As the calendar turned to 2026, the US economy, along with very favorable comparisons from the prior year, set the tone for an almost full year worth of appreciation in some asset classes, notably international, which were pushed dramatically higher by lower US interest rates and a lower US dollar. Add favorable valuations to said international markets and the race was on.
Lower interest rates feed into multiple areas of the economy, most notably, the housing markets, specifically the residential housing market. Mortgage rates trended down along with the US dollar, a tentatively new FOMC Chair Kevin Warsh, while he even quit from a former FOMC voting chair for disagreement on stimulus, signaled strong intentions of lowering rates immediately upon commencement to the position.
AI – Artificial Intelligence hits the scene
In extremely similar dialogue as the .com 1999 to 2003 transition and the digestion of the Internet, artificial intelligence officially kicked off the year by causing great conflict in certain industries as dramatic new improvements occurred. Of course, some of this is extremely scary for many industries, but we most excited about the possible healthcare and health related improvements that this new technology may bring forward. We are cautiously enthusiastically watching all fronts of AI and astonished a the speed of improvement. Due to this speed, look for our comments on www.street-cents.com for more timely updates.
Geopolitics enter the picture
While the official conflict date was late February, the US dollar began gaining strength several weeks before the actual conflict date, somewhat puzzling at the time. Post official conflict date, the US dollar movement began making sense as the Geopolitical situation became more prevalent, a rush to the US dollar, and therefore higher f/x rates against the global currencies ensued. As mentioned several times in our blog at www.street-cents.com the pace at market movement now is so quick that frequent times expected steps are missed, in this case interest rates began rising, expecting higher inflation, rather than a more usual lowering of rates from investor purchasing of the safety of friends Bonds.
Shortly after the official start of the conflict world, the most important commodity for many, black gold or oil, shot up from the mid $70s to well over $100 a barrel. With oil feeding into many aspects of the world economy, it is not surprising that inflation gauges moved higher as well. The CPI – Consumer Price Index, latest reading from last week formerly in the mid 2% jumped to the low 3% well above the feds flat 2% target. The watershed event of this movement is while we are expecting the afore mentioned new FOMC chief, Kevin Warsh, with his stated goal of lowering interest rate rates, becomes much more difficult with inflation running hot and looking to run even hotter. Not an enviable position to jump into.
Tax season come, and is finally nearing an end
While most of the changes in the tax code were to not change anything, in the form of continuing many items that were due to expire at the end of 2025, the tax forms themselves were dramatically different. The reporting was also different. This has made for one of the more difficult tax seasons, but also one of the most lucrative in finding taxpayer savings we have ever had, thankfully! We now move to planning for 2026 and look towards applying these new form findings into our planning for this year!
Have a Good start to Summer,
John A. Kvale CFA, CFP
AI Content Authenticity: All of the following text content has been completed by myself and has not been edited or created by AI. Occasionally we do use AI for images and will note when appropriate.
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
