January was a battle between high quality stocks and lower quality stocks. Lower quality stocks won.  That includes small and micro caps.  (Our view is that the primary small cap stock index, the Russell 2000, is a low-quality index.  About 40% of stocks in the index do not post a profit, and many are overleveraged financed by junk debt). 

Returns for the month of January:

Russell 2000                              3%
Equal Weighted S&P 500     3.1%
S&P 500                                      1.4%
Mag 7                                           0.0%

The equal weighted S&P 500 was a pleasant surprise.  It outperformed the market cap weighted S&P 500.  It shows the market is broadening out for large caps.  The mega-cap Mag 7 was a disappointment with a zero return.  We don’t expect that to continue (see main section).

Gold and silver crashed on Friday after a historic run higher.  Gold was down 10% and silver 25% in one day!  Both are small markets.  It doesn’t take much buying or selling to move prices.  Investors/speculators learned that on Friday the hard way.  To paraphrase Warren Buffet; in order to make money in gold you must think future buyers will be more afraid than you.

Since inauguration day, European stocks have outperformed U.S. stocks, including in January.  Before you think you are missing something, this is the first time this has happened in nearly 20 years!

EARNINGS GROWTH OR MULITPLE EXPANSION

 

Valuations are a horrible market timing tool for those investors who believe in market timing.  If indeed this market is expensive, it can stay that way for a long time.  But as we point out below, we think market valuations are justified.

Investors are willing to pay a premium for quality and certainty.  Quality is often defined as a high return-on-equity and high net profit margins.  The result is P/E multiple expansion.  As margins expand (as they have) multiples drift higher.  Is this a sign of a bubble?  No.  Why?  Because earnings are soaring.

This is especially true for the Mag 7.  It is not P/E multiple expansion for the Mag 7 that drove them higher last year.  Only two of the Mag 7 stocks saw multiple expansion in 2025 – Google and Tesla.  (We are especially interested in the Mag 7 as our clients own six of the seven.)  Earnings are driving tech, including AI, in this market, not multiple expansion.  When earnings are driving returns, it is hard to have a bubble.

Let’s look at the numbers.  Corporate earnings for the S&P 500 are still expected to grow 15% in 2026.  Tech, however, is expected to grow earnings at 28.5%.  Wow!  It is tough to bail on tech with that growth.

Is it time for the Mag 7 to make the hand-off to the S&P 493?  Not necessarily, but it sure is nice to see the market broadening in the last few months.  Could both the Mag 7 and the S&P 493 drive returns higher?  We think so.  But tech is still ruling the roost on EPS growth.  Tech is here to stay and is not in a bubble, in our view.

First it was the hyperscalers with huge capex budgets (primarily for the data centers) that led tech stocks.  Then it was show-me-the-money stocks with ROI (return on investment) being the stat of choice.  Now it is show-time.  Companies across multiple sectors need to show the benefits of using AI (including productivity gains and margin expansion).  Financial, industrial and healthcare stocks are sectors poised to benefit.

The biggest risk to stocks this year, in our opinion, is earnings not coming through.  Or if they do, are great earnings already discounted in share prices?  We don’t think so.  The investment backdrop is still positive as earnings growth and a supportive Fed keep recession odds low.  Risk on.

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Real Retirement Solutions

designed to improve
  • Wealth Preservation
  • Management of Risky Assets
  • Peace of Mind

This is achieved through an ongoing assessment of market risks given your specific financial situation and goals.

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Professional Expertise

Leadership Team

Richard Furmanski

Richard Furmanski

CFA

has been a portfolio manager and analyst for over 35 years. He manages conservative, tax-efficient portfolios for both pre-retirees and retirees. His lower risk approach appeals to investors who want less volatility and competitive risk-adjusted returns.

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Mary Ellen Adam

Mary Ellen Adam

Director of Operations

has been in office administration for over twenty years. Her experience includes customer service, firm operations, and office administration. She interacts with our clients on a day-to-day basis and handles any requests that may arise.

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Frequently Asked Questions

If you can't find the answer to your questions here, feel free to give us a call at 847-847-2505

Do you manage both stock and bond portfolios?

Yes. We build a portfolio of conservative, high-quality stocks and hold them for the long-term. The average holding period is 4 – 5 years. Our focus is on stocks that are suitable for retirement portfolios.

Our high-quality bond portfolios are designed to provide both income and stability of principal. Bonds provide the anchor for balanced accounts (those holding both stocks and bonds).

What is your investment philosophy?
We take great care in purchasing only high-quality stocks and bonds intent on a multi-year holding period. Portfolio turnover and taxable realized gains are modest in comparison to other active managers. We do not time the market but will become more defensive, in terms of stock holdings, when market conditions warrant.
Will the portfolio be managed in accordance with my financial goals?
Yes. Each of our clients has a custom-tailored portfolio. These custom portfolios are designed to meet specific client objectives with a thoughtful approach to specific constraints such as risk tolerance. And as each client’s situation changes, the portfolio does as well. There is no cookie cutter approach.
What kind of expertise do you have and how can that help me in difficult markets?
We have been working with high-net-worth clients like you since 1982. Over that time we have helped them to navigate several bear markets and financial crises (including the stock market crash of 1987). We hold the Chartered Financial Analyst (CFA) and Certified Financial Planner (CFP) designations.
Are you sensitive to taxes when managing portfolios?
Yes. Our holding period for an individual stock averages 4 plus years which means our turnover is low and realized gains can be carefully managed. Further, where possible, we tax loss harvest small losses as a way of offsetting gains taken elsewhere in the portfolio.
How have you performed?
Results will differ by client and the level of customization but we have provided competitive investment returns for many years.
How do you charge for your services?
We charge a management or consultant fee based upon the size and level of customization of the account. As the account grows, we benefit together.

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