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Quarterly Letter – Third Quarter 2025

Quarterly Letter – 3rd Quarter 2025 [PDF]Download

Introduction

Welcome to our third-quarter update, where we reflect on the key events that shaped the past quarter and share insights to help you prepare for the months ahead. First, “From the Desk of Liz Bernhard,” Albion’s President and Senior Wealth Advisor balances subjective investor sentiments with the stronger realities of hard economic data. Then, Chief Investment Officer Jason Ware analyzes and interprets recent economic events to provide an assessment of our current trajectory. And Senior Wealth Advisor Jackson Watson makes his debut in the Planner’s Corner by framing the remainder of the year around a checklist of practical financial planning considerations. Finally, don’t miss the final segment of this letter to meet the newest members of our team and for registration details to our Fall Conference Call on October 29th.

From Liz Bernhard’s Desk

Vibecession is still a thing 

First, a definition.  

Vibecession: an economic situation in which people feel like the economy is in a recession even if the objective data such GDP, employment, and inflation don’t actually meet the criteria for a recession.  

The term vibecession was coined in 2022 when we had tension between high inflation on one side and strong labor markets and growth on the other. Fast forward 3 years and the disconnect between how people feel about the economy and what is actually happening in the economy is still prevalent. I can’t tell you how many conversations I’ve had recently in which clients express their disbelief at how well their accounts and the markets in general have performed this year. For many, their somber expectations stem from what they hear in the news, on social media, or in their social circles. We know that doom and gloom sell – negative headlines get more attention than positive ones, and just about everything counts as “breaking news” these days. It is easy to understand how people’s perception of the economy may not mirror the objective economic data however, as prudent investors tasked with making the best decisions possible on behalf of our clients, we ask ourselves, what is really happening in the economy?   

Let’s dig in.  

You may have heard the term “soft data” and wondered what constitutes data that is soft. Statistics on laundry detergent or plush toilet paper? Nope. The term “soft data” is generally used to categorize information about how people feel. Think surveys. Two of the most frequently referenced surveys are the University of Michigan Consumer Sentiment Survey and the Conference Board’s Consumer Confidence Survey. Both surveys poll households across the U.S. monthly by asking a series of questions aimed at determining how people feel about the economy, their financial situation, and their outlook for the future. Although they use slightly different methodologies, both surveys (as of August/September) show consumer confidence/sentiment continuing to decline. 

Can survey responses be subjective? Absolutely. Wording of questions, the respondents’ recent experiences, headline news, and political identity all contribute to the responses given on these surveys. In fact, consumer sentiment has increasingly diverged along party lines since the early 2000s.  

If many consumers are generally feeling uneasy about the current state of the economy and the future, what is driving the markets higher? The answer: hard data! Hard data is not statistics on steel or cement, but rather measurable, quantifiable, observable happenings. The unemployment rate, inflation, GDP, retail sales, businesses fixed investments, and default rates are all examples of hard data. And so far, these data are holding up ok – some might even say they are holding up well (depending on how the question is asked and what side of the bed you woke up on). The overall unemployment rate is hovering around 4.3%, inflation is hovering around 3%, GDP for the second quarter was just revised up to an annual growth rate of 3.8%, and retail sales continue to climb. In this hard data environment companies are growing their earnings – on average earnings of S&P 500 companies are up more than 11% in the last year. Earnings drive stock prices and if companies are growing their earnings, investors are willing to pay more to be owners of the stock.   

 In an ever-divergent population where data is questioned and opinions are given ad nauseum, where clickbait sells, and feel-good stories are buried on page 6, it seems hard to envision the unification of sentiment. Some portion of the population is always dissatisfied with their current situation and pessimistic about the future. We are human and to be human is to be biased. However, to be a good investor we must put aside our personal feelings colored by our relationships, politics, and beliefs and look at the facts. That doesn’t mean we ignore the collective sentiment of consumers in the U.S. – we would be remiss to do so as consumer spending drives over 70% of our economy. If enough consumers feel bad about their lot in life, this collective sentiment, this “soft data” can impact the hard data too. Yet we must strike a balance. Regardless of your current vibes, we must look through the noise and focus on the measurable, trackable, quantifiable metrics that drive growth. 

Thank you for entrusting Albion to do this work on your behalf day after day, year after year. We are honored to be working side by side with you to reach your goals.   

Economy and Markets  by Jason Ware

The third quarter gave investors more plot twists (when does it not?): the first Fed (FOMC) rate cut in nine months, a notably cooling labor market, green shoots in both housing activity and the manufacturing sector, and equity markets that – despite periodic jolts from Washington – keeps grinding higher. 

Beneath the headlines, the real economy continues to expand. Not a boom like just after the pandemic, but a solid pace. After a soft(ish) first half due almost exclusively to spring tariff shocks, growth has resumed and looks far better in the second and third quarters. To wit, we think GDP growth over the summer may have tracked as high as +3% (annualized). For its part, the Atlanta Fed’s ‘GDPNow’ presently sits around +4%. Combined, that keeps full-year growth in a good lane underscoring the resilience of consumer demand and business investment (especially AI capex!). Private sector balance sheets are in good shape. Meanwhile, the job market has cooled but is overall healthy. Unemployment sits at 4.3%, while hiring slowed to sub 50K per month (average) and is more mixed across industries. Manufacturing jobs, energy, and government sectors were a drag while healthcare and education endured as bright spots. Other metrics within the labor market, like layoffs (low), wages (beating inflation), and demand (buoyant, though AI is probably having some impact), suggest that the overall employment situation is constructive. From our perch, waning monthly job adds might have more to do with labor supply than anything else. Consequently, a sub 100K cadence may, for now, be equilibrium. 

On the inflation front, things remain sticky, largely benign, though still above Jerome Powell’s 2% goal. The latest read on core PCE – the US central bank’s preferred gauge – ran at 2.9% y/y (headline 2.7%). Services continue to produce most of the inflation we experience, while goods prices are low yet have seen an uptick (perhaps due to tariffs). Within the service category, housing and insurance obstinacy lingers, though drifting down. Overall, inflation has not surprised us, and remains in the zone that we’ve long said was likely (mid/upper-2s). 

Housing has stirred a little recently. With mortgage rates easing into the low-6s by late September, purchase and refi activity perked up a bit and pending home sales surprised to the upside (+4% m/m in August). Certainly not boom levels of activity – inventories remain pretty tight – but lower financing costs and buyers finally losing patience have housing transactions thawing some. US manufacturing is also showing some promising signs after over two years mired in a slump. Time will tell if this is a durable upturn … it’s early … but we are encouraged by what we’ve seen in the data lately. Services continue to do more of the economic heavy lifting (as is typical). 

On policy, the Fed delivered a fresh rate cut at quarter’s end and (re)emphasized data-dependence. We expect additional easing in the months to come, particularly if the labor side softens further while inflation behaves. The present internal debate on the FOMC is interesting. Some favor moving faster, although the current center of gravity is gradualism. We continue to reason a destination near a mid-3s “neutral” funds rate is sensible; the glidepath will reflect the jobs-inflation tradeoff in the months ahead. Meanwhile, yields finished the quarter lower at the front end (on the Fed cut) but the 10-year Treasury hovers around 4.15% as term premium, growth and inflation data (plus expectations), and supply dynamics offset much of the easing impulse. 

Against this backdrop, equities continue their advance. Many US indices notched fresh highs in late September as mega-cap tech, semis, select communication services, and consumer discretionary groups led, while breadth improved on the margins with cyclical participation waxing and waning alongside rates. Small caps also (finally) logged a solid quarter. Indeed, year-to-date returns are firmly positive. Driving this are corporate earnings (critically important) with the summer reporting period posting double-digit growth (+11%). Q3 is tracking for further gains. Importantly, the AI-levered “super earners” still anchor the markets story, but we are seeing some level of a “quiet broadening” under the surface. 

Valuation is an open question. By most lenses stocks are “fully valued” versus history, though not egregiously so, expressly when paired with double-digit profit growth – both now and in the pull through 2026/27. There’s also the prospect of policy tailwinds from the Fed as well as tax cuts, deregulation, and other “business friendly” impulses on the fiscal side. Nevertheless, P/E multiples currently carry a premium to long run averages. That premium however is (still) more concentrated in higher growth, exciting areas like tech and AI – which, to date, continue to deliver. 

We kicked off 2025 talking about a “year of three-twos”: roughly +2% GDP, core inflation in the (mid) 2s, and at least two Fed cuts. That framework largely holds. Growth is proving sturdier than most feared, inflation sports a 2-handle, and we now have [Fed] “Cut #1” in the books with at least one more plausible before corks pop on New Year’s Eve. Add in steady corporate cash flows, the dream of AI productivity propelling profit margins, and a more pro-growth policy stance (both fiscal and monetary), and the bull case remains intact. Risks haven’t vanished, of course. Policy errors, including ever-present DC drama (e.g., late-September funding standoff, tariffs, etc.), geopolitics, and the penchant for markets to, at times, go to extremes, all could produce turbulence along the way. However, volatility is part of the experience in the stock market on the path toward reaping the magic of compounding returns. 

As always, we’ll keep adapting as facts change and stay grounded in what matters – discipline, resilience, and the long view. Thanks for your trust. 

Planner’s Corner by Jackson Watson

Fall Reflections & Year-End Readiness
As the third quarter wraps up and the days start to cool, I always enjoy the slower pace that fall brings—time with loved ones, crisp mornings, and the anticipation of ski season. It’s also a natural moment for reflection: to take stock of what the year has brought, and to focus on what still needs attention before it draws to a close.

While the world around us continues to shift—markets, legislation, technology—the principles of good financial planning remain steady. As we head into the final stretch of the year, the planning team at Albion is here to help you tie up any loose ends and ensure everything is aligned with your goals.

Here are a few key items to review:

  1. Retirement Contributions
    If you’re contributing to a 401(k), 403(b), 457(b), or another employer-sponsored plan, now’s a great time to check whether you’re on track to contribute what you intended by the December 31st deadline. Reviewing your paystub or custodian’s website is a helpful place to start—and we’re always here to assist with questions about contribution amounts, Roth vs. traditional, or anything else.
  2. Required Distributions
    If you’re turning 73 this year (or are already older), you may need to take Required Minimum Distributions (RMDs) from tax-deferred accounts by year-end. First-time RMD recipients have until April 1, 2026—but all others must take their RMD by December 31, 2025. If Albion manages these accounts for you, this is likely already in place. But if you have outside accounts, let’s make sure nothing gets missed.

If you have an inherited IRA that you inherited after 2019, RMDs were not required for 2020-2024, but they must be taken this year. As a reminder, these accounts need to be fully distributed within 10 years. 

The same goes for trust distributions—some irrevocable trusts require income to be distributed by year-end. If we manage a trust account for you, we’re happy to help with this review.

  1. Charitable Giving
    Gifts of cash or appreciated stock—including to Donor Advised Funds—must be completed by December 31st to count for 2025. If you’re making Qualified Charitable Distributions (QCDs) from an IRA, those must be made before taking the full RMD, or they won’t reduce your taxable income. Timing matters, and we can help ensure things are processed correctly.
  2. Annual Exclusion Gifting
    The end of the year is also a great time to consider annual exclusion gifts as part of your wealth transfer strategy. In 2025, you can gift up to $19,000 per recipient without using any of your lifetime gift and estate tax exemption. Married couples can combine their exclusions to give $38,000 per recipient. These gifts can be a simple, tax-efficient way to support children, grandchildren, or others—and when done consistently over time, they can significantly reduce the size of a taxable estate. To count for 2025, gifts must be completed by December 31st.
  3. Estimated Taxes
    Fourth-quarter estimated taxes are due January 15, 2026. This is a good time to check if those payments are still appropriate based on your income and realized gains this year. We can assist in reviewing your year-to-date picture to avoid under -or overpaying.
  4. Roth IRA Conversions
    For some clients, converting a portion of pre-tax IRA funds to a Roth IRA can be a valuable long-term strategy—especially if your current tax rate is lower than what you expect in the future. With the OBBBA tax changes arriving in 2026, this may be a particularly important year to review your Roth conversion potential.
  5. Realized Gains & Losses
    We’ll review realized gains and losses in Albion-managed accounts, but if you’ve sold assets elsewhere, let us know. We may be able to help coordinate with your CPA or adjust your estimated tax payments accordingly.

Closing Thoughts
The leaves are changing, and the first snowfall won’t be far behind. Just like prepping your skis for the season or doing a bit of fall yard cleanup, a little proactive financial prep now can save stress later.

If any of these items apply to you—or if you simply want to check in—we’re here to help. Thank you for your continued trust, and we look forward to helping you close out the year with confidence.

Albion Community Update

Save the Date


On Wednesday, October 29, 2025 at 10:00 AM MT we will
be hosting our next Client Conference Call. We always look
forward to these calls and greatly value the opportunity to
connect and share ideas with you. We encourage your
participation and welcome any questions you may have—
either live during the call or in advance by sending us an
email. A recording of the call will be available on our blog
and YouTube channel afterwards, and a copy will be
emailed to you. Go to our website to register –
www.albionfinancial.com/events.


New Faces


Please join us in welcoming the newest member of our
Financial Planning team, Lily Prunty. Lily is from Sandy,
Utah. She graduated from Utah Valley University with a
bachelors degree in Personal Financial Planning. Lily also
recently passed the CFP® exam and is working on
completing her certification. She will be working alongside
Michelle Buxton and Paige Christensen.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

Categories
News

Albion Financial Group Surpasses $2 Billion in Assets Under Management

$2 billion! While we do not measure our success merely by assets under management (AUM), we wanted to highlight this occasion by saying “thank you!” This number means nothing without our clients. This milestone affirms the values and client-focused approach that have defined Albion since our founding – 43 years ago.

Our success is built one relationship at a time, and this growth is a testament to the dedication of each member of our team and the trust of every client we serve. The numbers matter, but what’s most important is that we help people make a lifetime of good financial decisions.

Categories
Community

Quarterly Letter – Second Quarter 2025

Second Quarter 2025 – Quarterly Letter [PDF]Download

Introduction

As the golden days of summer unfold, this letter’s contributors each offer thoughtful perspectives: John Bird, CEO, characterizes how Albion’s steady guidance to clients aims beyond mere financial success, Jason Ware, CIO, charts the resilience of markets amidst uncertainty, and Senior Wealth Advisor Anders Skagerberg finds wisdom in the quiet growth of both gardens and portfolios. Read through to the Albion Community Update segment for details on our next conference call and to meet the two newest members of our Investment Team.

From John Bird’s Desk

What does it mean to have a successful financial life? It’s a question we’ve devoted our professional lives to understanding so we can guide clients along their own success path. Our work at Albion is concentrated in two overlapping spheres. The first is working to help each client understand their current financial position and where, on the current trajectory, their financial life is heading. We then work over the years to improve that trajectory through financial planning. Intimately associated with that is the second sphere; managing financial assets in service of the plan. Our investment team dives deeply into the economy and markets to identify and monitor investments that individually have merit and as part of a portfolio provide return potential and diversification. Our team must stay abreast of this flood of information every day and work to separate the signal from the noise. It’s ceaseless as financial markets never sleep. 

In this quarterly missive you will hear the perspective of Jason Ware, our Chief Investment Officer, who with the rest of the investment team works daily to keep our portfolios on the right track. And you’ll hear from Anders Skagerberg, one of our Senior Wealth Advisors, who will highlight important planning issues and how they might impact you. The work of these teams is the foundation of what we do. But it’s not all we do. And from time to time it’s not the most impactful thing we do.  

Is ‘What does it mean to have a successful financial life?’ the right question? I think not. Treating financial success as the primary objective is putting the cart before the horse. But drop a word and the question is better. How about ‘What does it mean to have a successful life?’. Albion’s work is to help our clients plan and manage their financial affairs so they stay on their path of a successful life. 

A few examples may help illustrate this point. In just the last several weeks I’ve been fortunate to join client meetings where while a review of financial planning and investment issues was an essential exercise for setting the stage the challenges creating the most concern were less financial and more about life direction.  

Taking the significant step to retire is one of these challenges. Our financial planning work provides clarity around the financial resources available in retirement. Portfolios are allocated to support retirement as well. The difficulty is often grappling with the question of “What does it mean to have a successful life?, which by extension requires coming to grips  with stepping away from a career that has provided purpose, meaning, identity, and financial success often for decades. Having some notion of what we are retiring to is at least as important as acknowledging all we’ve gained from what we are retiring from.  

In a recent meeting a client announced she’d made the decision, informed her employer, and was retiring in six weeks. We of course were excited for her and happy to hear the news. But it wasn’t a surprise. Rather it was the culmination of a long and thoughtful process of exploring what retirement would look like from a variety of perspectives. She’d thought through and had begun engaging in what she was retiring to. She had a strong family and friend group outside the office. And she knew the financial opportunities and limitations retirement would bring.  

Working with our clients as they negotiate the challenges of an ill spouse, child, or parent or the death of a spouse, child, or parent are other areas where financial stability is not, nor should it be, the primary focus. However it can be helpful when we are able to work with our clients to help them see a clear path to continued financial stability during such difficult times. The passing of a spouse is very difficult and may lead to a reexamination of life’s priorities. Serving as a sounding board, and a financial check and balance, for surviving spouses during these transitions has been helpful to our clients and gratifying when in some small way we are able to contribute to a better outcome. 

I met with a long-time client the other day whose spouse passed away after a protracted Alzheimer’s driven decline. Prior to her decline the two of them were inseparable. They built and ran a business together, played music and traveled together, and were clearly one another’s best friends. Alzheimer’s changed their roles. He became the primary caregiver, she the patient. Now she’s gone. The joy of running and growing the business is not nearly as powerful as it was when he shared challenges and successes with his best friend. Yet it’s been central to his life for five plus decades. He is working to redefine what’s most important to him and to be deliberate about what he’d like the next decade to be. I don’t know if our conversations will truly help him narrow down the potential paths available though I do feel that offering a safe space to explore – and helping keep financial guardrails in place – has offered a modicum of peace of mind. 

What are the takeaways? Having a place to explore your prospective path into the future with someone who can listen carefully and without judgement yet help ensure your financial guardrails remain in place may be helpful. Honoring who we are and where we’ve come from yet being open to step out of the past into the future opens a world of possibilities. And finally I’d like to note the primary conclusion from an eighty-five year study by Harvard University into determining the key factors that are the best indicators of being happy in life. It comes down to one: Positive relationships keep us happier, healthier, and help us live longer. It pays to care about one another. 
 
We will continue to work to offer excellent guidance as we endeavor to help you make a lifetime of good financial decisions. We will work to ensure your financial assets are invested to offer a high probability of meeting or exceeding your goals. But this is only part of it. Each of us needs to nurture those relationships that whether we know it or not truly give our life meaning. 

Thank you for entrusting your financial-well being to Albion. We will never take your trust for granted and work each day to earn it over again. 

Economy and Markets by Jason Ware

The second quarter of 2025 gave investors a bit of everything: acute policy uncertainty, sudden war in the Middle East, a sharp drawdown in stocks, and new all-time highs – all in the span of twelve weeks. April opened with a thud, as newly announced tariffs sent markets into a tailspin. Stocks dropped quickly in almost Covid-like fashion, bond yields jumped, and recession chatter returned. But the panic faded almost as quickly as it began. By the end of the month, the White House had walked back key parts of the tariff plan, easing pressure. Markets stabilized. Come mid-May, they were rallying once again as a second key tariff pause, this time with China, took hold. By late June, the S&P 500 had not only recovered it hit fresh highs and in the face of Israeli and US airstrikes on Iran nuclear facilities. Wow. Markets always seem to climb that “wall of worry.” 

Underneath the headlines, the economic backdrop continued to evolve, but not unravel. After a soft first quarter – real GDP slipped slightly into negative territory solely due to a flood of imports ahead of tariffs – the second quarter is shaping up stronger, with current estimates near +3% growth. Averaging the two quarters, the first half of the year is running around +1.5%. Not bad. Meanwhile, the labor market remains healthy. Job creation has normalized and is in positive territory, while unemployment remains stable and wage growth outpaces inflation helping real incomes. Given this employment backdrop consumer spending is holding up, especially among middle- and higher-income households. On the business side, capital investment remains solid led by AI infrastructure, automation, and software. That said, not everything is firing – manufacturing is weak (been in a slump for over 2 years), housing is stuck in a low-transaction freeze, and tighter credit conditions persist. Nevertheless, the US economic engine overall is still running. 

Inflation has settled into the “2 percent-plus” zone we’ve long argued would occur. It’s neither reaccelerating nor all the way back to the Fed’s 2% target. Numerically, core PCE, the Fed’s preferred measure, hovers in the high-2% currently driven by sticky shelter prices and select other services (like insurance). Going forward, many fret that tariff costs will be an upside impulse to general inflation. From our perch, we doubt that will be the case as the services category cools further.  

Speaking of the Fed, Powell & Co. held rates steady through the quarter, signaling a patient stance. The Fed isn’t in a hurry. They want to see how the economy evolves with tariffs and clearer signs that inflation is heading toward target. From our vantagepoint, the destination remains the same … a Fed funds rate in perhaps the high 3% range, which we view as neutral. The path there may just take longer than originally hoped. Indeed, we still pencil in two rate cuts this year, probably commencing in September. The annual gathering of central bankers in Jackson Hole later this summer (August) should be interesting.  

Against that backdrop, equities have displayed their mettle. The early-April plunge sent the S&P 500 down over -12% (-20% off February highs), yet business earnings and economic data kept coming in resilient, so buyers returned. To wit, first quarter profits rose over +13% year-over-year and early Q2 numbers are tracking positive as well. Full-year EPS is projected to reach ~$270 / share with 2026 estimates near $300. For perspective, that’s nearly double 2019’s pre-pandemic baseline. American companies continue to adapt and grow in ways that defy easy macro narratives. 

Valuations, however, are arguably “full.” The S&P now trades at roughly 22x forward earnings (P/E) – historically rich, though supported by good fundamentals. Moreover, valuation tells us little about near-term market direction and that premium may be justified by unmatched domestic corporate vitality – much of which remains concentrated in a few mega-cap names, the epicenter of said dynamism, though it is beginning to broaden. We’re seeing renewed interest in sectors like healthcare, financials, and industrials. Concurrently, after a notable sluggish stretch, other areas like small and mid-cap stocks – even international equities – are starting to show signs of life. We continue to believe that in this environment, where the market’s leadership may be less concentrated, diversification is prudent. 

Earlier this year we stated that 2025 could be defined by “three twos”: (roughly) +2% GDP growth, core inflation in the 2s, and two Fed cuts. That framework still holds. It’s a setup that doesn’t require heroic assumptions. With the economy expanding, profits growing, inflation steady and unproblematic, and rates in check, the case for an enduring bull market remains intact. Of course, risks haven’t vanished. Geopolitical friction, policy missteps, and DC politics may stir up volatility. But volatility, as ever, is a feature – not a bug – of long-term investing. 

We’ll continue to monitor the shifting landscape, adapt where necessary, and stay grounded in what matters most – discipline, resilience, and taking the long view. Thanks, as always, for your trust. 

Planner’s Corner by Anders Skagerberg

This spring has been a big one for me. It’s our first in our new home in Murray, we’ve just welcomed our third child (a healthy boy named Henry), and I’ve been spending many mornings out in the garden.

There’s something about those early hours, cup of coffee in hand, checking on the tomatoes and peppers, trying to figure out why my cucumber plant won’t grow (still a mystery), pulling a few weeds. It’s quiet work. Not flashy. But very satisfying.

What’s been most striking, though, is how much it mirrors the work I do as a financial planner—and how similar growing a garden is to building wealth.

You Can’t Rush Growth, But You Can Set the Stage

There’s a quote I love from Bill Gates:

“Most people overestimate what they can do in one year and underestimate what they can do in ten years.”

That feels especially true for me right now as I look out at my young and untamed garden.

I’ve spent the last few months designing, planting, weeding, laying mulch, and getting the irrigation just right. A lot of the effort is invisible—underground, behind the scenes. The payoff isn’t instant. But if I do it right, I’ll be reaping the rewards for years to come.

Wealth works the same way. The early stages are foundational:

  • Contributing to retirement accounts
  • Investing for the long run
  • Avoiding mistakes
  • Being patient

It’s easy to lose sight of the long-term vision when you’re knee-deep in the work. But if you can keep that vision in focus, the rewards can be staggering.

Some Things Multiply on Their Own—If You Let Them

I planted strawberries and asparagus this year, and one thing I love about both is that they propagate. They send out runners, expand their reach, and come back season after season, bigger, stronger, more fruitful.

That’s garden compounding at its finest.

When it comes to your money, compounding growth is one of the most powerful forces in investing. 

As your investments generate returns, those returns begin to generate their own returns—leading to growth on top of growth. Over time, this creates an exponential curve that’s easy to underestimate but incredibly impactful. With enough time and consistency, compounding becomes a positive feedback loop that can help you reach your financial goals—and potentially go far beyond them.

But you have to give it time and be patient. And of course, you have to protect against weeds.

Weeds Never Pull Themselves

In the garden (especially mine it seems), weeds are inevitable. They pop up after a rainstorm or creep in when you’re not looking. Left alone, they choke out the things you actually want to grow.

Financially, weeds can take the form of:

  • Delaying your estate plan
  • Spending more than you make
  • Jumping in and out of the market

Individual weeds may seem minor in isolation, but over time they drain energy, attention, and resources. Staying on top of them—just like in the garden—is what creates space for the good stuff to thrive.

Sometimes You Have to Get Technical

Here at Albion we talk a lot about simplicity in financial planning and investing—and for good reason. The fundamentals are powerful: spend less than you earn, invest consistently, own great companies, think and act long term, and stay diversified.

But sometimes, getting to simplicity requires complexity behind the scenes.

When I set up my irrigation system this spring, I had to dig into the details: What size dripper for each plant? How long for each zone? How frequently, and at what time of day?

It was technical, tedious, and worth every minute—because once it’s dialed in, everything else runs smoothly.

That’s how I think about tax planning, too.

It’s not glamorous, and it’s often overlooked. But when you fine-tune the details, create solid income projections for the year and compare different tax scenarios and strategies, you begin to understand how you can save money at tax time each and every year. 

And just like the irrigation system, once it’s set up right, your financial plan can run more efficiently—with less stress, better results, and just minor changes along the way.

At the end of the day, good gardening and good planning aren’t all that different.

The same principles apply:

  • Start with a plan.
  • Dial in the details.
  • Check in regularly.
  • Clear the weeds.
  • Invest long-term.
  • Stay patient.

And remember—growth might not look dramatic day-to-day, but when you zoom out, you’ll be amazed at what you accomplish.

Here’s to a summer of steady effort and meaningful progress—in your garden, your finances, and your life.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

Categories
News

Albion Financial Group ranked one of “America’s Top RIAs” by FA Magazine

We are pleased to share that Albion Financial Group has been included in Financial Advisor Magazine’s America’s Top RIAs list for 2025.

About the Ranking

Each year, Financial Advisor Magazine compiles its list of America’s Top Registered Investment Advisors (RIAs) based on assets under management (AUM) at independent RIA firms. For the 2025 edition, the ranking includes firms with AUM exceeding $500 million as of December 31, 2024. This recognition places Albion Financial Group among the top-tier advisory firms in the country.

Proudly Representing Salt Lake City

We are especially proud that Albion Financial Group is the only Salt Lake City-based firm to be included in this year’s list. This distinction underscores our position as a pioneer in the financial advisory industry, both locally and nationally.

Looking Back

This ranking highlights the firm’s impressive growth from our founding in 1982. This growth is a reflection of the trust that many individuals and families have placed in our firm to help manage their financial futures. We are grateful for the opportunity to serve our clients and appreciate the confidence they have in us.

Looking Ahead

We thank FA Magazine for this recognition of the hard work of our talented team. We see our growth as a testament to our dedication, expertise, and service to our clients and it inspires us to continue striving for excellence and innovation in all that we do.

Thank you for being part of the Albion community. We look forward to achieving even greater milestones together!

**Albion did not provide compensation to be included in this ranking. The criteria and methodology used are determined by the sponsoring organization and is generally based upon publicly available information. Please note that this ranking is not exhaustive, does not include all financial advisory firms nor does it consider individual client portfolio performance. A firm’s inclusion in this ranking does not constitute an endorsement or guarantee of its services and investors should conduct their own due diligence before selecting an advisory firm.**

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Spring 2025 Client Conference Call

During last week’s conference call, our panelists – Jason Ware (CIO & Chief Economist), John Bird (CEO & Co-Founder), Anders Skagerberg (Senior Wealth Advisor), and Liz Bernhard (President & Senior Wealth Advisor) – addressed the heightened uncertainty in today’s economic and market environment. They discussed recent volatility in both stock and bond markets, the weakening US dollar, and declining consumer sentiment. The conversation covered the broader economic landscape, including the impact of shifting trade policies, new tariffs, and changes in federal policy leadership, all of which have contributed to a general slowing in economic activity as businesses and consumers await greater clarity.

The team also shared insights from our client conversations. Many are understandably feeling nervous given the current uncertainty, and we emphasized that Albion’s planning process is designed to account for both good times and challenging periods. Our scenario modeling is designed so financial plans remain robust, even in less favorable environments. At the same time, we recognize that everyone’s situation and perspective is unique—some are concerned, while others, with more experience weathering market cycles, are less fazed by current events.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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Quarterly Letter – First Quarter 2025

As the snow melts and spring blossoms emerge, we close the books on a dynamic first quarter and look forward to the opportunities that lie ahead in this season of renewal and growth. From the desk of Albion’s President Liz Bernhard, this letter begins with a retrospective of headlines from past recessions compared to the tone of today’s newspapers. Then our CIO Jason Ware details the strengths and weaknesses of the US economy and markets. Finally, Senior Wealth Advisor Anders Skagerberg promotes the long-term mindset that is required to persist through challenging times. Read through to our Community segment for team updates and upcoming events.

From the Desk Of Liz Bernhard

“This Time Is Different”—But Is It, Really? 

Every market cycle brings its own headlines, anxieties, and reasons to believe that “this time is different.” And in some ways, it is—unique political developments, global tensions, new technologies, and shifting economic data can make the present feel unprecedented. 

Lately, investors have voiced concerns about market volatility, geopolitical strife, and domestic political uncertainty. It’s easy to feel unsettled. These moments invite the temptation to react, retreat, or alter long-term plans based on short-term fears. 

But while the circumstances change, human behavior rarely does. History shows that uncertainty is not the exception—it’s the norm. Markets have weathered wars, recessions, elections, and crises. And each time, the refrain is familiar: “But this time feels different.” 

And yet—this too shall pass. 

Let’s take a walk down memory lane. Remember the Great Financial Crisis of 2008? Of course you do. A few headlines from that time: 

  • “Job Losses Accelerate, Signaling Deepening Recession” — The New York Times, Dec. 6, 2008 
  • “Foreclosures Soar as Homeowners Fall Behind” — Bloomberg, late 2008 
  • “World Recession Looms as Markets Tumble” — BBC News, Oct. 6, 2008 

How about COVID? 

  • “Wall Street’s Coronavirus Collapse Marks Fastest Bear Market Ever” — Bloomberg, Mar. 12, 2020 
  • “Oil Prices Plunge to 18-Year Low as Demand Evaporates” — CNBC, Mar. 30, 2020 
  • “March 2020 Becomes Most Volatile Month in Stock Market History” — MarketWatch, Mar. 31, 2020 

The beginning of the war in Ukraine: 

  • “Market Volatility Spikes as Russia Launches Full-Scale Attack on Ukraine” — CNBC, Feb. 24, 2022 
  • “Stocks Swing and Oil Prices Soar After Russia Attacks Ukraine” — CBS News, Feb. 24, 2022 
  • “Global Inflation Surges Amid Ukraine Conflict” — Reuters, May 10, 2022 

And now: 

  • “Consumer Confidence Hits Two-Year Low as Inflation and Job Fears Rise” — Associated Press, Mar. 28, 2025 
  • “Wall Street Tumbles, and S&P 500 Drops 2% on Worries About Slower Economy, Higher Inflation” — Associated Press, Mar. 28, 2025 

Each moment felt unique: the worst economy since the Great Depression, a global pandemic, a war in Europe. And each time, the market—and headlines—reacted. Yet the market recovered. 

  • The S&P 500 took about 4.5 years to recover from the March 2009 low during the GFC. 
  • The COVID crash recovery took under five months. 
  • After Russia’s invasion of Ukraine in February 2022, it took only a month for markets to bounce back. 

The point is: markets recover. Stocks go higher. While each situation truly was different, those who stayed the course were rewarded. 

The core principles of sound investing haven’t changed: stay disciplined, remain diversified, and stay focused on long-term goals. Emotional reactions to uncertainty are among the greatest threats to building lasting wealth. 

Our approach remains rooted in evidence, not emotion. We build durable portfolios designed to weather a wide range of possibilities—always with an eye on the big picture and the most probable long-term outcomes: humanity will progress, economies will grow, markets will rise. And within that reality, asset allocation, diversification, behavior, and planning are what matter most. 

The Wall Street Journal from March of 2020. The coronavirus outbreak fanned new fears of a worldwide recession, as well as an all-out oil price war, sending stock markets spiraling down to new record lows not seen since the financial crisis of 2008.

Economy and Markets by Jason Ware

The first quarter of 2025 is in the books, and it was a bumpy one. While it never feels like it at the time, corrections are normal – even healthy – in a bull market. Since 1928, the S&P 500 has experienced 103 such corrections, occurring about once every 13 months, with an average drawdown of -13.5%. The latest decline of about -10% follows an extended stretch of relative calm as the previous correction (September-October 2023) was roughly 16 months ago. Put differently, in a way, markets were sort of due. We certainly recognize that pointing to historical patterns offers little comfort when portfolios are under pressure. But history is clear on how most corrections end: by avoiding recession. The majority don’t turn into full-blown bear markets. When they do, it’s almost always tied to economic contractions or sudden, unexpected shocks. 

Consequently, the critical question now is: where do we stand on recession risk? Let’s unpack.  

Underneath the volatility – both in the markets and the headlines – the US economy remains on pretty good footing, though with some shifting undercurrents. Growth is moderating from last year’s pace, but not stalling. The labor market, while cooling at the margins, is still adding jobs, layoffs are low, and wage growth continues to outpace inflation supporting real household incomes. Meanwhile, business investment runs apace, with AI, automation, software, and infrastructure spending leading the way. 

That said, some pockets of weakness are emerging. Higher borrowing costs continue to weigh on certain industries, particularly interest-rate-sensitive sectors like commercial real estate, housing, and manufacturing. Consumer spending, while resilient, is showing more divergence between higher-income households (who are still spending freely) and lower-income consumers, who are feeling the pinch of tighter credit conditions, a lower savings cushion, and elevated uncertainty. However, with pro-growth fiscal deficits still in place (despite ‘DOGE’), productivity improving, and a generally healthy jobs market underwriting robust services activity (by far the largest piece of GDP), we continue to believe the post-Covid economic expansion endures. 

Meanwhile, the inflation story has largely played out as we’ve expected. The supply shocks and demand surges of 2021-23 have faded, and price pressures have eased. While we’re unlikely to see inflation sustainably at 2% any time soon, the mid-to-high-2s look like a reasonable resting place. That’s a world away from the 9.1% peak of 2022, and as long as inflation stays contained the Fed has room to maneuver. Moreover, as we’ve past highlighted, inflation at 3% or less is constructive for both the economy and stock market.  

After holding rates steady for much of 2024, the Fed finally pivoted to rate cuts late last year. The goal? A “soft landing” where inflation stays in check without tipping the economy into recession. The Fed’s definition of “neutral” policy – where rates neither stimulate nor restrict growth – coupled with the economy’s structural underpinnings as we see them suggest a terminal fed funds rate somewhere around 3.5%. With inflation easing, the Fed had begun moving in that direction, but the path forward remains uncertain. Markets are pricing in multiple rate cuts ahead, but the Fed is keeping its options open, and we see “sticky” inflation restraining them for now – unless unemployment begins to rise meaningfully. 

Bond yields have settled into a more predictable range. If neutral rates are around 3.5% and term premiums are historically normal, then long-term Treasury yields should hover in the 4.0-5.0% range. Of course, fiscal deficits, geopolitical events, US economic growth and inflation, as well as investor sentiment will keep things volatile at times. But in general, this is a favorable environment for long-term investors with a balance asset allocation looking to lock in attractive yields. 

Turning to stocks, notwithstanding the acute volatility since late-January, US equities remain well-supported by fundamentals. Corporate earnings are growing at a healthy pace. S&P 500 earnings-per-share (EPS) finished 2024 at $243, with estimates for 2025 approaching $270 (that’s double-digit growth!) and 2026 potentially reaching $300. For context, EPS was about $138 at the Covid low and $162 in 2019, reinforcing the ever-present resiliency and dynamism that defines American business … a vigor we never wish to bet against.  

While earnings growth remains strong, valuation is a key consideration. As of this writing, the S&P 500 trades at ~20.5x this year’s earnings – not “cheap” per se, but certainly not extreme. Much of the premium remains concentrated in a handful of technology (AI) stocks, while other areas of the market, such as healthcare, industrials, REITs, financials, and small / mid-caps, offer more attractive valuations. Many of the mega cap stocks, or “Mag 7”, also look more attractive amid the market pullback. Portfolio positioning remains key, as leadership may continue to broaden beyond the handful of dominant winners. In everything we do, the mantra own great companies and diversify reigns supreme.   

In sum, as noted in our last missive, we’re calling 2025 “A Year of Three-Twos.” That is, a US economy growing at roughly +2%, core inflation settling into the mid-2s, and a Fed that may cut rates two times. It’s a backdrop supportive of continued, if more moderate, market gains. Indeed, we don’t need multiple expansion. Rather, merely sustaining nourishment from a salubrious business cycle and profits should do the trick. Of course, risks remain. Geopolitics, tariffs, government austerity, the level of inflation and bond yields could each or in concert introduce volatility. But overall, the foundation, at present, remains solid from our perch. 

As always, we remain resolutely focused on navigating the ever-evolving landscape while keeping our true north, the long-term, firmly as our guide. Thank you for your continued trust! 

Mind The (Behavior) Gap

Anders Skagerberg, CFP®, EA

As the first quarter of 2025 comes to a close, a few things stand out to me.

First and foremost, as an advisor, I’m reminded that one of the best parts of my job is the privilege of walking alongside my clients—through market ups and downs, life’s milestones, and all the thoughtful decisions in between. This is meaningful, important work.

Second, periods like these highlight just how powerful human behavior is. Recently, markets have been bumpy and headlines unsettling, affecting how we feel as investors—and ultimately, how we behave.

Like it or not, we’re wired to feel losses more intensely than gains and to focus more on negative information than positive. These behavioral biases—known as loss aversion and negativity bias—are built-in features of the human brain.

Now, don’t get me wrong—these biases aren’t inherently bad. Think of them like a well-meaning friend who always ‘speaks their mind.’ They’re survival mechanisms, hardwired to protect us from danger. If we rewind a few hundred thousand years, early humans lived in a world filled with physical threats, where losing essential resources like food, shelter, or safety could literally mean life or death. That harsh reality shaped our brains to prioritize avoiding losses and taking fewer risks—because back then, one wrong move could have serious consequences.

Fast forward to today, and those same instincts often lead to unintended, sometimes costly, outcomes. What once protected us can now get in the way, pushing us toward decisions that undermine our long-term financial well-being.

In our industry, we call this impact The Behavior Gap.

At Albion, this concept is so central to how we think about investing that we’ve made “Behave Yourself” one of our Four Pillars of Investing. It’s something our Chief Investment Officer, Jason, reminds us of regularly: “Investor behavior will determine success or failure more than anything else.”

Popularized by financial writer Carl Richards and quantified in Dalbar’s annual Investor Behavior Report, the behavior gap refers to the difference between what an investment should return and what an investor actually earns. Simply put, it’s the gap between potential returns and actual results.

And it turns out, there’s quite a gap. 

Dalbar’s most recent study, published in April 2024, shows the average investor underperformed the market by 5.5% in 2023—the third-largest gap in the past decade. Looking at the long-term data, since 1988 the market has averaged a 10% annual return, while investors earned just 4.1%. That’s nearly a 6% shortfall per year!

This is why, as investors, managing our own behavior is one of the most crucial ingredients for growing wealth.

Of course, that’s easier said than done. If it were easy, everyone would do it—and the gap would disappear. But it’s worth the effort. And ultimately, this is where we strive to add the most value as your advisors. We understand it’s scary. We understand how it feels (we’re investors too). And we understand what’s at stake.

If nothing else, I hope this gives you a glimpse behind the curtain at how we think about our work. To us, the most meaningful thing we can do is be there—through the good times and the bad—to help you make the best decisions for yourself and your family, even when they don’t feel like the easiest.

But before I go, in true advisor fashion, I want to leave you with some practical steps. Here’s how to mind the (behavior) gap:

Step 1: Be aware of the gap.

If you’ve read this far, you’re already ahead—you’re now aware of the gap that exists between investment returns and investor returns. Awareness is the first, crucial step.

Step 2: Understand the role of volatility.

You’ve likely heard the term, but volatility simply measures how much and how quickly an asset’s price moves over time. Here’s the key: volatility isn’t something to avoid—it’s something to expect. It’s the price we pay for long-term growth. As financial writer Morgan Housel puts it, “Volatility is the price of admission. The prize inside is superior long-term returns. You have to pay the price to get the returns.”

But here’s the part you can control: how much volatility you feel.

Consider two investors who both started 30 years ago, invested the same way, and never sold. One checks their account once after 30 years. The other checks daily.

Both end up with the same financial result—but their experiences are vastly different.

The first investor might think, “Wow, investing is simple. Look how much my account grew.” The second, having lived through every dip—the dot-com crash, the 2008 financial crisis, the COVID crash—might feel like they barely made it through.

This is an extreme example, but the point stands: volatility is unavoidable, but how intensely you experience it is within your control. The more you check, the more you’ll feel the bumps. The volatility exists either way—but you decide how much of it affects you.

Step 3: Focus on what really matters.

At the end of the day, investing isn’t just about numbers or market performance—it’s about your life, your family, your dreams, and your legacy. When headlines feel overwhelming and markets feel uncertain, it helps to come back to what truly matters.

Think about the goals we’ve planned for together—whether it’s retirement, supporting your kids or grandkids, or contributing to causes close to your heart. Keeping these front and center brings clarity and perspective when doubt creeps in.

As your advisors, we’re here to keep you grounded in those objectives. It’s not always easy, but the most important decisions rarely are. We’re grateful for your trust and partnership as we navigate these moments—always keeping your bigger picture in mind.

Read the full quarterly letter with the Community segment here.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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Celebrating Excellence: Sarah Bird, CFP® Recognized in NAPFA’s Women to Know 2025

We are thrilled to announce that our esteemed colleague, Sarah Bird, CFP®, has been named to the National Association of Personal Financial Advisors (NAPFA) Women to Know list for 2025. This recognition is a testament to Sarah’s outstanding professional accomplishments and her unwavering commitment to promoting women within the financial planning profession.

As a Senior Wealth Advisor at Albion Financial Group, Sarah has consistently demonstrated her dedication to empowering women through financial education and personalized guidance. Her leadership in the “Women of Albion” program has been instrumental in helping women take control of their financial futures.

NAPFA’s Women’s Initiative plays a crucial role in attracting, supporting, and developing female advisors and leaders across the industry. This aligns perfectly with Sarah’s career-long focus on education and empowerment, particularly for women and recent widows. As a Trauma of Money certified advisor, Sarah’s work often addresses the emotional and psychological aspects of financial decision-making, which can be crucial for individuals dealing with financial challenges that may stem from trauma.

Albion Financial Group is proud of our long-standing relationship with NAPFA, an organization that has been at the forefront of promoting the highest professional standards in financial advising since 1983. Sarah’s recognition further strengthens our commitment to NAPFA’s mission and values.


Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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2025 Tax Planning Guide

2025 Tax Planning Guide [PDF]Download

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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Weekly Market Recap – January 24, 2025

Weekly Market Recap – January 24, 2025 [PDF]Download

Weekly Recap:

Stocks finished higher and bond yields fell slightly during a holiday-shortened week that was light on macro data, but long on executive orders and policy pronouncements from the new Trump administration. Notably absent was the immediate enactment of tariffs on Mexico, Canada, and China, which had been repeatedly promised by Donald Trump on the campaign trail. Markets breathed a sigh of relief that perhaps tariffs would be used more thoughtfully by the Trump administration than many had feared.

The rise in stocks was broad-based, with 10 out of 11 sectors in the S&P 500 finishing higher on the week. Energy was the lone exception thanks to a $3/barrel pullback in oil prices. International benchmarks finished higher and largely outperformed the US, in large part due to relief that a punitive tariff regime was not immediately enacted by President Trump.

In fixed income, interest rate volatility subsided for the time being despite public pronouncements from Donald Trump that rates “need to be lowered immediately.” Credit rallied and spreads finished tighter by 2 basis points, in sync with the gains in equities.

In macro news:

* S&P’s US Manufacturing PMI just barely rose into expansion territory at 50.1

* S&P’s US Services PMI unexpectedly fell 4 points to 52.8

* The U of Mich. Consumer Sentiment index fell 2 pts to 71.1 in the final January print

* Existing home sales rose 2.2% in December to a SAAR of 4.24 million

Chart of the Week: University of Michigan Consumer Sentiment

Albion’s “Four Pillars”:

Economy & Earnings

The US economy has been resilient despite the higher interest rate environment. S&P 500 earnings are on track for high single-digit y/y growth for full-year 2024, with consensus calling for an acceleration to double-digit y/y growth in 2025.

Valuation

The S&P 500’s forward P/E of 22.2x is well above the long run average, so valuations are likely to be a headwind to future returns. More predictive metrics like CAPE, Tobin’s Q, and the Buffett Indicator (Eq Mkt Cap / GDP) suggest that compound annual returns from current levels over the coming decade are likely to be in the mid single digits.

Interest Rates

After the “hawkish cut” at the December 2024 FOMC meeting, a near term pause on further rate cuts is likely, and the curve has mostly resumed its normal upward slope. Belly and long end rates in the 4% to 5% range likely represent the “new normal” given solid economic growth, lingering inflation pressures, and large US fiscal deficits.

Inflation

After the disinflationary trend resumed in the summer of 2024, more recent inflation data has shown some renewed signs of stickiness. Services inflation remains somewhat elevated, in part due to heavily lagged shelter costs.

Publisher’s Note: This is the final Weekly Market Recap from Michael Kessler after five years of writing this article every week. Michael is leaving Albion Financial Group this week. We thank him for his contributions over the years and wish him the best in his future endeavors!

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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Weekly Market Recap – January 10, 2025

Weekly Market Recap – January 10, 2025 [PDF]Download

Weekly Recap:

Bond yields rose and equities fell after stronger-than-expected labor market data and rising inflation expectations dampened rate cut hopes.

On the labor front, the monthly JOLTS report showed 8.1 million open jobs in the US for November, more than 350k above consensus estimates which had called for a small sequential decline. The prior month was revised higher as well.

Then on Friday, the monthly jobs report from the BLS also exceeded consensus, with 256k nonfarm payrolls added. Unemployment (U3) fell 10bp sequentially to 4.1%, and underemployment (U6) fell 20bp to 7.5%.

At the same time as the labor market was showing continued strength, inflation concerns were stoked by the ISM Services Index, as the Prices Paid component unexpectedly rose more than 6 points sequentially to 64.4.

And finally, preliminary January data from the University of Michigan’s Consumer Sentiment survey showed rising inflation expectations over short (1y = 3.3%; +50bp m/m) and longer term (5-10y = 3.3%; +30bp m/m) time horizons.

The outcome for financial markets was predictable:

* Fed funds futures now imply just one 25bp rate cut will occur in 2025

* Treasury yields rose across the curve, with the 20y briefly breaking above 5%

* Equity prices fell, led by rate-sensitive sectors like tech, financials and real estate

Chart of the Week: Net Nonfarm Payrolls Added

Albion’s “Four Pillars”:

Economy & Earnings

The US economy has been resilient despite the higher interest rate environment. S&P 500 earnings are on track for high single-digit y/y growth in 2024, with consensus calling for an acceleration to double-digit y/y growth in 2025.

Valuation

The S&P 500’s forward P/E of 21.5x is well above the long run average, so valuations are likely to be a headwind to future returns. More predictive metrics like CAPE, Tobin’s Q, and the Buffett Indicator (Eq Mkt Cap / GDP) suggest that compound annual returns from current levels over the coming decade are likely to be in the mid single digits.

Interest Rates

After the “hawkish cut” at the December 2024 FOMC meeting, a near term pause on further rate cuts is likely, and the curve has mostly resumed its normal upward slope. Belly and long end rates in the 4% to 5% range likely represent the “new normal” given solid economic growth, lingering inflation pressures, and large US fiscal deficits.

Inflation

After the disinflationary trend resumed in the summer of 2024, more recent inflation data has shown some renewed signs of stickiness. Services inflation remains somewhat elevated, in part due to heavily lagged shelter costs.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.