September Newsletter to Clients

Enjoy this month’s edition that features a review of the stock and bond markets so far this year and a note about some coming tax law changes.

Before we start thinking about the so-called “September Effect”, let’s continue to revel in the performance of our investments so far this year. 

The S&P 500 Index of large, U.S. stocks rose 1.9% in August and the NASDAQ Index of mostly technology stocks rose 1.6% for the month. Through the end of August, here is how the major indices have performed so far:

• S&P 500 is up 9.8%;

• NASDAQ is up 11%;

• Russell 2000 Index of small, U.S. stocks is up 5.4%;

• The Aggregate bond index is up 5.5%;

• The MSCI-EAFE index of international stocks is up 18.5%.

Now, September is historically the worst month of the year for stocks, with the S&P 500 falling more than 1% on average since 1928. September is also the only month where the index has declined more often – 53 – than it’s risen – 43. Why? There are plenty of theories but that’s all they are and, as I’ve written repeatedly, we aren’t market timers (we don’t buy and sell based on where we think the market might be headed) so we’re focused on each client’s personal goals and timeline. 

Having said that, someday the market will swoon and we’ll see a downturn. How do I know? Because just as sure as the sun rises in the east and the Cracker Barrel logo will always display an old man on a rocker, market declines happen. 

Now, I want to reinforce the point I’ve made before – and maybe it’s easier to receive when investment returns are so good and we’re not dealing with the emotions of a down market – that holding on during downturns is key to bouncing back. Here is some data to help reinforce my point. The 10 best stock market days in the last 50 years occurred during major declines, including one this year. For instance:

• On Oct. 8, 2008 the S&P 500 gained 11.4% during a 40.9% slide;

• On March 24, 2020 the market gained 9.3% after declining 34.3%;

• On April 9, 2025 the market gained 9.7% after losing 19.7%.

If an investor sold during those down periods they would have missed those huge up days.

The best illustration of the market over time is of a girl playing with a yo-yo on an escalator. The yo-yo will go up and down continuously but over time the yo-yo will rise higher than where it started.

Congress passed its tax bill in July, the One Big Beautiful Bill Act, that will impact all of us in some way or other. Here are a few changes to federal tax law that take effect in tax year 2025:

• Provides an additional tax deduction for those 65+ by $6,000 for singles and $12,000 for couples filing jointly. These apply to those singles with incomes at or below $75,000 and couples at or below $150,000;

• Increases the standard deduction to $15,750 for singles and $31,500 for couples;

• Increases the State and Local Tax (SALT) deduction to $40,000 for those that itemize their deductions (90% of filers do not itemize but take the standard deduction);

• Allows a deduction of up to $10,000 in automobile loan interest;

• Limits the mortgage interest deduction permanently to interest on up to $750,000 of mortgage debt ($375,000 if filing as single).

Starting in 2026 the deductibility of charitable donations will be limited for those that itemize. If you itemize and charitable giving is part of your tax strategy, it may make sense to contribute more this year.

As always, we would love to discuss your particular tax situation as part of your overall strategy so give us a call to schedule a meeting. 

Thank you for your continuing confidence.