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The weather report for the Continental Divide west of Denver that day in February 2014 called for sun, +5-degree temps, and gusts to 20mph, perfect conditions for a daylong winter excursion! Unfortunately, we believed the report. After battling mild altitude sickness, -5-degree temps, and constant 60mph winds for seven hours, my overconfidence was exposed and I nearly succumbed to the elements for lack of remembering the indispensable principle, “mountains make their own weather”. No less do the financial markets create their own volatility, and following the 36 months we just experienced, certain principles are important to remember at a time such as this. Let’s identify those principles as we consider the outlook for the financial markets in 2026.

THE OUTLOOK

Major U.S. banks are universally bullish on the S&P 500 for 2026, though expected returns range from a paltry 4% (Bank of America) to a rosy 18% (Oppenheimer). Supporting this outlook are the facts a) the S&P 500 advance/decline line has been rising with continuity that rivals the morning sun, indicating a broad and healthy advancement,¹ b) the CNN Fear & Greed Index stands at 50, or “neutral”, suggesting the psychological euphoria generally cohabitating major market tops is absent, and c) large government and private sector investment in energy sources demanded by AI supercomputers is “LIVE”.² Balancing positive expectations for 2026 is the Presidential Election Cycle Theory, which measures average S&P 500 returns for each distinct year of Presidential cycles since 1950. The study reveals there have been two years of good average returns (years 1 and 4), one year with great average returns (year 3), and one year with bad average returns coupled with increased volatility (year 2).³ Also on the negative side are the facts a) employment is weakening, b) the subprime consumer is tapped, and c) the credit market has shown signs of tightening, but increased economic efficiency from parabolic technological advancement seems to be neutralizing their impact and bolstering corporate earnings, at least for now.

TWO FACTORS TO CONSIDER

• Positive: The market doesn’t seem irrational quite yet, but even if the studies are wrong and it is, the market can remain irrational longer than you can remain solvent. Fight inflation, not the trend!
• Negative: There are exceptions, but investment risk generally rises in tandem with rising valuations (P/E Ratio). Today’s S&P 500 valuation rivals historical peaks, and new investments into large US stocks better understand this research.

CONCLUSION

A highly disruptive global megatrend is in full swing with the widespread adoption of AI and other technological advancements. This trend may render market research less reliable as economic learning and automation accelerate. Dangers lurk but the bull market appears intact. Returns in 2026 may be modest or even negative, and heightened volatility is highly probable as the market prepares for year 3 (2027), the year of great average Presidential Cycle returns.

PRINCIPLES TO REMEMBER IN LATE STAGES OF A BULL MARKET

• Lean, don’t jump. Maintain a diversified portfolio with appropriate asset allocation consistently over time. Never allow emotions, economic forecasts, or geopolitical developments affect investment decisions; rather, use high quality tools to push decisions based on an investment plan. Tweak your allocation, don’t shuffle it.
• Manage risk with an exit plan, especially on speculative and highly appreciated securities. Invest large, but speculate small, and only with well-researched, high conviction ideas.

Don’t forget, mountains make their own weather! May God bless your desires to be a good steward and a wise investor, Shaun.

“Precious treasure and oil are in a wise man’s dwelling, but a foolish man devours it.” ~Proverbs 21:20

1 Market In Out Stock Screener, S&P 500 Advance/Decline Line, January 15, 2026

https://www.marketinout.com/chart/market.php?breadth=advance-decline-line

2 Doc Eifrig’s Health & Wealth Review, “The Banks Are Predicting a Good Year for Stocks”, January 11, 2026

3 Wealth Management, “Presidential Election Cycle Theory”, August 2024 White Paper by John Heilner, CIO

https://www.wtwealthmanagement.com/whitepapers/2024-08/

Disclosure: Old Forge Wealth Management, LLC is a registered investment adviser. This material is for informational and educational purposes only and should not be construed as investment advice or a recommendation to buy or sell any security. This commentary is general in nature and not tailored to the circumstances of any specific investor. The principles discussed are general investment considerations and may not be appropriate for every investor. Individual circumstances, risk tolerance, and objectives should be considered. Market commentary and outlooks are based on current conditions and third-party sources believed to be reliable; however, accuracy is not guaranteed. Forecasts, projections, and return expectations are inherently uncertain and are not guarantees of future performance. Past performance is not indicative of future results. Investing involves risk, including possible loss of principal. Indexes referenced are unmanaged, do not reflect fees or expenses, and are not available for direct investment.

Early in my mountaineering career I discovered that a handful of ginger on the pre-summit push rest stop provides a sustainable burst of energy with no residual crash. I’ve never climbed without a bag of ginger since that wonderful revelation occurred! An experienced climber uses every technical, nutritional and directional advantage available to survive mountain hazards and reach the finish line, which is a warm car. Dodging retirement pitfalls like market and interest rate risk, sequence of returns and longevity risk, inflation and tax-hike risk, and long-term care risk, is no easier, though effective risk mitigation strategies avail. Consider the redeeming qualities (and understand the shortfalls) of a qualified longevity annuity contract (QLAC) as you strategically plan the later income years of your own retirement.

• A QLAC is a special type of deferred annuity you can buy with money from a tax-deferred retirement account (like a traditional IRA or 401(k)). Its main purpose is to provide a fixed source of income later in life, typically starting as late as age 85.
• Money used to buy a QLAC may be excluded from RMD calculations until payouts begin (up to age 85). This can lower taxable income in one’s 70s and early 80s. Maximum contribution is $200,000 or 25% of eligible retirement funds (whichever is less).
• Helps protect against longevity risk (exceeding life expectancy and having to fund the extra years) by providing a guaranteed lifetime income source.
• Tax deferral of QLAC dollars (until income begins) tends to lower taxable income, which can expand strategic Roth Conversion opportunities and other savvy tax maneuvers.
• QLAC’s offer market risk mitigation, since future payments are guaranteed.
• QLAC income complements Social Security to layer income sources and match them with future expenses. Research suggests retirees are happier spending a permanent source of income (like a pension) as opposed to selling assets to create income (like a systematic withdrawal program). They are more confident and content, and they spend more than those using a systematic withdrawal (who actually underspend as a group).¹
• QLAC income is generally received in one’s later years, when inflation is felt most and expenses escalate amidst health declines. That ginger sure comes in handy at high camp!  It can be harder for elder abuse to occur when income streams are passive.

There’s no downside to ginger that I know of, but few things on this earth consist of all positives. QLAC’s reduce liquidity, offer no inflation-fighting upside on invested capital (in an inflationary culture), and actually increase inflation risk (since income payments don’t generally rise). Also, if the retiree passes before income payments begin a loss of capital can occur (unless a return of premium option is purchased).

A QLAC may be well suited for retirees worried about outliving their savings, for those with very large Traditional Retirement account balances, and for those who seek retirement income certainty.

God bless your retirement income planning efforts!

Shaun.

“In an abundance of counselors there is safety” ~Proverbs 11:14

1 The College of America, Retirement Income Certified Professional RICP®, December, 2025

Disclosure: Old Forge Wealth Management, LLC is a registered investment adviser. This material is for educational purposes only and is not individualized investment, tax, or legal advice. Any guarantees referenced are subject to the claims-paying ability of the issuing insurance company. Tax rules are complex and subject to change, and the tax treatment of a QLAC (including any impact on RMD calculations) depends on individual circumstances. There is no guarantee that any strategy will be successful. Consult your financial, tax, and legal professionals before implementing any strategy.

People have asked me why mountaineers don’t climb Alaska’s Mount Denali in the more hospitable summer months to mitigate the risk of cold injuries, not realizing higher temperatures destabilize the snow and ice, increasing the incalculable risks of slip and falls, crevasse falls, and avalanches. Just as the climber’s survival hinges on a wise discernment of mountain conditions affected by the weather, an investor’s durability sometimes rests on an accurate assessment of the economic engine which drives corporate earnings, interest rates, employment, and other market-impacting dynamics. Since early recognition of “economic turns” can both profit and protect the astute investor, let’s consider today’s economic trends.

·         While 2024 saw fairly robust GDP growth, 2025 has brought increasing signs of deceleration. Recent data — such as the latest ISM Services Index and JOLTS reports — indicate hiring slowdowns or outright freezes in major service industries, and many businesses are scaling back investment and hiring as cost pressures mount. That slowdown is feeding broader concerns about a possible recession or at least a prolonged period of sluggish growth. Several widely followed economic forecasts now assign a meaningful probability to a downturn in the next 12 to 18 months.

·         For years, a strong labor market helped underpin consumer spending and supported economic resilience. But in 2025 the hiring tone has shifted.  Growth in job creation appears to be slowing, and some indicators suggest unemployment risk may be inching higher.  This softening in employment presents a key risk: weaker incomes may feed into weaker spending, creating a downward spiral. Moreover, many businesses now face increased uncertainty — from demand weakness, rising input costs, and unclear policy and trade conditions — which may prompt further hiring freezes or cutbacks.

·         Economic risks are being amplified by uncertainty on several fronts. Trade policy remains a wildcard, and many analysts note that tariffs and shifting global trade dynamics may be straining supply chains, raising business costs, and contributing to inflation pressures.  At the same time, the central bank faces a difficult balancing act. On one hand, higher interest rates are helping combat inflation; on the other, they make borrowing more expensive — exacerbating pressure on businesses and households.  Economists point out that lowering rates too soon could reignite inflation, while waiting too long could deepen a slowdown.  The backdrop of economic fragility, consumer stress, and policy uncertainty creates important implications for investors and wealth management portfolios. Markets are trying to price in both possible rate cuts and an economic slowdown.

While persistent inflation coupled with a weakening economy befuddle policymakers, stock valuations remain near historically elevated levels, which raises the question:  what could go wrong?  The famous 1996 Mt. Everest storm, which claimed the lives of eight unwary mountaineers, revealed the serious threat that deteriorating conditions present to climbers caught high on the mountain.  Might it be a wise time – for some investors, depending on their personal financial plan and risk tolerance-to review stop-loss orders, consider taking profits, raise cash, reduce outstanding debt, or trim discretionary spending?

Think about it, Shaun.

“Rule #1: Never lose money. Rule #2: Never forget Rule #1.” ~Warren Buffett

“The prudent sees danger and hides himself, but the simple go on and suffer for it.” ~Proverbs 22:3

Disclosures

Old Forge Wealth Management, LLC is a registered investment advisor.

This commentary is provided for informational purposes only and should not be construed as personalized investment advice.

Any investment strategies or considerations discussed should be evaluated in light of an individual’s own objectives, financial situation, and risk tolerance.

The economic views expressed reflect conditions at the time of writing and are subject to change without notice. Forecasts or forward-looking statements are inherently uncertain and actual outcomes may differ materially.

Information referenced is derived from sources believed to be reliable; however, accuracy or completeness cannot be guaranteed.

This material does not constitute an offer to buy or sell any security or to adopt any particular investment strategy.

Past performance is not indicative of future results.

I learned the hard way on my first (and last) solo winter mountain climb that a successful expedition lies not in summiting, but in returning safely home. No summit experience can be compared to the value of a climber’s remaining life on earth; therefore, mountaineering is a reasonable hobby to the extent to which life-threatening risks can be effectively mitigated. Navigating the financial dangers of a multi-decade retirement is as treacherous as mountaineering! Just as effective means exist which neutralize mountain hazards, planning strategies avail to side-step retirement pitfalls, one of which is tax inefficiency. As you strive to maximize after-tax retirement income, consider the following truths regarding tax planning and the Roth Conversion:

• Tax efficiency is achieved in two primary ways: by never missing a deduction or exemption, and by managing annual income taxes towards a consistent tax rate. This does not resemble the attempt to minimize income taxes every year, a strategy that research has proven inferior.

• An effective way to achieve a consistent tax rate throughout retirement is to choose to pay more taxes when in a low bracket (such as in early retirement), and less taxes when in a high bracket (such as during peak earnings years). In other words, choose to pay more taxes at low rates and less taxes at high rates.

• Though Roth Conversions involve paying taxes sooner than required, a net benefit may be achieved if the same money will otherwise be withdrawn later at a higher tax rate. Advanced planning software can project which tax bracket you will be in every year of your retirement, all factors considered. This is highly valuable information.

• For those with legacy aspirations, consider the tax implications for your heirs: the Traditional IRA can be among the less favorable assets to inherit due to tax and distribution rules (most regulated and highest taxed), and the Roth IRA is one of the best (less regulated and untaxed).

• Other potential Roth Conversion benefits include: may offer some insulation if tax rates rise in the future, retiree access to tax-free income (once the 5-Year Rule is satisfied), smaller Required Minimum (taxable) Distributions due to smaller Traditional IRA balances, and avoidance of higher income taxes for surviving spouses due to escalated single filer rates.

• Be sure to investigate three issues before converting to prevent resulting negative surprises: will the added taxable income from a Roth Conversion trigger an increase in the Medicare Surcharge two years from now (IRMAA), increase the portion of your Social Security income that is taxable, or cause you to lose some or all of the additional $6,000 Standard Deduction (age 65+, OBBBA)?

• Facets of the Roth Conversion to remember include the following: more shares can be transferred “in-kind” to a taxable brokerage account for the same taxable distribution when stock prices are suppressed; it is generally advisable to withhold zero on Roth Conversions and pay the tax from personal savings so the whole conversion ends up in the tax-free Roth; a delayal of Social Security benefits to age 70 maximizes the “sweet spot” period for Roth Conversions.

While asset ‘allocation’ drives investment returns, asset ‘location’ empowers investors to manage a consistent tax rate resulting in tax efficiency. Since net income is the only income available to pay retirement expenses, savvy tax maneuvers are as important to the retiree as crampons are to the winter mountaineer. Think about it, may the Good LORD bless your retirement planning efforts, and your family this Thanksgiving season.

Shaun

“Render to Caesar the things that are Caesar’s, and to God the things that are God’s” ~Matthew 22:21

“Every god gift and every perfect gift is from above, coming down from the Father of lights, with whom there is no variation or shadow due to change” ~James 1:17

Disclosures

The information contained in this material is for educational purposes only and is not intended to constitute tax, legal, or accounting advice. Tax laws and regulations are subject to change, and their application can vary widely based on individual circumstances. You should consult your tax professional or attorney regarding your specific situation before making any financial decisions.

The concepts discussed, including Roth conversions, Social Security strategies, required minimum distributions, and tax-bracket management, are general in nature and may not be appropriate for every investor. Projections, forecasts, or modeling tools referenced are hypothetical in nature, rely on certain assumptions, and cannot predict future results or outcomes. No guarantee can be made regarding future tax rates, market performance, or the success of any planning strategy.

Investment strategies involve risk, including the possible loss of principal. Past performance is not indicative of future results. Discussions related to estate planning, IRMAA surcharges, and Social Security taxation are based on current regulations, which may change at any time.

The opinions expressed in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Old Forge Wealth Management, LLC is a Registered Investment Advisor.

For many retirees, Social Security is a key piece of the income puzzle. But when and how you claim your benefits can affect the amount you receive over time. A little strategy and planning can help you make the most of what you’ve earned.

• Know How Your Benefits Are Calculated

Your benefit amount is based on your 35 highest-earning years. If you haven’t worked that long, each missing year counts as zero—and that can drag down your average. Working additional years could increase your benefit amount, especially if you’re earning more now than you did earlier in your career. Those additional years can replace lower-earning ones and increase your overall payout.

• Understand Your Full Retirement Age

Your Full Retirement Age (FRA) is when you can collect 100% of your earned benefit. Depending on when you were born, it falls somewhere between 65 and 67. If you claim benefits before reaching FRA, you’ll receive a smaller monthly check—but wait a little longer, and your payments will grow.

• Time It Right

You can start collecting benefits at age 62, but you’ll only get about 70% of what you’re eligible for. Waiting until your FRA gets you the full amount, and if you hold off until age 70, you could receive as much as 132% of your benefit. Simply put: the longer you wait (up to age 70), the bigger your monthly check.

• Make the Most of Spousal Benefits

Married couples may be eligible for spousal benefits, which can be up to 50% of the higher earner’s benefit. Typically, the lower-earning spouse can start collecting earlier while the higher-earning spouse delays, allowing their future benefit amount to increase through delayed claiming. Once the higher earner hits 70, the couple can switch to filing against that person’s earnings history.

• Check Your Social Security Statements

Each year, the Social Security Administration (SSA) sends out statements showing your estimated benefits and your earnings history. It’s easy to toss it aside—but don’t! Reviewing your earnings record is important. Mistakes happen, and an error in reported income could reduce your benefit. If you spot something off, contact the SSA to get it corrected.

• Increase Your Earnings

If your projected benefits aren’t quite where you’d like them to be, consider finding ways to boost your income. A raise, a side job, or even working part-time for a few more years may increase your 35-year earnings average—and your future benefit.

• Be Careful If You Work in Retirement

You can work and collect Social Security at the same time, but there are income limits before you reach full retirement age. In 2025, if you earn more than $23,400, the SSA will deduct $1 in benefits for every $2 you earn over that limit. Once you hit full retirement age, the limit rises, and the reduction drops to $1 for every $3 earned over $62,160.

• Don’t Forget About Taxes

Up to 85% of your benefits may be taxable, depending on your income and filing status. Remember, Social Security counts alongside other income sources like wages, pensions, and investments. It may be a good idea to work with a tax or financial advisor to plan ahead and avoid surprises at tax time.

Social Security isn’t one-size-fits-all. The right claiming approach depends on your age, health, income, and long-term goals. Taking the time to understand your options—and making a plan that fits your situation—can help you make the most of your benefits and enjoy a more confident retirement.¹ God bless your Social Security maximization efforts!

Shaun

“Be wise as serpents and innocent as doves.” ~Matthew 10:16

1 Smart Asset, “10 Strategies to Maximize Social Security Benefits”, August 12, 2025

Disclosures

This material is provided for informational and educational purposes only and should not be construed as individualized investment, tax, or financial advice. The information contained herein is based on sources believed to be reliable, but its accuracy and completeness cannot be guaranteed. Social Security rules, tax laws, and benefit amounts are subject to change.

Old Forge Wealth Management, LLC is a registered investment advisor.  Registration does not imply a certain level of skill or training.

For personalized advice regarding your situation, please consult a financial, tax, or legal professional.

Mountaineers who fail to identify and effectively mitigate specific risks often become valuable examples for more studious climbers. Just as hypothermia, personal injuries, white-outs, slip-and-falls, avalanches, and crevasse falls threaten the mountaineering expedition, the following hazards endanger an equally challenging endeavor, the Retirement Income Plan. Identify and mitigate the following risks to help improve the sustainability of your retirement income and lifestyle:

1. Market Risk

Market fluctuations can significantly impact retirement portfolios, especially for those relying on investments to generate income. A major downturn can erode account balances just as retirees begin withdrawing funds. Diversification across asset classes and maintaining an appropriate mix of growth and defensive investments may help mitigate this risk.

2. Interest Rate Risk

Interest rate movements affect both bond values and the income retirees can earn from fixed-income investments. Rising rates can reduce the market value of existing bonds, while prolonged low rates can make it difficult to generate sufficient income safely. A laddered bond strategy or a mix of short- and intermediate-term instruments can provide balance and flexibility.

3. Sequence of Returns Risk

The order in which investment returns occur matters greatly in retirement. Experiencing negative returns early—while taking withdrawals—can permanently damage a portfolio’s longevity. Managing withdrawals strategically, holding a cash reserve, and using income “buckets” or guaranteed income sources can help offset this timing risk.

4. Inflation Risk

Even modest inflation erodes purchasing power over time. A dollar today won’t buy as much 20 years from now. Including assets that tend to outpace inflation—such as equities, real estate, or inflation-protected securities—coupled with a delay in Social Security benefits can help maintain the real value of income over time.

5. Long-Term Care Risk

The potential cost of extended care late in life poses one of the most significant threats to retirement security. Whether provided in-home or in a facility, long-term care expenses can quickly deplete savings. Options like long-term care insurance, hybrid life/LTC policies, or setting aside dedicated assets can provide protection.

6. Income Tax Risk

Future tax policy is uncertain. Rising federal or state taxes could reduce net retirement income, particularly from taxable accounts or required distributions. Proactive tax diversification—using a mix of taxable, tax-deferred, and tax-free accounts—offers flexibility to manage withdrawals efficiently under changing tax regimes.

The Bottom Line

A successful retirement plan isn’t just about growth—it’s about managing financial risks, much the way an accomplished climber manages mountain perils. By addressing these key threats with thoughtful diversification, flexible withdrawal strategies, and prudent contingency planning, retirees may increase their confidence that their income will endure as long as they do. Think about it and may God bless your planning efforts, Shaun.

“The prudent sees danger and hides himself, but the simple go on and suffer for it”. ~Proverbs 22:3

“Where there’s no guidance a person falls, but in an abundance of counselors there is safety”. ~Proverbs 11:14

Disclosure(s)

The information provided herein is for education purposes only and should not be construed as personalized investment, tax, or legal advice.  Investing involves risk, including the potential loss of principal.  Past performance is not indicative of future results.  Any strategies discussed may not be suitable for all investors and should be considered in the context of an individual’s financial circumstances and objectives.

Old Forge Wealth Management, LLC (“OFWM”) is a registered investment adviser located in Rhode Island.  Registration does not imply a certain level of skill or training.

Examples and opinions expressed are full illustrative purposes only and do not constitute a recommendation or solicitation to buy or sell any security.  All information is believe to be accurate at the time of publication but may change without notice.

Building wealth is less about luck and more about disciplined principles applied consistently over time. Below are ten foundational principles, each with practical examples to help guide your financial journey.

1. Increase Earning Power

Invest in yourself through ongoing education and specialization in your field.
Example: An engineer who earns additional certifications may qualify for higher-paying roles, increasing long-term income.

2. Carry Some Cash

Maintain an emergency fund of 6–12 months of household expenses. Keep cash in your portfolio to hedge downturns, seize opportunities, and stay disciplined.
Example: During a market dip, an investor with available cash can buy quality stocks at discounted prices.

3. Keep Debt Low

Strive for a low debt-to-equity ratio and aim to retire debt-free.
Example: A family that pays off their mortgage early frees up thousands in monthly cash flow for savings and investments.

4. Avoid Consumer Debt

Say no to impulse spending and ensure your household maintains a positive cash flow.
Example: Avoid financing a new car unnecessarily—opt for a reliable used vehicle and save the difference.

5. Invest 15–20% of Earnings

Regularly invest a portion of income using Dollar Cost Averaging in both equity and debt of capital-efficient businesses.
Example: Contributing monthly to an index fund smooths market volatility and builds long-term wealth.

6. Reinvest Dividends

Compound returns by reinvesting dividends from industry leaders over decades.
Example: A $10,000 investment in dividend-paying companies can multiply many times over if dividends are reinvested rather than withdrawn.

7. Protect Against Catastrophic Loss

Do thorough due diligence, diversify holdings, and maintain exit strategies for risky assets.
Example: A balanced portfolio of stocks, bonds, and real estate reduces the chance of a single market event wiping out wealth.

8. Manage Taxes Smartly

Plan to minimize lifetime taxes—pay more when in low brackets, and less when in high ones.
Example: Contributing to a Roth IRA while in a lower tax bracket can provide tax-free income in retirement.

9. Own the Right Insurance

Ensure you have the right type and amount of life insurance at the right price—avoid being “insurance-poor.”
Example: A young parent with term life insurance ensures family protection without overpaying for costly permanent policies.

10. Stay Disciplined Over Time

Wealth is built over years, not months. Commit to consistency, patience, and adaptability as circumstances change.
Example: A disciplined saver who invests steadily for 30 years often achieves financial independence regardless of market cycles.

These principles are not shortcuts—they are timeless guidelines. Applied consistently, they help individuals and families create resilience, seize opportunities, and ultimately achieve financial independence. Hold it loosely and God bless your efforts, Shaun.

“Give a portion to seven, or even eight, for you know not what disaster may happen on earth.”  ~Ecclesiastes 11:2

Disclosures:

The information provided in this blog is for educational purposes only and should not be construed as investment, legal, or tax advice. Investing involves risk, including the potential loss of principal, and past performance is not indicative of future results. Examples provided are hypothetical and for illustrative purposes only; they do not represent actual results and should not be relied upon for making financial decisions.

Old Forge Wealth Management, LLC is a registered investment adviser located in Rhode Island. Registration does not imply any level of skill or training. For advice specific to your personal circumstances, please consult a qualified financial professional.

A mountain guide can attempt to lead an expedition up a dangerous ascent but cannot force climbers to follow; that requires competence and trust. When the Federal Reserve begins to lower interest rates during a period of persistent inflationary pressure, it risks reviving a specter long thought consigned to the 1970s: stagflation. This toxic mix of stagnant growth, high unemployment, and elevated inflation is particularly dangerous because traditional monetary tools lose effectiveness—the very act of fighting one problem can worsen the other. Bond investors understand these things and are not following the Fed’s lead of an interest rate cut on Wednesday of this week, and are rather demanding more interest for the risk of holding U.S. Treasury debt. What gives?

Sticky Inflation Meets Monetary Easing

Inflation that proves “sticky” tends to come from services, wages, or supply-side constraints rather than one-time shocks like energy prices. These underlying pressures are less sensitive to changes in interest rates. If the Fed eases too early, cheaper credit can reignite demand without resolving supply bottlenecks. The result: inflation plateaus or re-accelerates, rather than falling back to target.

Growth at Risk

Rate cuts are typically intended to cushion slowing growth or avert recession. But if inflation expectations remain elevated, households and businesses may demand higher wages and prices to protect purchasing power. This undermines real growth, erodes consumer confidence, and can deter investment. Instead of stimulating activity, lower rates may trap the economy in a cycle of weak output and sticky price gains.

Lessons from History

The 1970s illustrate how premature monetary easing deepened stagflationary dynamics. Policymakers oscillated between fighting inflation and supporting growth, eroding credibility. It took years of painful tightening under Paul Volcker to reset expectations. Today, while the structure of the economy is different, credibility and expectations remain central. A Fed perceived as too willing to tolerate inflation risks losing its anchor, making policy less effective over time.

Navigating the Trade-Off

The Fed faces a delicate balancing act. Cutting rates too soon could entrench inflation above target, forcing sharper hikes later and increasing recession risk. Waiting too long, however, could exacerbate financial stress and unemployment. Clear communication, credible inflation targeting, and close monitoring of wage and service-price dynamics are essential to avoid repeating the mistakes of the past.

Bottom line: If the Fed eases policy in the face of sticky inflation, it risks trading a short-term growth boost for the longer-term pain of stagflation—a scenario far more damaging and difficult to escape.¹

Following the 25-basis point cut in the fed funds rate on Wednesday, Treasury rates rose noticeably across the yield curve.² These are market rates driven by bond investors, collectively known to be the best economists in the world. This contrary move indicates that bond investors are calling the Fed’s bluff and warning of the risk of stagflation. Stay nimble and may God bless your wealth-building efforts! Shaun

“For the LORD gives wisdom; from his mouth comes knowledge and understanding” ~Proverbs 2:6

1 ChatGPT, September 19, 2025, “The risk of stagflation if the Fed cuts rates while inflation remains sticky”

2 U.S. Department of the Treasury, September 19, 2025, “Daily Treasury Par Yield Curve Rates”

This commentary is provided for informational and educational purposes only and reflects the views of the author as of the date indicated. These views may change at any time and without notice. Nothing contained herein should be construed as investment, legal, or tax advice, nor as a recommendation to buy or sell any security, index, or investment strategy. Certain statements may constitute forward-looking opinions, which are based on current expectations and assumptions; actual results may differ materially due to changes in economic conditions, interest rates, or market dynamics. The information used has been obtained from sources believed to be reliable, but its accuracy and completeness cannot be guaranteed. Past performance is not indicative of future results, and all investing involves risk, including the possible loss of principal.

Old Forge Wealth Management, LLC is a registered investment adviser located in Rhode Island. Registration as an investment adviser does not imply any particular level of skill or training. Additional information about our services can be found in our Form ADV, which is available upon request.

A fascinating and slightly unnerving aspect of technological advancement (TA) is the fact that everything ever learned is harnessed for further learning, causing the rate of advancement to accelerate continuously towards eventual parabolic growth. The chart resembles that of long-term compounding returns, and both resemble the bottom right quarter of a circle. A less understood phenomenon in the case of ‘TA’ is the inversion which occurs when a particular product or function approaches perfection. Product perfection doesn’t supersede additional learning; it invigorates a more useful process to displace itself! Consider the examples:

• The 2007 BlackBerry, with its seamless keyboard, instant e-mail syncing, and 3-Day battery life, was dubbed a “CrackBerry” by Wall Street due to executive addiction yet was displaced by the iPhone in 24 months, rendering the stock near worthless; today BlackBerry’s are no longer made.
• $50 AI-tutors, which package employable outcomes, are actively displacing $50,000 universities, which package credentialed knowledge.
• The farmer’s milk bucket became a portable, direct feed dumping station, then a direct line to the tank; today robots milk happier cows non-stop for wealthier dairy farmers who have more time and better knees.
• One needs but a short drive on either U.S. coast today to see the coming inversion of personal transportation. I’m excited to see the far more productive uses transportees will engage during ‘travel time’ as we grow accustomed to self-driving cars.

Josh Baylin, a senior analyst at Stansberry Research, astutely recognizes the greatest danger to a tech company in this redundant process isn’t early on when a company strives to gain market share, but later when “it gets so good at solving the wrong problem that it makes itself irrelevant”. Baylin suggests that in this accelerating, AI-driven tech world it is crucial for investors to identify companies refining nearly perfected processes and allocate less capital to them, and those introducing new processes which eliminate problems and steps and allocate more capital to them.¹ Might AI’s voice-first interface alter the human/computer discourse and displace Apple’s nearly perfected iPhone? Is this why Berkshire is reducing its Apple position in noticeable proportions? To what extent are you exposed to the same displacement risk? Can you identify emerging processes that are capable of inverting existing systems and displacing present leaders?

This is an important topic to consider in an age in which parabolic ‘TA’ causes more frequent process inversions and company displacements. Think about it, and may God bless your wealth-building efforts!

Shaun

“For the LORD gives wisdom; from his mouth comes knowledge and understanding” ~Proverbs 2:6

1 Stansberry Research, Daily Wealth, “Don’t Get Caught in the Perfection Trap”, by Josh Baylin, April 21, 2025

Disclosure(s):

This material is for informational and educational purposes only and should not be construed as investment, tax, or legal advice. References to specific companies or securities are for illustrative purposes only and do not constitute a recommendation or solicitation to buy, sell, or hold any security.

Old Forge Wealth Management, LLC and/or its clients may hold positions in securities discussed. Such positions are subject to change at any time without notice. Information from third-party sources is believed to be reliable; however, we cannot guarantee its accuracy or completeness, and the views expressed by third-party sources are their own and do not necessarily reflect the views of Old Forge Wealth Management, LLC.

Forward-looking statements reflect our current views and assumptions and involve risks and uncertainties; actual outcomes may differ materially. Investing involves risk, including the potential loss of principal. Past performance is not indicative of future results.

Old Forge Wealth Management, LLC is a registered investment adviser located in Rhode Island. Registration as an investment adviser does not imply a certain level of skill or training. Please consult your tax or legal professional regarding your specific situation.