the Fed

7 Market Movers | January 30, 2026

Anne Harris — Fri, 30 Jan 2026 15:09:46 +0000

7 Market Movers | January 30, 2026 Anne Harris Fri, 01/30/2026 - 09:09

This week was dominated by monetary policy and Microsoft. Gary analyzes the Fed’s decision to keep interest rates steady for the first time since July. Microsoft had a difficult week, losing around $400 billion in market capitalization when their shares fell 12% after their latest earnings report. Watch the video below for the full analysis.

FULL TRANSCRIPT:

Hello, everyone. Welcome back to 7 Market Movers. My name is Gary Quinzel with Wealth Enhancement. The Fed held rates steady this week, which was widely expected, but the real story isn't about the decision itself. It's what changed beneath the surface. Today, I'm going to focus on three key investment takeaways from the Fed's January meeting and how our investment team is interpreting those shifts. The first and most important takeaway is that the Fed has clearly shifted from cutting to calibrating.

If you compare the statements from the last meeting to the most recent, the language tells the story. The Fed removed references to rising downside risks in the labor market and instead noted that unemployment has shown some signs of stabilization.

Chairman Powell reinforced in his press conference, emphasizing that after 175 basis points of rate cuts, the policy is now close to neutral and not meaningfully restrictive. We observed multiple sources sources of independent research, which broadly agrees with this sentiment.

The Fed believes that it's done most of the heavy lifting already and now wants to pause, reassess, and let the data guide the next move. This is no longer a race to the next cut. It's a wait and see environment.

The second takeaway centers on the labor market, and this is where opinions start to diverge. The labor market is going to be the swing variable at upcoming FOMC meetings. Chairman Powell acknowledged that job growth has slowed, but argued that labor demand and labor supply have cooled at the same time, leading to stabilization rather than outright deterioration.

Now, independent research providers agree, suggesting that the economy may be experiencing a jobless expansion or productivity gains support growth even as hiring slows. Yet others are more cautious. Some argue that the Fed may be declaring victory too soon, pointing to weaker private hiring, elevated uncertainty for small businesses, and borrowing costs that remain restrictive for parts of the economy. This disagreement matters because if labor conditions stabilize, the Fed can stay on hold. But if labor weakens again, rate cuts could return very quickly. For for investors, that makes labor data the single most important catalyst in the months ahead.

The third takeaway is all about growth, which will have a direct impact on what the Fed does next. The Fed upgraded its assessment of economic activities from moderate to solid. Now Chair Powell emphasized that resilient consumer spending, improving productivity, and ongoing investment tied to artificial intelligence and data centers all matter.

Now research again echoes this view noting that growth has remained stronger than expected even as the full impact of fiscal policy has felt. So strong growth is good news for the economy, but on the other hand, it also caps how dovish the Fed can be.

When growth is solid and inflation risks are better understood, there's less urgency to ease aggressively. That's going to shift market leadership away from Fed speculation and back towards earnings, cash flows, and fundamentals. So to sum up, the Fed is no longer cutting preemptively. The labor market is the key swing factor. Growth remains solid, and the markets are becoming more selective.

Now before we close, it's worth touching briefly on Thursday's significant move in Microsoft, which recently reported earnings. Shares fell roughly 12%, wiping out more than $400 billion in market value, which was one of the largest, actually the second largest, single day losses of market value in one day, after earnings showed that record AI spending but slower growth in its cloud business. This wasn't about Microsoft suddenly becoming an ineffective company. It was about expectations, valuation, and concentration.

When markets and portfolios are heavily concentrated in a small number of mega cap names, volatility can emerge quickly, even in high quality businesses. It's just yet another timely reminder that diversification isn't about filling up a style box, it's about managing risk when leadership becomes narrow. So please remember, in this environment, discipline, diversification, and fundamentals matter more than trying to time the next policy move or predict winners from the AI tailwind. Thanks for joining us. We'll see you next time on 7 Market Movers.

This information is not intended as a recommendation. The opinions are subject to change at any time and no forecasts can be guaranteed. Investment decisions should always be made based on an investor's specific circumstances. Investing involves risk, including possible loss of principal. There is no guarantee that asset allocation or diversification will enhance overall returns, outperform a non-diversified portfolio, nor ensure a profit or protect against a loss.

2026-10865

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Gary Quinzel

December 2025 Market Commentary

Tom Bidinger — Thu, 04 Dec 2025 15:20:32 +0000

December 2025 Market Commentary Tom Bidinger Thu, 12/04/2025 - 09:20

For the period November 1 – November 30, 2025.

Executive Summary

Markets oscillated in November as investors debated two issues: The likelihood of a December Fed rate cut and the current state of the AI revolution. Although market volatility was heightened during the month, November was a time of digestion rather than disruption.

What Piqued our Interest

The Government Restarts

The longest government shutdown on record, lasting 43 days, came to an end on November 13. Despite the reopening, not everything is back to normal, especially when it comes to economic data releases. During the shutdown, releases were either canceled or delayed, and, importantly, no new statistics on prices or jobs were collected, leaving policymakers and investors with a data gap. Some alternative data has been used to fill the gaps, but official government data will still carry weight when released. While there continues to be debate over how much the shutdown impacted the economy, the stock market mostly shrugged it off.

The K-Shaped Economy and Fed Policy

Views on spending, affordability, and economic growth vary depending on who you ask and what data you look at. The varying growth rates resemble the letter K, where some segments are seeing growth while others are seeing slowing. Recent data from the Fed’s Beige Book, a report that gathers anecdotal evidence on current economic conditions, showed that higher income spending was strong but lower and middle-income households were seeking more discounts and promotions. We see bifurcation from a sector standpoint as well, where spending remains robust by companies in the Technology sector, especially those that are tied to AI. On the other hand, other sectors such as manufacturing, residential construction, and trucking are struggling and pulling back on hiring.

The Fed will meet for its final meeting of 2025 on December 10 and markets are expecting another 0.25% cut, which would bring the target Fed Funds rate to 3.50-3.75%. As usual, investors will be focused on the forward guidance and accompanying commentary more so than the rate cut itself. If inflation risks are expected to linger, markets may need to digest and recalibrate the pace of expected cuts in 2026.

The AI Debate

The debate surrounding whether we are in an AI bubble raged on during the month, especially as investors wrestled with lofty valuations and a slight shift in how the build-out for AI would be financed. Thus far, Mega Cap Tech companies with great balance sheets and strong operating cash flows have been doing the heavy lifting, but the last few months have introduced some incremental debt issuance that brought back fears of a dotcom era bust. For many Technology companies, the risk is spending too little, falling behind, and missing out on the next big shift in computing.

For investors, the risk is that the companies they have invested in have poor returns on this invested capital. It is a concern because the future monetization of AI is not yet concrete and competitive dynamics for many AI models and platforms can shift rapidly. In November, the markets paused and digested the new narrative, but most investors remain cautiously optimistic.

Market Recap

Equities Oscillate

Volatility was elevated during November, but the S&P 500 Index saw a late recovery heading into the Thanksgiving holiday. Growth stocks, heavily concentrated in the Tech sector, weighed on returns. The Technology sector in the S&P 500 Index declined -4.3%, and the Growth-oriented Nasdaq 100 Index declined -1.5% for the month. U.S. Large Cap Value stocks outperformed during the month, up 2.7%, but are still behind Growth stocks on a year-to-date basis.

U.S. stocks grab a lot of attention, but this year ex-U.S. returns are outperforming. Emerging Market stocks pulled back by -2.4% during the month, but the MSCI Emerging Markets Index is up close to 30% for the year. Developed International stocks aren’t far behind, posting a positive 0.6% return in November and taking the year-to-date return to 27.4%.

Fixed Income Markets Remain Stable

Lack of economic data, numerous Fed governor speeches, and speculation surrounding who the next Fed chair would be kept the bond market active, but returns were steady in fixed income during the month of November. The 10-year Treasury yield declined, ending the month with yields near 4.0%. The Bloomberg U.S. Aggregate Bond Index rose 0.6%, while the high-yield index posted similar gains. In municipals, there is anticipation that new issue supply will be short of demand, providing a tailwind into December, where returns have historically been positive, averaging returns of 0.54%.

Wealth Enhancement Perspective

November reminded us that narratives can change quickly. Concerns over AI and Technology stock valuations, alongside cautious Federal Reserve governor speeches, gave way to renewed excitement around improved AI models and growing confidence in a December rate cut. While fundamentals remain constructive, sentiment shifts can occur and impact short-term returns.

For long-term investors, this is a time to stay disciplined, diversified, and opportunistic. Portfolio maintenance may not be high on a Holiday to-do list, but it can be a time to rebalance portfolios that may have drifted away from initial allocations, tax-loss harvest to offset gains, and selectively deploy cash to assets that can help you reach your objectives.

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7 Market Movers | November 14, 2025

Anne Harris — Fri, 14 Nov 2025 20:44:24 +0000

7 Market Movers | November 14, 2025 Anne Harris Fri, 11/14/2025 - 14:44

High valuations and high volatility have gone hand-in-hand so far in November. Watch as Aya Yoshioka breaks down the latest market news this week, including increased investor interest in the healthcare and energy sectors. She also shares updates on expectations for the upcoming fed meeting, inflation, and more!

Watch the full video here:

TRANSCRIPT:

Hi, my name is Aya Yoshioka. I'm a Portfolio Consulting Director and Senior Investment Strategist here at Wealth Enhancement. Welcome to another edition of 7 Market Movers, where we cover a variety of topics that have impacted markets over the last week. So let's get started.

After a record long 43-day government shutdown, lawmakers finally reached a deal to reopen federal operations. They agreed that they would have a short-term funding extension to fund most federal agencies through the end of January 2026, not too long from now. SNAP and food aid funding was restored, and there was a deferral on voting for tax credits, related to the Affordable Care Act. When news of all of this first broke, on Monday, stocks staged a relief rally as a major overhang was lifted. In the coming days and weeks, though, we will get several economic data releases related to jobs, inflation, GDP, and much, much more, and we'll get a sense of where the US economy currently stands.

On that note, we aren't expecting too much of a change, in terms of the trends that were persistent prior to the government shutdown. And that includes inflation that was already staying very sticky in this 3% level and cooling or weakening, labor market. So we don't think we're going to see too many changes there, but markets will parse through all this economic data for both the delayed data as well as the current data as government agencies catch up to all of the information. We will then, as market participants, crystallize around what the probability of that December Fed cut will be. Right now, it currently stands at about 65% in terms of the probability that the Fed will cut again and do another 25 basis point cut. But again, that will crystallize and become more clear as we approach that next Fed meeting in December.

We are on track for a 3rd consecutive year of double digit gains in the S&P 500. And yesterday, we saw the Dow Jones Industrial Average break through the 48,000 milestone. While the Dow is up 0.4% for the month of November so far, the S&P is actually down 1% and the tech heavy NASDAQ is down a little over 3% as stocks related to AI really do take a little bit of a breather.

Equity markets are a little expensive here. The S&P 500 index is trading at a forward price to earnings ratio of 25x compared to a 5-year median of about 22x. And that's still expensive relative to the long term average of around 16x to 17x. And when valuations are high, volatility can get a bit more elevated, and we've seen that in November so far. The VIX index, an indicator of market volatility, is currently showing a reading of around 20. This is up from the low of 15 that was seen in August, but this compares to the heightened periods of volatility that we saw from the tariff tantrum in April where the VIX spiked to over 50 or the early days of the pandemic when the VIX spiked to 80.

So this current bout of volatility, is it a sign that the AI bubble is deflating? We don't necessarily think so. Perhaps, right? There's been a lot of talk about the AI bubble, but this can be viewed positively overall as we see a little bit of a breather in markets. So we think that the AI build out is going to continue for quite some time, but it also happened with the internet as well. Sometimes investors get a little ahead of themselves. And we think that having a little bit of a pause in some of these names can be very healthy.

And we're seeing a good rotation across markets into other areas that are seeing some valuation support. So areas such as healthcare and energy were unloved all throughout 2025. And they're starting to see some investor interest as people take some profits off the table in tech. They're not running away from the market overall. They're just leaning into some of that diversification, which we really think is crucial for investors to embrace when markets are elevated from a valuation perspective.

With that, if you would like to discuss your portfolio, please reach out to a financial advisor here at Wealth Enhancement, and we'd be happy to discuss your portfolio or our market outlooks with you. Thanks so much for listening and have a great one.

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Ayako Yoshioka

November 2025 Market Commentary

Tom Bidinger — Wed, 05 Nov 2025 17:04:39 +0000

November 2025 Market Commentary Tom Bidinger Wed, 11/05/2025 - 11:04

For the period October 1 – October 31, 2025.

Executive Summary

Equity markets extended their rally in October, once again closing out the month near record highs. The Fed’s second rate cut of the year helped reinforce optimism across risk assets, even as policymakers signaled a more measured approach ahead.

What Piqued Our Interest

Global equities continued their climb in October, once again led by Large Cap Growth stocks—particularly the “Magnificent Seven,” which remain the primary beneficiaries of the ongoing artificial intelligence (AI) tailwind.

AI continues to be one of the most powerful forces driving both corporate spending and investor enthusiasm. Recent estimates suggest that AI-related capital expenditures accounted for more than 90% of U.S. GDP growth in the first half of 2025, with “hyper-scaler” investment projected to exceed $1.4 trillion between 2025 and 2027.

At the same time, some analysts have expressed concern over “circularity” in this spending cycle—where technology firms, suppliers, and financiers are increasingly reliant on each other’s capital to sustain growth. This dynamic has raised questions about profitability, returns on investment, and the long-term durability of AI-driven business models, especially as infrastructure spending outpaces realized revenue.

We continue to view AI as a long-term productivity catalyst, with the potential to lift U.S. labor productivity by as much as 15%. However, we remain mindful that concentrated capital flows and lofty expectations can create vulnerabilities if liquidity tightens or earnings growth slows.

The Fed Cuts Rates—Again

The Federal Reserve reduced the federal funds rate by 25 basis points in October, marking its second cut of the year. Policymakers cited softer labor data and further progress on disinflation, with headline CPI at 2.9% and core PCE near 2.8%.

The decision was largely expected and reinforced the view that the Fed may be nearing a “soft landing.” Lower borrowing costs supported both equities and fixed income, with the Bloomberg U.S. Aggregate Bond Index gaining 0.62% for the month. Fed Chair Jerome Powell emphasized that future policy moves will remain data-dependent, suggesting a cautious pace of easing until inflation settles closer to target.

Market Recap

October was another strong month for equities. Despite a brief mid-month pullback, the S&P 500 rose 2.34%, the Dow gained 2.59%, and the Nasdaq 100 surged 4.81%, extending its year-to-date gain to nearly 24%. Large Cap Growth stocks remained the primary drivers of performance, while Small Caps and Value-oriented sectors saw more modest gains.

International markets also posted solid returns, with the MSCI ACWI ex-US up 2.02%, and emerging markets outperforming developed peers. The MSCI EM Index climbed 4.18% and is now up more than 32% year-to-date, buoyed by currency strength and improving liquidity conditions abroad.

Wealth Enhancement Perspective

Markets continue to balance optimism around monetary easing with recognition of structural risks. The Fed’s pivot toward rate cuts provides a supportive backdrop for asset prices, but it also reflects a slower underlying economy. This comes as the government shutdown is now the longest on record, impacting everything from food stamps, economic data releases, air traffic controllers, and much more. Fiscal uncertainty, tariffs, and geopolitical tensions remain unresolved, all of which may influence market dynamics in the months ahead.

Valuations are difficult to ignore. The S&P 500 now trades at roughly 23 times forward earnings, well above its five-year average of 20, while the Nasdaq 100 commands a multiple near 28, signaling elevated expectations. While valuations are a poor predictor of short-term performance, they can temper long-term return potential if earnings growth moderates.

For investors, discipline and diversification remain essential. As we approach year-end, maintaining balance between risk assets, quality fixed income, and other diversifying assets—while avoiding overconcentration in any one sector or theme—will be critical to navigating the next stage of the market cycle and positioning portfolios for long-term success.

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7 Market Movers | October 31, 2025

Tom Bidinger — Fri, 31 Oct 2025 12:54:09 +0000

7 Market Movers | October 31, 2025 Tom Bidinger Fri, 10/31/2025 - 07:54

This week on 7 Market Movers, Wealth Enhancement Deputy Chief Investment Officer Doug Huber discusses the latest economic and market headlines. Topics include the Fed surprising us all with a second interest rate cut despite ambiguous signals and the ongoing government shutdown, strong corporate earnings, and equity markets remaining broadly positive.

Please contact our office if you have any questions you’d like to discuss.

There is no guarantee that asset allocation or diversification will enhance overall returns, outperform a non-diversified portfolio, nor ensure a profit or protect against a loss. Investing involves risk, including possible loss of principal.

2025-9873

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Key Insights to the Bond Market Q2

Venkatesh Vavilapalli — Mon, 12 May 2025 05:00:00 +0000

Key Insights to the Bond Market Q2

In January, Fed Funds futures, which imply the market-based odds of a Fed rate move, were only pricing in one and a half rate cuts for 2025, meaning that sticky inflation and a healthy job market made aggressive economic loosening unlikely.

Venkatesh Vavi… Mon, 05/12/2025 - 00:00

Mark Scarlett

December 2024 Market Commentary

Venkatesh Vavilapalli — Fri, 14 Mar 2025 05:00:00 +0000

December 2024 Market Commentary

With the US presidential election in the rearview mirror, US equities climbed higher in November and bond yields declined. Risk assets continue to be supported by a positive macroeconomic backdrop, solid earnings growth, and an accommodative Fed.

Venkatesh Vavi… Fri, 03/14/2025 - 00:00

Bruce A. Mandel

Weekly Market Update October 25, 2024

Venkatesh Vavilapalli — Fri, 01 Nov 2024 05:00:00 +0000

Weekly Market Update October 25, 2024

It was a soft week for equities, and for bonds too, whose prices fell as interest rates continued their ascent that began after the central bank lowered the Fed Funds rate in September (bond prices move opposite interest rates).

Venkatesh Vavi… Fri, 11/01/2024 - 00:00

Paul DeSisto

Investment Management Foundations - Why Monetary Policy Matters

wegmigrate — Wed, 04 Sep 2024 05:00:00 +0000

Investment Management Foundations - Why Monetary Policy Matters wegmigrate Wed, 09/04/2024 - 00:00

In this episode of “Investment Management Foundations,” Gary Quinzel, Vice President of Portfolio Consulting at Wealth Enhancement, discusses the significance of monetary policy, highlighting its impact on interest rates, economic stability, and investment market behavior.

VIDEO TRANSCRIPT BELOW

Hello everyone. Welcome to the latest segment of “Investment Management Foundations.” My name is Gary Quinzel, Vice President of Portfolio Consulting at Wealth Enhancement. Today's topic is why monetary policy matters. I'm going to outline three reasons why we think that monetary policy matters.

First, monetary policy impacts everything from the interest rate that you pay on your mortgage, to how much yield you get in your savings account. Almost every interest rate in the world is tied in some degree to the rates that are set by the Federal Reserve and other major central banks around the world. The second reason that monetary policy matters is because it has become incredibly important, as it's helped rescue the economy from deeper peril during periods of heightened uncertainty and financial instability. Without the significant rescue packages that were issued during periods like the global financial crisis, such as the Troubled Asset Relief Program, it's hard to imagine how much worse the global financial crisis may have become. The third reason why monetary policy matters is because it's become an incredibly important driver of the markets, and more importantly, the communication about monetary policy has become an important driver of markets. As an example, if we think back to the fourth quarter of 2023, when the Fed first signaled that they were done raising interest rates, that marked a turning point. The market has considerably rallied on the anticipation of lower rates, which are looked at as a positive or beneficial for markets and for equity markets, as well as fixed income.

So, let's look a little closer at what exactly the Fed does. Central banks use monetary policy to help achieve price stability as well as maximum employment. Central banks enact monetary policy by influencing the supply of money. By increasing the supply of money, they put more money into the financial system, which encourages spending and thereby boosts economic growth. But of course, it can also put upward pressure on inflation. Conversely, if central banks decrease the supply of money, this makes money more scarce or expensive, which could then slow down spending with the intention of decreasing inflation. But then, of course, the byproduct of that is it can decrease money supply, and you can actually push the economy into a recession.

So, how does the Fed and other central banks increase or decrease the supply of money? They use open-market operations, which is essentially the buying and selling of government bonds and treasuries and agencies, and when the Fed conducts large-scale purchases, this can be referred to as quantitative easing, as it expands the Fed's balance sheet. If we take a look at the first chart, we can see some notable examples of when the Fed has increased their balance sheet in the past. We can see that leading up to around 2008, the Fed's balance sheet was under $1 trillion, and it was very consistent and steady up until the crisis, when it more than doubled in just a few months. We then see that it increased up to around $4.5 trillion after multiple rounds of quantitative easing, finally started to decrease around 2018, and then, of course, we saw a significant increase in the balance sheet due to the rescue packages affiliated with the Covid pandemic rescue.

The Fed, of course, also influences money supply through their open market operations, which determines the federal funds rate. So, this is the target rate by which commercial banks borrow and lend their excessive reserves to each other overnight. And the FOMC is the policy-making body of the Federal Reserve. What we can see from the second graph is that the federal funds rate has been a fairly reliable indicator in that it has helped suggest when different recessions have occurred. Now, it's not a perfect indicator, as we can see from the chart, in the mid-90s, we saw the Fed stop raising rates, and then started to come back down again without a recession occurring till later in 2000. But overall, what we can see from the pattern is that once the Fed has gone from being done raising rates to starting to cut rates, a recession has occurred after that. So, the takeaway here is that we are now at a point where the Fed is done raising interest rates, or at least they've communicated that, and they signaled that rates have started to come down.

So, the question is, do we have a recession coming right now? The economic data and evidence that we see does not suggest that, but of course, time will tell, and we will continue to look for more evidence that that will help suggest when the next economic downturn will occur. But we do know that monetary policy is incredibly important for all the reasons mentioned, because it helps rescue the economy, it helps it influence the markets, and of course, it helps set the interest rates that we pay on our mortgages and other spending. We hope you found this information segment useful, and we hope you can join us on future episodes of “Investment Management Foundations.”

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Gary Quinzel

AI is Transforming Investing. What's in it For Investors?

wegmigrate — Sun, 26 Feb 2023 06:00:00 +0000

AI is Transforming Investing. What's in it For Investors? wegmigrate Sun, 02/26/2023 - 00:00

AI has been called a disruptor, a game-changer, and the next frontier in investment management. Every day, analysts use AI models to manage risk, inform credit decisions, and automatically detect fraud. One of the most popular uses of AI is in portfolio modeling, where algorithms use historical data to make predictions about the future performance of various asset classes.

AI is becoming increasingly important to financial firms for managing risk and improving operations and compliance. But what are AI’s potential benefits for individual investors?

AI's transformation of every industry will create innovative new companies and exciting opportunities for investors.
Financial advisors use AI tools to generate insights and customize client portfolios more effectively.
AI has great potential to help alpha-seeking investors manage risk and model long-term performance.

AI’s ability to analyze large, unstructured datasets is increasing our predictive power in several ways. While we can't predict the future, we can use AI to improve our predictive capabilities and decision-making. Wealth Enhancement Group has been exploring different types of AI designed to amplify human intelligence rather than replace it. Equipping our experienced financial advisors with more powerful predictive tools represents a unique opportunity, with an eye on improving returns, managing risk, and creating improved client experiences.

Enter the Swarm

Swarm AI is a class of AI that uses the collective behavior of swarm animals (such as ants, birds, and bees) as inspiration for its algorithms. These animals solve problems as a group, using their intelligence to implement agile solutions actively. Swarm AI, a collaborative platform developed by Unanimous AI, uses an algorithm trained by data informed by group behavioral dynamics. This technology allows individuals to answer questions collectively, with the AI reacting and facilitating the decision-making process to encourage an outcome. Then, another AI model assesses the group's behavior and assigns a "conviction score" to gauge their confidence in the decision.

Wealth Enhancement Group is always looking for ways to empower our advisors to provide more personalized, responsive service. To that end, we tested Swarm AI with a small team of our expert advisors. We asked them a series of questions about 2023's outlook, using the Swarm AI platform to collect insights. This article highlights our results.

2023 Economic Outlook

The first topic our advisors addressed was the general economic outlook for 2023. Through the following questions, we used AI to gauge our advisors' sentiments effectively and gleaned some insightful results. It is important to note that the decisions and answers presented in this article should not be relied on as financial advice. This article aims to demonstrate one way AI can help amplify human intelligence in financial advising and give our advisors the chance to express their opinions.

We asked our advisors, what is the biggest risk the stock market will face in the next six months?

Recession
Weak corporate profits
Inflation
Geopolitical turmoil
Employment
Federal Reserve intervention

To kick off our session, we asked members of our Roundtable™ team of advisors the biggest risk stocks would face in the first two quarters of 2023. Using Swarm AI software to track the group's collective sentiment, they answered with “Weak corporate profits.” The heat map below visualizes the amount of support each answer received.

Figure 1: Our panel speaks about weak corporate profits are the biggest challenge to stocks

Interestingly, our advisors chose weak corporate profits as more impactful than inflation or employment. They ultimately suggested that weak corporate profits may lead to a decrease in investor confidence and a price decline. In a market environment like this, our advisors prioritize keeping a close eye on the companies' earnings reports in their client's portfolios.

What are the odds the U.S. will enter a recession in the next 12 months?

Given the unrelenting impacts of inflation, continued Federal Reserve rate hikes, and global geopolitical turmoil, our advisors collectively decided there is a 75% chance that the U.S. will enter a recession in 2023. Our team landed on this pessimistic outlook with a reasonable level of confidence, which indicates that investors should account for this possibility as we progress through the year.

If we do enter a recession in the next 12 months, how long is the recession most likely to last?

When we asked advisors how long a 2023 recession could last, they responded with a high conviction that the recession would last only up to 6 months. The graphical data of our advisors' deliberations show that the most popular responses were between 2 to 3 quarters.

Using GDP decline as our benchmark, we asked advisors, how severe will this potential recession would be?

Our advisors decided a shallow (1-2%) recession is most likely, as shown in the heat map below.

Figure 2: Our panel speaks that the recession will likely be shallow.

Our advisors predicted a 75% chance that 2023 will yield a shallow (1-2%) recession lasting about two financial quarters.

How likely is a "stagflation" scenario for the U.S. economy in the next six months?

The dreaded "stagflation" scenario combines slow economic growth, high unemployment, and inflation. Our advisors said stagflation is unlikely during the first two quarters of 2023. While these conditions regularly occur at different times throughout economic cycles, it’s less common to see an alignment of all three, especially during a tight employment market.

Which major equity market will perform best in the next 12 months?

Our advisors initially needed help to reach a consensus when we asked this question. They were confident in their positions, to the point that they could not come to a clear answer as a group, highlighting the truth to the statement markets are unpredictable. When we asked the question again, they suggested Emerging Markets as the strongest performer but with only 30% conviction.

Figure 3: Our panel speaks, selecting Emerging Markets as the strongest performing market.

Perhaps the uncertainty of our advisors' consensus reflects a fundamental belief in portfolio diversification and not overweighting any one market or region.

Fed Report Card

The Fed plays a crucial role in our economic system, and its policies significantly impact individual investor portfolios. In this series of questions, we asked our advisors to "grade" the Fed, from A through F, on its performance in driving the U.S. economy.

We asked our advisors…how would you grade the Fed’s efforts in managing the following issues?

Fed’s grade on: Employment

Our advisors' grade? A C+, with an 84% conviction rate, shows high confidence. While the unemployment rate may currently be relatively low, this grade may change along with the rate hikes we've recently experienced if the increases lead to a softer labor market in 2023.

Fed's grade on: Stabilizing inflation

Our advisors' grade? A D, with a 71% conviction rate. The Fed's rate hikes seem to be working to lower the blistering rate of inflation.

Fed’s grade on: Avoiding a Recession

Our advisors' grade? Another D, with an 89% conviction rate, is our experiment's highest conviction rate. Advisors needed to be more impressed with the Fed's actions to avoid a recession. The need to rein in inflation has forced the Fed to raise rates very quickly, negatively impacting investor portfolios and boosting the likelihood of a recession.

Wealth Enhancement Group: How It All Fits Together

We asked our advisors… what investors value most in their Financial Advisor?

Although most of the answers below received some level of support:

Inspire confidence
Clear communication & explanations
Professionalism
Personal attention
Detail-oriented
Since their time is valued

Our team of advisors landed on clear communication & explanations as their best answer. A financial advisor is responsible for analyzing and interpreting various financial information. Clear communication about their findings makes it easier for an advisor to help their client's financial plans stay on track.

Finally, we asked our advisors… which investor action should be the HIGHEST priority now?

Trim expenses
Pay down debt
Boost emergency fund
Avoid impulsive decisions
Explore alternative investments
Consider available tax efficiencies

In the uncertain macroeconomic environment, our advisors considered what investors should prioritize in 2023. While exploring alternative investments and considering tax efficiencies were popular among some of our advisors, the winning answer was to avoid impulsive decisions. Our advisors know it can be easy to make emotional and financial decisions in difficult times. It's of the utmost importance to avoid this type of decision-making. Fortunately, our experienced advisors are here to help with that!

About this research

Our goal in this exercise was to convene Wealth Enhancement Group advisors with Swarm AI technology to gather insights and unlock the group's collective intelligence. We evaluate this technology and others for its capabilities as predictive decisions and forecasting tools.

Swarm AI® technology, developed by Unanimous AI and used by our advisor teams for this article, employs real-time human input and AI algorithms modeled after swarms in nature. Nature shows us that groups can produce insights that greatly exceed the abilities of any individual member. Research indicates that Swarm AI technology enables human groups to amplify their intelligence, an intriguing proposition for financial services.

Swarms have generated insights for the Washington Post, TechCrunch, TIME, Forbes and a host of Fortune 500 companies. More published research using Swarm® is available on the Unanimous AI website.

For more information on leveraging the power of Wealth Enhancement Group's UniFi™ process and applying our collective intelligence to your financial plan, set up a free, no-obligation meeting with an advisor today.

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