The U.S. economy is growing above trend. Last Thursday’s third release of Q2 2025 GDP was revised up from 3.29% to 3.84% with upward revisions to consumer spending on services, business fixed investment, and state/local government outlays.  Fears over consumer spending slowing sharply this year appear to be misplaced.

One popular narrative prior to the report was that the economy has been totally dependent on AI capex spending to keep growing.  AI is certainly boosting the economy but there are other pillars in its foundation of growth as well.

This good economic news leads to the question:  How much can the Fed really cut rates if the economy is growing above potential while inflation runs materially above target for the fourth consecutive year?  Maybe investors’ expectation of two more rate cuts this year is overly optimistic.  How will the market react when the chances of those two cuts is reduced?  This eventual realization by investors may add to the market’s choppiness and possibility we have its first real drawdown since the April low.

Stock valuations are one reason bears say we are in a bubble. Sure, the S&P 500 is trading at about 22x 2026 projected earnings, but a more detailed look shows that mega-cap tech stocks are skewing the P/E ratio much higher.  A better way to look at valuations is to look at an equal-weighted P/E ratio which takes out the impact of the mega-caps.  The equal-weight S&P 500 trades at about 16.5x 2026 forecast earnings, a significant discount to its market cap weighted cousin (source:  Barron’s).  And notably, the current equal-weight P/E ratio is about 15 points lower now than it was at the market peak in 2021.  We acknowledge that mega-cap tech is trading at a premium valuation but that is where the growth is.  And many investors flock to the best available growth in the market, especially with large caps.

RALLY LOSES STEAM

To say the stock market is due for a drawdown is an understatement.  The S&P 500 has been ripping higher almost uninterrupted since the April lows without a pullback of more than 3%.  Both the S&P 500 and NASDAQ are overbought.  Markets that are overbought tend to mean-revert over time (they don’t stay that way forever).  Many stocks are already in downtrends…except some of the most volatile ones.  One of the best examples of extreme upside volatility is quantum computing stocks.  A basket of four popular quantum computing stocks is up about 3,000% since last fall!

Just because markets are overbought doesn’t mean a sharp sell-off is guaranteed.  Corrections can occur in terms of both price and time, so a period of sideways trading could alleviate these overbought conditions.  If we do have a sharp sell-off, long term investors should view lower prices as an opportunity to upgrade portfolios – as we did in April.  An overbought market doesn’t mean the bull is over – rather, a pause that refreshes is probably necessary. 

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.

Recent Commentaries

Stay up to date with all of our latest comments and analysis.

September 2025 Market Commentary

So much for the normal summer doldrums this year. The S&P 500 stock index rose almost 10% in the June – August...

August 2025 Market Commentary

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July 2025 Market Commentary

Since the stock market’s 18.9% pullback during the tariff-tantrum in early April, it has had one of the fastest rebounds on record. The S&P 500 is up more than 10% in Q2 (which includes ugly April).  The tech-heavy Nasdaq 100 is up about 18% and semis are up more...

June 2025 Market Commentary

Investor sentiment soared in May along with stock prices.  According to a recent AAII survey, the percentage of bullish respondents rose to 37.7% versus 20.9% at the start of May.  Bears dropped from nearly 60% at the start of the month down to 36.7%.  These are big...

Monthly Updates

September 2025 Mid-Month Recap

Many professional investors think the bond market is a better forecaster of future economic strength than the stock market. What is the bond market currently telling us?  One bond market indicator, credit spreads, is signaling the coast is clear and current labor...

August 2025 Mid-Month Recap

The number of stocks rising lately has increased even though this year’s winners have taken a breather. A bull’s dream is for the broader market to keep trending higher as investors rotate like this underneath the surface.  Small caps and non-Mag 7 stocks have fully...

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