Hosts Doug Johnson, Senior Investment Strategist, HCM Wealth Advisors and CPAs Dan Rinck, Investment Strategist and Investment Committee Member

In this episode

• [00:00] Welcome and introductions
• [01:00] The Fed hikes 25 basis points with a hawkish tone, and why Chair Warsh's committee is showing more independence than expected
• [02:45] Can rate hikes fight inflation driven by energy prices and the Iran conflict?
• [03:15] A hot PMI sends the 10-year Treasury through 5%, and why this is a global move
• [05:00] Preview of the PCE inflation and payroll reports
• [06:30] Is the yield spike overdone?
• [07:30] Muni bonds and tax-equivalent yields near 7%
• [09:00] Stocks near all-time highs and a VIX around 16 despite the rate move
• [10:50] Weakening breadth: equal-weight vs. cap-weighted S&P 500 and the struggle in small caps
• [12:50] Dan's outlook: yields back under 5% by year-end and an "everything rally"
• [16:00] Alternatives and gold: real yields, debt and deficits, and buying opportunities
• [17:50] What the 2-year yield signals about future Fed hikes
• [21:00] The Fed has never hiked in October before a midterm. Will that change?
• [22:00] Getting past the "PTSD of 2022": the case for fixed income now
• [24:00] Rebalancing a drifted 60/40 portfolio
• [25:00] Money markets vs. CDs and Treasuries: locking in yield
• [28:00] How today's Fed differs from 2022
• [29:45] Wrap-up and potential portfolio adjustments ahead
• [30:50] Doug and Dan's PCE and payroll predictions
• [32:30] Closing and upcoming quarterly webinar

Key numbers mentioned

• 10-year Treasury: about 5.25%, peaking near 5.30%, up from about 4.7% a month ago and the highest since around June 2007
• 2-year Treasury: about 4.9%; 3-month: 4.18%
• 3-year Treasury: about 4.99%
• Money market yields: about 3.7–4%
• VIX: about 16
• Equal-weight S&P 500: down about 7% since August 15, vs. less than 2% for the cap-weighted index
• Gold: about $4,170, trading in a $4,000–$4,350 range

Coming up Watch for HCM's quarterly webinar, with charts and visuals, in about two weeks.

Questions? Reach out to your HCM advisor to talk through anything discussed in this episode.

[00:53] Fed Meeting Preview Recorded the day before the Fed's rate decision. Doug and Dan discuss the market-implied 80–90% odds of a 25 bps hike, driven by bond market pressure (10-year near 5%, 30-year around 5.3%). Dan argues it's a likely policy error, since the Fed funds rate already sits above inflation and a small hike won't address the real driver — Middle East-linked oil prices. They compare the setup to 2022 (very different — inflation was near 8% then) and discuss "fast vs. slow" hiking cycle research from Ned Davis, concluding this looks more like a slow, one-off move than an aggressive cycle.

[~14:00] Portfolio Positioning Ahead of the Decision What they're watching post-decision: equity reaction, and how the firm's gold/commodities-driven "debasement trade" (in place since June 2025) responds to a potential dollar strengthening. Notes on current bond positioning — concentrated in investment-grade corporates and defined-maturity products to limit rate sensitivity.

[20:51] The Weekend AI Story A widely discussed essay from Anthropic's CEO calling for more oversight and a slower pace of AI development. Doug recaps market reaction (modest, not the "crash" some social media takes suggested) and notes on Sam Altman and Elon Musk's public agreement, contrasted with pushback from President Trump and Chinese officials.

[23:28–29:22] Why Now? Two Theories Doug and Dan each offer a theory on the essay's timing and motive — one centered on a possible internal incident prompting a public oversight push, the other on monetization and IPO-timing pressure across major AI labs. Side discussion on the risks of engineering AI outputs to reflect particular viewpoints.

[29:22] Comparing to the Citrini Report A look back at an earlier fictional "future scenario" research report (the Citrini piece) that triggered a bigger software-sector selloff, for context on how this weekend's essay compares. Both agree this isn't the event that pops any AI "bubble," pointing to continued heavy compute investment and productivity gains at major companies.

[33:33] Tying It Together — Current Positioning No planned major portfolio changes right now; the firm continues to lean on objective data over prediction. Notes on diversification and alternatives contributing positively to returns. Brief mention of upcoming year-end tax planning season and balancing tax efficiency with sound portfolio management.

[36:50] Off-Topic: NFL Week 1 Bengals season-opener recap, fantasy football talk, and some good-natured banter to close out the episode.

[38:52] Sign-Off Listeners encouraged to reach out to their advisor with questions. Next episode in about two weeks.

In this episode of the HCM Market Brief, Doug Johnson, CFA, Dan Rinck, APMA, and Senior Financial Advisor Greg Middendorf, CFP®, CCPS® discuss the challenge of managing investor expectations after several years of exceptionally strong market returns. While strong earnings and continued growth—particularly around artificial intelligence—have supported the market, investors may be starting to view unusually high returns as the new normal. The team explains why expectations matter and why a diversified portfolio should be evaluated based on a client's goals rather than its performance relative to the market's hottest investments.

The conversation explores the risks of FOMO and concentration, particularly as AI-related companies continue to attract investor attention. The advisors emphasize that diversification remains important even when a handful of companies are driving market returns. They also discuss investor psychology, including hindsight bias and loss aversion, and the importance of making investment decisions based on a disciplined process rather than emotions or headlines.

For retirees, the team highlights HCM's use of bond ladders as a "calm bucket." Having stable assets available for spending during a market downturn can help retirees avoid selling stocks when prices are depressed and give the rest of the portfolio time to recover.

The discussion also highlights the opportunities that can emerge during market declines. Tax-loss harvesting can turn investment losses into potential tax benefits, while lower market values may create attractive opportunities for Roth conversions. By integrating investment management with tax planning, HCM seeks to look beyond the immediate market decline and identify strategies that can improve a client's long-term after-tax outcome.

Ultimately, the episode reinforces a core HCM philosophy: financial plans should be built around the client—not around the headlines. Markets will experience periods of strong growth, corrections and significant downturns. Rather than chasing what's hot or reacting emotionally to volatility, investors can benefit from a comprehensive approach that combines diversification, risk management, financial planning and proactive tax strategies.