THE DEAN’S LIST: Edition 1

Dean’s note: Numbers have a funny way of grounding us. We hit an all-time high on December 11, and just a few days later we're in a mini-panic. Nothing fundamental changed except the Fed's tone. If your emotions swing that fast, the market isn't the problem. Your expectations are.

A clearer map of what matters this week, and why good news can feel like bad news.

The Fed cut rates. Markets fell. If that seems backwards, welcome to December 2025.

Here's what happened: the Federal Reserve delivered exactly what Wall Street expected, a 25 basis point cut, and then Chairman Powell opened his mouth. He called it a "close call." He said they "could make a case for either side." He hinted that future cuts would be slower and fewer than markets had priced in.

Markets heard "almost done" louder than they heard "cut."

Meanwhile, the jobs report came in weak-the weakest in four years. Gold is hovering near record highs. And the battle to replace Jerome Powell is heating up with two Kevins vying for the most powerful economic job in the world.

If you feel confused, you're paying attention.

Here's what's actually shaping money right now:

Strong markets are welcome. But confidence comes from understanding the forces behind them, not from assuming they'll keep rising.

On December 10, the Federal Reserve cut interest rates by 25 basis points, bringing the target range to 3.50%–3.75%. This was the third consecutive cut of 2025 and exactly what markets expected.

So why did the S&P 500 drop nearly 3% in the days that followed?

Because it wasn't just a cut. It was a message.

The vote was 9-3—the most divided Fed decision in years. Three members dissented: two wanted no change at all, one wanted a bigger cut. Powell described the decision as a "close call" and said the committee "could make a case for either side." That's not confidence. That's a coin flip.

Then came the "dot plot", the Fed's projection of future rates. It now signals only one more cut in 2026 and one in 2027. Just weeks ago, markets were pricing in three or four cuts next year. The gap between expectation and reality hit like a cold shower.

Here's what most people missed: the Fed also quietly resumed Treasury bill purchases, about $40 billion starting December 13. They're calling it "technical." But when the central bank starts buying government debt while cutting rates and running deficits this large, the history books start vibrating a little with the sounds of monetizing debt. 

Central banks can successfully ease into low unemployment and rising asset prices as long as inflation remains in check. The debt load on the US government demands lower rates even if it comes at the expense of some more income inequality. And maybe asset inequality is really the better way to put it.

Is it a bubble? Sell everything? No. Position your portfolio to benefit from more themes than just Mag 7. Small caps, mid caps, foreign stocks, gold and even bonds have a role to play in 2026. Bubbles can inflate for years before they pop, and they only pop when policy tightens enough to prick them. We're not there yet. But it does mean the easy part of this cycle is behind us.

Dean’s note:
Rate cuts calm nerves. But when they happen during strong growth and high asset prices, it's worth asking: who are they really helping—the economy or the balance sheet? The new Fed chair is most certainly going to push the low rate accelerator. Some parts of the market will benefit disproportionately. The longer part of the yield curve and the dollar both require close monitoring as this drama unfolds.

Jerome Powell's term ends May 15, 2026. The race to replace him has narrowed to two men, both named Kevin.

Kevin Hassett is currently Director of the National Economic Council. He's close to the president, dovish on rates, and favors aggressive cuts. A recent survey found 84% of market participants expect Trump to pick him—but only 11% think he should be picked.

Kevin Warsh is a former Fed Governor with a more traditional approach. He's seen as more independent, more hawkish, and more willing to let markets find their own footing. Wall Street tends to prefer him, but he's not as politically connected.

Why does this matter? Because the Fed chair shapes the cost of money for a decade. A dovish chair means easier credit, higher asset prices, and more risk of overheating the economy and further dividing the haves and the have nots. A hawkish chair means tighter policy, lower valuations, and less margin for error.

History offers a guide here. In 2013, when Janet Yellen was named to succeed Ben Bernanke, Treasury yields stabilized, equity multiples expanded, and markets priced in a different rate path months before she took office. The transition itself became a catalyst.

The same will happen now. Markets don't wait for someone to sit in the chair, they price in their expected approach well before the first meeting.

Dean’s note:
Fed chair transitions are underrated market events. The shift in expectations can matter more than the actual policy changes that follow. If you own long-duration bonds, growth stocks, or anything sensitive to discount rates, this decision will move your portfolio before the new chair writes a single memo.

The November jobs report landed with a thud.

The economy added just 64,000 jobs—barely above expectations of 45,000 and a far cry from the 200,000+ pace we saw earlier in 2025. October was revised down to show a loss of 105,000 jobs. Unemployment climbed to 4.6%, the highest since September 2021. Average hourly earnings rose just 3.5% year-over-year, the smallest gain since May 2021.

This isn't collapse. But it's not strength either.

What we have is a "low-hiring, low-firing" economy. Companies aren't laying off workers en masse, but they're not adding them either. If you have a job, you're probably keeping it. If you don't, finding one has gotten harder.

Part of this story is structural. Immigration restrictions have slowed workforce growth. The share of workers holding multiple jobs is the highest it's been in 25 years—a sign that one paycheck isn't stretching as far as it used to.

The government shutdown made things messier. The Bureau of Labor Statistics skipped the October report entirely, leaving a two-month data gap. The Fed made its December decision with stale information—and Powell acknowledged as much, noting that payroll gains "may be overstated" and that his team estimates the economy might actually be losing 20,000 jobs per month rather than gaining 40,000.

That's a big difference. And it explains why the Fed sounded uncertain.

The labor market doesn't lie, but it does whisper. Right now it's saying: "I'm not breaking, but I'm bending." For retirees and near-retirees, this matters less for your portfolio and more for your adult children, your grandkids, and the economy they're trying to build careers in. A soft job market doesn't crash stocks. But it does change who benefits from the next leg up.

Gold is trading around $4,360 per ounce, right near its October all-time high of $4,381, and up close to 70% year-over-year. That's one of the best annual performances since 1971, when Nixon took the dollar off the gold standard.

Why? Because investors are nervous, and they're willing to hold an asset that pays nothing for the privilege of sleeping better at night.

Gold doesn't predict doom. It reflects mood. And right now, the mood is cautious:

Central banks are buying gold at a pace not seen in decades. Poland has expanded its purchases. Brazil resumed buying for the first time since 2021. China continues to accumulate. These aren't retail investors panicking—these are institutions hedging against a world where the dollar's dominance isn't guaranteed forever.

Here's the math: gold yields nothing, while 10-year Treasuries yield 4.1%. That means investors buying gold at $4,360 are implicitly betting it appreciates more than 4.1% per year just to break even. They're making that bet anyway.

I've long believed that a small allocation to commodities like gold—5% to 10%—serves as a hedge against the things you don't know. Not because you're predicting disaster. Because you're acknowledging you can't predict everything.

If you check the gold price every hour, you've misunderstood what gold is for. It's not a trade. It's insurance. You don't check your homeowner's policy every day to see if your house burned down. Same principle.

We hit an all-time high last week. Then the Fed spoke, and suddenly everyone's worried again.

This is how markets work. They don't move in straight lines. They zigzag, overreact, correct, and eventually find their footing. The S&P 500 is up about 16% this year. Most people didn't expect that after the tariff tantrum mid-year, the government shutdown, or the AI rotation fears. And yet, here we are.

Wall Street expects more gains in 2026 - most forecasts land between 7,400 and 7,700 on the S&P 500, roughly 10% to 14% higher from here. The herd is usually wrong, but which way? My instinct? They'll miss too low again. Corporate earnings are solid. The Fed is supportive. Geopolitical risk is declining, not rising.

But here's the thing I keep reminding myself: what you don't know about the future is far greater than anything anyone knows about the future. Powell doesn't know. The Fed doesn't know. I certainly don't know.

What I do know is this: Cardiff had a year I never imagined possible. Did I feel victorious? Not really. I felt gratitude. And freedom. Because when you already have what matters—choice, time, independence—the scoreboard becomes less important.

If you're withdrawing three to five percent per year, this is a moment where understanding the why behind your returns matters more than the returns themselves. Income, stability, and clarity work together.

Next week, we'll talk about preparing for 2026, the Santa Claus rally, year-end tax moves, and what the new year might bring. No twists. No sudden pivots. Just more clarity and more grounded truth.

— Dean