downturns, not around them. The real risk isn’t what the market does next, it’s reacting emotionally and abandoning a long-term strategy that was designed for moments like this.

If you’re worried, that’s a cue to revisit your plan, not rewrite it.  If you don't have a plan, let's get one.

 "You can get all A's and still flunk life" - Walker Percy 

I first started reading Walker Percy in college.  Someone left a copy of THE THANATOS SYNDROME at our house.  I couldn't get enough.  Next, were the THE MOVIEGOER and THE LAST GENTLEMAN.  Eventually I finished LOVE IN THE RUINS and THE SECOND COMING.  

I love this quote because it cuts straight across the modern ideas of success. Percy believed modern people are often highly competent, well-educated, extremely successful, but internally lost.

The A's represent our credentials, achievement, social status, and any other measurable successes.  But often we flunk, losing our sense of purpose and living unfulfilled lives.

In Percy's view, modern life excels at optimization (like a well-tuned portfolio) but struggles with orientation or knowing WHY you are doing what you are doing.  

Knowing your WHY is important in life and especially in investing.  Optimizing a portfolio to your WHY is the most important thing that I can do.

We appreciate you passing this on to a friend or family member who might like a fresh opinion.  We really appreciate it!