Thanksgiving 
As Thanksgiving approaches, we find ourselves reflecting on the many blessings for which we are thankful.  If you are reading this, please know you are on our list!  It is great to live in a country whereby one can make a living by doing something one enjoys, with people one likes.  You make this possible and we thank you for the opportunity!

Thoughts on Things
Yesterday, the S&P 500 and the Dow Jones marked record highs.  This was the 52nd S&P 500 all-time high for the year!   At first glance, the stock market seems to be trading a bit rich.  Per the most recent FactSet report, the S&P is currently trading at 22 times forward earnings, whereas the 5 and 10-year forward averages are 19.6 and 18.1, respectively.  However, if we dig a little deeper, the market might not be trading as high as it initially appears.

It seems likely that a number of changes could develop which might cause earnings to increase more than the amounts currently priced in and presently anticipated.

Taxes, Tariffs, Regulatory Costs, and M&A Activity
Due to the sunset on tax policy occurring January 1, 2026, numerous taxes are scheduled to increase.   If nothing happens, the 21% corporate tax rate returns to its earlier 28% rate.  However, there is talk of not only extending the current lower rate of 21% farther into the future, but even lowering it further.  Hearing 18%, 15%, and possibly even 14%.  This alone would increase the E, as in earnings, resulting in a less pricey P/E multiple.

Should higher tariffs come to fruition, many economists believe that to be inflationary.  This is concerning.  Especially because the Federal Reserve would no longer have the ability to cut rates as much as possibly priced into the markets.  All eyes will be on the Fed’s upcoming December 18 meeting, press conference, and updated Dot Plots in their Summary of Economic Projections, for any guidance.

Some sectors are likely to benefit substantially should there be less emphasis on regulatory oversight resulting in lower costs and therefore higher earnings.  This too could have a significant impact on corporate earnings.

Furthermore, a change at the helm of the FTC to a less restrictive stance on mergers and acquisitions could result in increased activity.  This too could result in potentially higher corporate earnings, and perhaps an even higher multiple for the markets. 

 
Putting it all together, the market currently seems a bit pricey.  However, should any / all of the issues highlighted above materialize (excluding tariffs) one could see the market continue to rally.

Thank you!
Tomorrow, as we collectively pause to give thanks, please know you will be in our hearts and on our minds for reasons to be thankful.  We remain encouraged and optimistic about the future, and about the equity markets for longer-term investors.

Happy Thanksgiving to you and yours!