Snowbirds, Mixed Signals, and Year-End Planning
It’s that time of year again in Arizona. The mornings are finally cooling off, baseball playoffs are here, and yes—the snowbirds are back. For year-round residents, that means heavier traffic and longer waits at restaurants. But it also brings fresh energy into the Valley as seasonal visitors shop, dine, and contribute to local growth.
The economy is experiencing something similar. We’re seeing both headwinds and tailwinds. Some indicators point to softening conditions, while others suggest strength that could carry into year-end. Just like snowbirds, these mixed signals can feel inconvenient at times, but they also add momentum.
The Fed’s Dual Mandate: Inflation and Employment
The Federal Reserve has two primary responsibilities: manage inflation and support maximum employment. Balancing these goals has rarely been simple.
- Inflation: After easing earlier this year, inflation is projected to finish 2025 at around 3.2%, above the Fed’s 2% target, before trending lower in 2026.
- Employment: The labor market remains relatively strong but is cooling. Unemployment is expected to reach 4.4% by year-end, a modest rise from earlier levels. The Fed has responded by cutting rates 25 basis points in September, with expectations for two more cuts in Q4 and at least one additional cut in 2026. Lower short-term rates may help retail sales, housing, and consumer spending, but they also reflect an acknowledgement that growth is slowing at the edges.
GDP Growth and Earnings Strength
The U.S. economy expanded at a 3.3% annualized rate in Q2, with forecasts calling for 3.0% in Q3 and 2.3% in Q4. Earnings projections for the S&P 500 remain healthy, with stronger growth expected in 2026.
Seasonality also supports optimism. Historically, the fourth quarter is the strongest period for equities, and new highs in the S&P 500, Russell 2000, and international benchmarks have often led to above-average gains in subsequent months (CFRA Research).
This mix—resilient earnings, steady GDP, and historical seasonal strength—provides reasons for confidence.
Four Risks Worth Watching
At the same time, investors should not ignore risks. Mitch Zacks recently highlighted four areas of concern that could influence markets:
- A Second Wave of Inflation – August CPI data ran hotter than expected, raising concerns that inflation could reaccelerate. If that occurs, it may force the Fed to slow or reverse its easing path.
- Fed Independence and Dollar Stability – While political noise is nothing new, any perception of Fed interference could rattle markets. The U.S. dollar remains dominant globally, but “de-dollarization” headlines will continue to surface.
- Over-Concentration in Tech – AI-driven gains have fueled strong performance, but heavy concentration makes markets more vulnerable to reversals if sentiment shifts. Diversification remains essential.
- Rising Long-Term Bond Yields – Global yields have been climbing, steepening yield curves. While modest increases can support lending and growth, sharp spikes could weigh on equity valuations.
Each of these risks is widely discussed and monitored. That reduces the likelihood they become surprises—but it does increase the chance of short-term volatility if one flares unexpectedly.
SIG Perspective: Strengths Still Outweigh Risks
We view today’s environment as one where strengths outweigh negatives:
- Earnings and GDP remain resilient.
- The Fed is easing, not tightening.
- Seasonal history is favorable.
Yes, markets are still overvalued relative to long-term averages, but we believe those valuations are warranted for now, given the underlying support. Mixed signals could always lead to a pullback, but in our view, the foundation for continued growth remains intact.
At SIG, we don’t try to predict each twist in the economy. Instead, we use our Three Phases of Wealth framework—Foundation, Accumulation, and Strategic Income—to ensure your plan is prepared for whatever mix of sunshine and storms lie ahead.
Three Things to Consider Before Year-End
As we move into the final stretch of 2025, here are three practical steps to discuss with your SIG Financial Planner:
- Maximizing Contributions
Year-end is the deadline for many tax-advantaged accounts. Reviewing your 401(k), IRA, or HSA contributions now ensures you’re getting the full benefit of tax deferral and building long-term savings before December 31. - Tax Planning
Strategies like tax-loss harvesting, charitable contributions, or funding Donor-Advised Funds can reduce your 2025 tax burden and amplify your impact. - RMDs and Cash Flow
If you’re required to take a Required Minimum Distribution (RMD), doing so while valuations are high could be beneficial. Planning cash flows now can help avoid year-end bottlenecks.
Looking Ahead
We’ll continue to monitor:
- The Fed’s balancing act between inflation and jobs
- GDP trends into Q4
- Seasonal strength versus valuation concerns
- Risks around inflation, Fed independence, tech concentration, and yields
Just as Arizona’s roads fill up when snowbirds return, the economy can feel more crowded with mixed signals in play. The important part is not the traffic itself—it’s knowing how to navigate it. With a disciplined process and clear year-end planning, your strategy stays on course.
Compliance Disclosures
This commentary is provided for informational purposes only and should not be construed as investment, tax, or legal advice. The views expressed reflect conditions as of the date noted and may change. Past performance is not indicative of future results.
Strategic Income Group is an SEC-registered investment adviser. Registration does not imply a certain level of skill. For more information, please see our Form ADV available at www.adviserinfo.sec.gov.
