In my client meetings, I often anchor our conversations around three words: Commotion, Caution, and Correlation. These words capture the current environment of the stock market well.
In 2020, we entered a worldwide pandemic and the government printed money to keep the economy moving. This increased our national debt and, in the short term, provided lower interest rates — which incentivized economic activity in the hope that growth would outpace the cost of that debt.
What was spent then will need to be paid for later. And that brings us to 2026.
We are now in an environment where, under normal conditions, we would be experiencing higher inflation and higher interest rates. What does that mean for your portfolio?
If things were playing out as expected, your 401(k) would likely carry a lower balance. Here's why: Higher inflation typically slows consumer spending, which reduces corporate profits, which in turn affects the value of stocks held in your portfolio. And if interest rates were higher, the face value of the bonds you currently hold would decline — because newer bonds offering better rates become more attractive, making your existing bonds less valuable. Over time, markets tend to level out, but the adjustment period can be uncomfortable.
But things are not playing out as expected. The market continues to hit all-time highs — largely driven by a concentration of companies and high-income households that are propping up the economy. Much of the stock market's recent growth has AI's success priced in — arguably overpriced — and the top 30% of income-earning households account for more than half of U.S. consumer spending.( Bureau of Labor Statistics and Fed data)
What I can't deny is that market principles win over time. I believe the market's priced-in assumption of AI dominance may be overvalued, or it may actually conflict with the interests of those very high-income households. The reality may be this: for AI to deliver on its value, some of those high-paying jobs may need to be eliminated. The principles are clear — inflation will rise, interest rates will rise, and the market is currently overpriced. The conclusion is equally clear: action must be taken today to ensure your portfolio is properly positioned, because this is not a question of if — it is a question of when.
So, what does this mean for you?
At Greater Works Wealth, we help small business owners and families with multigenerational income planning — connecting the financial dots between parents and their children. Below, we outline key considerations based on where you are in your financial journey.
Work Optionality Years (10 or fewer years from leaving the workforce)
1. Capturing the Returns in Your Portfolio I've been having conversations with clients and prospects about shifting from a price-based approach buying a share at $100 and watching it grow to $200 as a paper gain to an income-driven approach. The goal: have every share that has appreciated to $200 producing income you can actually live on, while reducing your exposure to sudden losses from market corrections. At that time, you can still experience dividend cuts, but those can be modeled. Also, tangible income would still be produced
2. Sequence of Returns Risk Waiting is not in your favor when it comes to making adjustments. Once market principles reassert themselves, portfolio values will decline. The depth of that decline will depend on how aggressively you are allocated, and significant losses at the wrong time can dramatically reduce the likelihood that your money outlives you. That is the definition of a successful retirement: your money lasts longer than you do.
3. Wealth Preservation What factors within your control could cause a sudden loss of wealth? Are you protected from liability? Have you planned for healthcare costs? Are your assets structured for responsible distribution? If any of these are unaddressed, they deserve your attention now.
Some investment areas worth researching further: TIPS (Treasury Inflation-Protected Securities), the duration of your bond portfolio, and a review of your stock positions through a principled lens. Simply put, would you rather hold a fast-growing, popular company that offers little current profit, or a reliable, proven company that distributes consistent dividends today? For those in the work optionality years, the latter deserves a closer look. In a market downturn, capital tends to flow toward companies that are consistently profitable before returning to high-growth names.
Accumulation Years (10 or more working years remaining)
1. Diminishing Marginal Utility (Lifestyle Creep) As income rises, so does the temptation to upgrade, new car, new house, new expenses. I encourage you to honestly assess whether your spending is rising in step with your income. If so, redirect those excess dollars: build your cash reserves for potential job disruption, and pay down debt. The graph below illustrates how utility (satisfaction) from additional wealth levels off over time.
2. Prepare for the Offensive As you build your cash position, start identifying stocks or ETFs you would want to buy at a discount. When the market corrects, defined as losses of 10–20%, those opportunities are rare and short-lived. Having cash ready to invest in a high-quality asset at a 10–20% markdown is the kind of opportunity you do not want to miss.
3. Engage With AI, Don't Avoid It Do not put your head in the sand and hope AI won't affect your career. Start addressing it today through classes, courses, or simply integrating AI tools into your daily life. Developing familiarity now positions you to be an asset, not a casualty, when AI is deployed more aggressively across industries. And having a strong cash reserve will provide peace of mind if job disruption does occur.
We are in a complex moment, but the actions required are straightforward, even if they aren't easy. Ask yourself: Three years from now, where do I want to be professionally and personally? That question is a powerful compass for deciding what steps to take today.
Thank you for reading. If you have questions or thoughts, don't hesitate to reach out.
For compliance purposes: This is not investment advice.
