Tag Archive for: investing

Beyond the Magnificent Seven: A 2026 Midyear Check-In

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Back in January, we published our 2026 Outlook under the title “Beyond AI & Mega-Cap Tech.” Our argument was simple: real diversification was working and could add value beyond the AI trade which was concentrated to a handful of household names (namely the Magnificent Seven, which includes Microsoft, Amazon, and other big tech names). Six months later, we observe that the AI trade has indeed packed its bag, picked up a passport, and traveled to other asset categories including small caps and emerging markets.

As of late July, small caps and emerging markets are leading the pack. The Russell 2000 (small cap index) is up 18.8% year-to-date while emerging markets 16.3% — all outpacing the S&P 500’s respectable 8.9%. Investors rotated into other corners of the same AI story, with small caps and EM carrying their own AI-adjacent demand related to chips, data centers, and power. 

The AI Trade, Domestically: Rotated, But With More Vulnerability

The Magnificent Seven, as a basket, is down 6.9% year-to-date. Hyperscalers (i.e., the biggest spenders on AI infrastructure) including Microsoft (-18.3%), Meta (-10%), and Amazon have struggled in 2026. Only Apple (+25.3%), Alphabet (+6.1%), and Nvidia (+5.8%) are green — and none are this year’s real winners in tech.

That title belongs to the memory and storage names behind the AI buildout: Micron and other chip manufacturers (i.e., CPUs, Memory, etc) are leading the trade, even after “taking a breath” off early-summer highs. Data center demand for memory has minted bigger winners than the household names that started the AI story.

Research cited by Capital Group and Empirical Research Partners shows 68 AI-linked stocks (a.k.a. “Magical 68”) now make up 42% of the S&P 500’s market cap and are compounding earnings north of 30% vs. roughly 5%+ for non-AI stocks – evidence that backlogs are being structurally rewritten to meet supply-constrained demand. In fact, the semiconductors industry alone has also grown from roughly 6–7% of the index three years ago to nearly 20% today.

The bigger question remains whether that demand holds up. Chips are being sold into datacenters built for AI service demands assumed to keep compounding for years – a slowdown, or is absorbed faster than expected – today’s earnings – and the valuations riding on them – could reprice just as fast as they arrived. 

The AI Trade, Internationally: Same Movie, Different Language

Emerging markets caught the same bug. The MSCI EM Index — up 16% YTD — now carries a heavier tech weighting than the S&P 500, essentially making EM an AI trade. Investors adding EM for diversification may just be buying semiconductors or memory chips in a different currency.

It’s worth noting that EM’s recent outperformance traces back to a handful of AI-linked chip names. Taiwan and South Korea now make up roughly 45% of the benchmark — nearly double their weight a year ago, and above the dot-com peak. Taiwan’s market cap alone exceeds China’s, despite an economy a fraction of the size, with forward earnings (i.e., market cap to cash earnings) running several standard deviations above trend. Put plainly, the diversification benefit of market-cap weighted EM is thinner than it once was and is linked to the fragility of the AI supply chain.

Kevin Warsh and the Inflation Watch

Inflation is sending mixed signals, with core prices (excluding food and energy) running near 2.5%, but the headline number — what you actually feel at the pump and grocery store — is up 3.5% year-over-year due to tensions in the Middle East (the Federal Reserve’s target is ~2%). Consumer spending remains resilient and AI-related business investment is creeping into higher prices. Despite these pressures, cooling wage growth and anchored long-term inflation expectations make it less likely that this turns into a longer-lasting, demand-driven problem.

Kevin Warsh, the Fed’s new chair, wasted no time setting a firmer tone. At his first meeting, he scrapped the Fed’s usual forward guidance and signaled a tougher stance, holding rates steady while making clear that further rate hikes — not cuts — could be on the table. That represents a sizable shift from earlier this year, where markets expected two rate cuts; year; now they’re pricing in the possibility of an interest rate hike. 

There’s a less obvious ripple effect worth knowing about: the AI boom is increasingly funded by borrowed money, not just cash on hand. Big tech companies have issued roughly $130 billion in bonds so far this year to fund AI infrastructure, already surpassing all of last year’s total, with the broader AI debt market on track to exceed $500 billion in 2026. If interest rates rise, that borrowing gets more expensive — which could eventually squeeze the profits and stock valuations behind the AI trade that’s driven so much of the market’s gains.

Investment Implications

We recognize the risks building in the AI ecosystem, but the technology remains genuinely transformative, with substantial earnings potential and runway left in the build-out. Rather than timing an exit from one of the market’s most powerful themes, we’ve repositioned equity exposure to manage these imbalances more deliberately.

On the U.S. side, we’ve paired core market-cap-weighted exposure with a Quality tilt (JQUA), favoring companies with stronger balance sheets, durable free cash flow, and healthy returns on equity. This is a more disciplined way to own the AI trade — capturing upside while screening out the accounting and accrual adjustments that can inflate earnings tied to the theme.

On the EM side, we’ve balanced our pure-growth exposure (XSOE) with a value- and income-oriented fund (EYLD), tilting toward cash-generative businesses focused on dividends, buybacks, and debt paydown. This preserves our exposure to developing-market growth while reducing sensitivity to EM’s biggest AI-related vulnerabilities over a multi-year horizon.

The AI story likely has room to run, but we expect turbulence as investors scrutinize return on investment, large language model providers limit token usage, and frontier-model competitors emerge (e.g., Kimi K3). We view these positioning shifts as a thoughtful way to stay invested in AI while diversifying risk and return within an increasingly concentrated market

Phillip Law, CFA

Phillip Law, CFA

Senior Portfolio Manager

Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors and/or its clients may hold positions in the securities mentioned. Holdings may change at any time without notice. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

IPO Mania: What the Rocket Ships, Chatbots, and Rule Changes Mean for Your Portfolio

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The headlines are hard to miss. SpaceX. Anthropic. OpenAI. Three of the most talked-about private companies in history are preparing to go public — and together, they could raise more money in a matter of months than the entire U.S. IPO market raised all of last year. Today on the blog, we explore what to expect from the hottest Wall Street darlings and what these shiny objects mean for markets.

Let’s Set the Table

In 2025, the entire U.S. IPO market raised $77 billion. SpaceX alone is targeting a $75 billion raise — add Anthropic ($60–65 billion) and OpenAI ($60 billion), and you’re looking at a combined raise close to $200 billion.

These are no longer the scrappy startups where early public investors get in on the ground floor. Much of the value has already been captured by venture capitalists and private investors. Before going public, SpaceX was reportedly valued at ~$1.25 trillion, Anthropic at ~$900 billion, and OpenAI at ~$825 billion — nearly $3 trillion in private market value accumulated behind the scenes. SpaceX here is the outlier, going public 24 years after inception as indicated by the turquoise bubble in the chart above.

Don’t Forget to Ask — Why Now?

I usually view IPOs with a skeptical eye – not because success stories can’t be made, but because an information asymmetry will permanently exist. Insiders can tell when the public is overpaying for their company and use it as an opportunity to cash out. So why go public now?

  1. These companies need cash. Building cutting-edge AI and sending rockets to space is extraordinarily expensive. Going public gives them a massive influx of capital to fund that growth.
  2. Early investors need an exit. Founders, employees, and early-stage investors have been waiting years to convert paper gains into real dollars. It’s also worth noting: history has eerie examples of companies timing public offerings around industry peaks — Blackstone before the 2008 real estate crisis, Glencore before the 2011 commodity cycle pop. Worth pausing a moment for.
  3. The market is excited. The AI investment environment has been exceptionally strong, recovering from the skepticism that characterized earlier this year.

What Comes After the Honeymoon?

IPOs are often explosive in the short-term — a honeymoon period followed by selling pressures where the relationship starts to go south. Here’s what to expect:

Short-term: Prices get a boost from engineered scarcity (companies deliberately underprice and limit tradable shares), retail enthusiasm and FOMO, and index fund buying — which could account for approximately 17–24% of tradable shares within the first 15 trading days, based on estimates from AlpineMacro.

Medium-term: Here comes the reality-check. Lock-up expirations release insider shares onto the market, applying downward pressure on prices. This year, those lock-ups are unusually concentrated in adjacent AI and tech companies, introducing more fragility than prior cycles. It’s also worth noting that most IPO’s have underperformed their broader industry in the 12 months following launch, with gains often concentrating in only a small number of big winners while the rest disappoint. Past performance and historical trends are not indicative of future results.

Longer-term — the Index Dilemma: Major index providers like S&P and Nasdaq are reportedly bending their own rules to fast-track these mega-IPOs into their benchmarks. Most consequentially, S&P is considering relaxing its profitability requirement. As these stocks join indexes and lock-ups expire, automated buying algorithms will be forced to fund those purchases by selling something else — most likely the largest, most liquid names: Apple, Microsoft, Nvidia.

Investment Implications

If these IPOs execute well, it’s a green light for the AI trade and would lift companies across the ecosystem. If they stumble, it’s a meaningful warning signal for anyone spending heavily without yet turning a profit.

We believe the index risk is the more underrated story. When index rules are bent to accommodate unprofitable companies, the passive investor is quietly exposed to degraded quality screens, less certain cash flow trajectories, and deeper AI concentration. It blurs the line between passive and active investing — and you have to ask yourself: what am I really owning?

In this environment, we continue to rely on our pairing of market-Cap weighted S&P 500 exposure alongside quality-focused ETFs (for example, JQUA, the JPMorgan U.S. Quality Factor ETF), depending on client objectives and risk tolerance. JQUA generally focuses on companies with strong earnings, healthy balance sheets, high returns on equity, and manageable debt – qualities (no pun intended) meant to ground investments in fundamentals when narratives run ahead of numbers. We believe this approach may allow portfolios to participate broadly in market enthusiasm, depending on client objectives and risk tolerance.

Our Take

We recognize the excitement surrounding this IPO wave, but our role is to navigate these waves with discipline. While these are compelling names and future portfolio candidates across our fund managers, we believe the more prudent approach is to allow valuations to normalize, narratives to mature, and market expectations to recalibrate before committing capital. In other words, we are letting quality discipline and our understanding of IPO markets – not enthusiasm – guide your portfolio’s trajectory.

Phillip Law, CFA

Phillip Law, CFA

Senior Portfolio Manager

Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors and/or its clients may hold positions in the securities mentioned. Holdings may change at any time without notice. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

On the War in Iran: Do Markets Not Care, and What’s Next?

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Last month, we emphasized the unpredictability of geopolitical risk and acknowledged its limited ability to depress longer-term returns. Today, we observe roughly 80 oil tankers stranded at sea, a supply shortfall of 9 million barrels per day, and a ceasefire so fragile that ships are still being bombarded. Yet, markets are hovering near all-time highs.

It seems as if markets have already asked, “Will this war matter in a year?” and answered “Probably not.” Are they correct to think that the worst is behind us, or are we seeing an irrational optimism? More importantly, how are we thinking and what are we doing about it?

Both Sides Are Boxed In

At first glance, it would seem that markets are celebrating the ceasefire. Instead, we believe they’re celebrating the constraints on both sides. Despite the current administration’s bravado on social media, the US is operating within real limits:

  • Gas prices are climbing into politically damaging territory.
  • We’ve burned through years of munitions stockpiles and missile interceptors — replenishing them adds to an already strained debt picture.
  • At the start of the war, only 53% of the public supported it, and support has only eroded from there. With the midterms approaching, this war is becoming a liability.

Iran’s position is also complicated:

  • Its arsenal is materially depleted, forcing more selective targeting.
  • Headline inflation is near 50%, causing social unrest that has spilled into the streets and warranted radical response.

Yes, the regime is exhibiting an unexpected tolerance for pain despite being under genuine strain. It has come to realize how powerful its leverage over the Strait of Hormuz is, but that leverage has a ceiling. If Iran pushes hard enough to tip the world into recession, the world could coalesce to force the Strait open.

At that point, nobody is negotiating with Tehran and will not care about its capitulation. Iran’s smarter play is subtler — agitate just enough to keep oil prices elevated, respect the ceasefire to the bare minimum, and let the pressure build on Trump’s midterm prospects.

Where Are We in the Playbook?

Some people might describe President Trump’s tactic using the TACO — Trump Always Chickens Out — acronym. Instead, BCA Research’s Marko Papic put together a seven-step framework for Trump’s maximum pressure negotiating style that we find more instructive.

Steps 1 through 3 — maximalist demands, threats, and following through — are in the rearview. We appear to be entering Step 4: fragile ceasefire, back-channel signals, and political jockeying from both sides to frame their position as a win. If the framework holds, we could be in for one more dramatic detour before a deal gets done.

A breakdown in negotiations or a miscalculation on either side could push oil prices meaningfully higher with downstream impacts on earnings and global growth. This is more of a tail-risk scenario, but Trump has left the altar before. The question is – will Iran still be there when he returns?

We imagine the likely base case resembles a uranium moratorium — perhaps similar to the Obama-era Joint Comprehensive Plan of Action, but sold very differently. Trump’s version will lean on the military degradation of Iranian capabilities. For Iran, the goal was always a shift in US policy posture. Both sides will aim to find a version of that story to tell their constituents.

Where We Stand

Before the conflict, our strategies had real momentum. Our tilt towards international equities was outperforming the US, and the Diversifiers strategy (i.e., gold, natural resources, commodities) boosted returns. Some of that outperformance has pulled back as international markets are more vulnerable to gulf energy. However, we believe that the bigger picture is unchanged.

Prior to the war, deglobalization was already underway, only to be accelerated by this conflict. Nations that spent decades outsourcing their energy and security needs are now building for self-sufficiency with more urgency. New trade arrangements, energy partnerships, and military alliances are forming in rooms the US is not in. The map is being redrawn, and we want exposure to that.

And What We Did

Our take? Rather than dramatic strategy shifts, we acknowledge the market’s ability to look past geopolitical noise and instead rebalanced firmwide back to target. This trimmed what held up — gold, commodities — and rotated into areas that sold off, including US equities. Should markets sell off further in a tail-risk event, we are actively watching for opportunities to tactically pivot strength into weakness. 

To clients, the right posture might seem boring — and boring is probably correct. Sometimes, boring means hedging against the risks you can see, and diversifying against the ones you cannot.

WSWA

Warren Street Wealth Advisors

Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Sources:

  • BCA Research

Oil, Conflict, and Your Portfolio: What We’re Watching

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Before we dive into the facts, we want to take a moment to recognize that before we are advisors or investment analysts, we are human. Our hearts go out to the families and individuals affected. We hold that reality close as we do our job of helping you navigate what it means for your financial future.

Part of that job is cutting through the noise, so let’s talk about what’s happening, what it means, and what we’re doing about it.

What’s Happening

The conflict entered its second week with crude oil briefly crossing $110 per barrel. Energy infrastructure in the region sustained damage, and the world turned its attention to the Strait of Hormuz — the narrow waterway through which roughly 20% of global oil supply flows — and whether it would remain open for business.

The View from fire-detecting satellites:
Fire anomalies detected by infrared sensors on 7-8 March. Circles are sized by fire radiative power, darker circles mean several fires in close proximity

Sources: FT Analysis, Nasa Firms. Fires reported are either in locations with no history of regular burns or are unusually bright.

We don’t have a crystal ball for what will happen next, but there are three questions we’re watching closely:

  1. Will there be more lasting damage to energy infrastructure?
  2. What does the endgame look like in terms of leadership and capabilities on both sides?
  3. Can a compromise be reached that keeps oil flowing through the gulf?

And Then Oil Dropped $20

Here’s the thing about geopolitical risk: it tends to be loud and unpredictable.

As I’m writing this, oil has pulled back from $110+ per barrel to below $90 — after President Donald Trump suggested the potential for a swift conclusion to the conflict. Meanwhile, the Strait of Hormuz is seeing vessel traffic increase, recovering from post-attack lows with inbound and outbound ship movements gradually rising. 

While it’s too soon to declare a resolution, the swift oil price drop following comments from President Trump shows the market was pricing in a major supply shock that hasn’t materialized. This underscores why we avoid trading headlines, which often lead to emotional decisions mistaken for analysis. Our consistent advice for geopolitical headlines remains: stay diversified, stay disciplined, and trust your portfolio strategy.

History Has Seen This Before

Here’s something worth sitting with. Looking at the past 20 major military conflicts and their impact on the S&P 500 over the last 75 years, the average decline from the initial shock to the market bottom was around 6%, and in 19 out of 20 cases, markets returned to pre-event levels in an average of just 28 days.

The two biggest exceptions — the 1973 Yom Kippur War and Iraq’s 1990 invasion of Kuwait — both involved sustained oil supply disruptions that pushed stocks down 15–16%. The 1973 episode scarred a generation of investors who sold out of equities and missed the enormous bull run of the 1980s.

The lesson isn’t that conflicts don’t matter. It’s that panicking out of a well-structured portfolio tends to hurt more than the conflict itself does.

This Isn’t 1973

Clients who lived through the Yom Kippur War might flinch from the prospect of re-living around-the-block gas lines, federally imposed speed reductions, or darkened cities to conserve energy. We understand the instinct, but there are major differences today.

In 1973, the U.S. was heavily dependent on imported oil. Every extra dollar at the pump was more money in the pockets of Middle Eastern countries. Today, the U.S. is a net energy exporter. Higher oil prices are painful for consumers, yes — but every extra dollar is more cash in the pockets of domestic energy producers. It’s a redistribution within the economy, not a pure drain out of it.

As for inflation, Energy makes up only about 6% of today’s U.S. inflation basket.  There also headwinds blowing against the case for a 1970’s stagflation landscape, including:

  1. Shelter Lags: Shelter costs (33% of the basket) are declining as lagging rent data catches up to reality, which will apply downward pressure on inflation prints.
  2. Technological Progress: AI and technology-driven productivity is quietly acting as a deflationary force as consumers and businesses increase adoption.
  3. Calming Tariff Tantrums: After the recent IEEPA tariff ruling, the effective tariff rate has also come down meaningfully to 9.1%.
  4. Fundamental economic strength: We acknowledge the recent jobs report’s weakness, but also recognize other areas in the economy remain healthy. Corporate profits are expected to grow at high single to double digits in 2026. Tax refunds from last year’s One Big Beautiful Bill (OBBB) haven’t fully hit consumer accounts yet.

The Fed will likely pause at upcoming meetings, but that’s very different from the kind of policy circumstances that defined the stagflation era.

Weeks, Not Months?

Both sides have strong incentives to reach a compromise quickly. Iran can’t export oil under prolonged conditions and is subject to existential economic pressure. In the U.S., $4+ gas heading into a midterm summer is its own political tax. December oil futures were already trading in the low $70s before today’s pullback, suggesting the market never fully bought the doomsday scenario. Inflation breakeven rates have stayed surprisingly calm throughout.

Even after hostilities quiet down, there’s likely a period of elevated shipping costs and more cautious tanker behavior through the region. Think of it as a persistent risk premium rather than a single clean resolution — but a manageable one, not an economy-altering one.

What We’re Doing

We’re not making dramatic moves based on headlines and that’s by design. We are however, sticking to our operating procedure of:

  1. Rebalancing – different parts of our clients’ portfolios have generally weathered the volatility well, but some may have drifted off target. Rebalancing is a disciplined move back toward those levels, not a market call, but a long-term wealth strategy of selling strength and buying weakness.
  2. We built the “Diversifiers” strategy in client’s retirement portfolios for moments like this. It’s doing its job and reminding us that traditional stock-bond portfolios don’t always move in opposite directions when inflation is in the picture.
  3. If markets sell off further in an extreme scenario, we have the flexibility to tilt asset classes within our portfolios.

We’ll continue monitoring the conflict while staying with our standard operating procedure, but what we won’t do is trade headlines. The oil price chart of the last two weeks makes that case better than we ever could.

WSWA

Warren Street Wealth Advisors

Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Sources:

2026 Outlook: Beyond AI & Mega-Cap Tech

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“Is AI a bubble?” my uncle asked as I put my fork down mid-bite on New Year’s Eve. I’d wager that this question dominated dinner tables and family gatherings across the country this holiday season. Even my sister, whose focus lies entirely within the arts and creative pursuits, managed to put the two words “AI” and “Bubble” together.

This tells me two things: 1) Concern around AI and “bubble-ness” is virtually inescapable and 2) this question is dominating the audience’s perception of markets, perhaps even more so than the meteoric rise of silver and gold as we enter 2026.

Why Does AI Deserve So Much Attention?

In 2025, AI-related names drove ~60% of the increase in the S&P 500’s value. Furthermore, AI spending from the “Hyperscalers” (Google, Microsoft, etc.) accounted for the lion’s share of our economy’s growth. Without the spending on data center infrastructure—servers, GPUs, and the centers themselves—some estimates suggest US GDP would have grown at a measly 0.1% in the first half of 2025. It’s safe to say that AI alone kept the economy afloat for most of last year.

The robust figures above underscore why AI rightfully commands significant attention. However, fixating on the bubble label can be a trap, much like timing the market. Instead, we should look at bubble psychology and how those excesses may be extending into the AI ecosystem.

Settling the AI Bubble Talk

It’s been over 20 years since we’ve seen such a transformative, general-purpose technology with the potential to deliver productivity gains eclipsing the internet era. This fervor has already minted a class of early winners, leaving everyone else watching with a potent mix of envy and regret. It’s the classic setup for FOMO, where the “AI train” starts looking less like a sound, technological investment and more like a high-speed shortcut to a cushy nest egg.

The danger is that the faster this train moves, the easier it is to speed right past the following flags:

  • Starting Valuations: We pay prices regardless of whether reasonable returns can be generated.
  • Risk/Reward Profiles: We stop asking if we’re actually being compensated for the layers of risk we’re adding to our broader portfolio.
  • Lofty Narratives: AI’s newness unrestrains the imagination to justify price tags that reality can’t yet support.

Behind the Excitement: What’s Different This Time?

A Stronger Starting Line-Up Unlike the fragile startups of the dotcom era, today’s main AI spenders are profitable, cash-printing businesses. They are self-funding a massive AI arms race with capital expenditures set to leap by 60%, from $250bn in 2025 to over $400bn in 2026. Operating cash flows continue to outspace AI spend as a percentage of sales, allowing this historic investment to feel like a strategic augmentation of their core businesses rather than a reckless gamble.

Justified Valuations While Forward P/E ratios look expensive, today’s multiples are anchored by real-world profit. Take Nvidia: its stock price increased 14x over the last five years, but earnings grew 20x. Today’s titans aren’t as frothy as the dotcom class of 2000 because they are delivering healthy bottom-line results. However, this optimism hinges on perfection. While bulls argue we are buying “cheaper” growth today than at any point in the decade, that narrative leaves a near zero margin for error if adoption slows.

Infrastructure Demand In contrast to the fiber-optic mania of the 90s, the demand for AI build-outs can’t seem to catch a break. Data center vacancy rates are at a record low of 1.6%, and ~75% of pre-construction builds are already pre-leased. Additionally, past infrastructure bubbles saw spending peak between 2% and 5% of GDP, whereas today’s AI investment sits at roughly 1%. This suggests the build-out still has room to run.

Show Me the Money Revenues are skyrocketing. Alphabet’s Q3 2025 results proved that AI-driven features are accelerating search and ads, with generative AI product revenue surging into the triple-digit percentage range year-over-year. Beyond the titans, some industry participants have grown revenues nearly ninefold since ChatGPT launched. For now, the receipts are keeping the optimism alive.

AI Is Running Fast… But Will it Trip a Wire?

We are in a high-stakes arms race on both a micro level (hyperscalers) and a macro level (US vs. China). Businesses are pouring trillions into this effort to secure US leadership in a technology that will change the fabric of society. But in this race to the top, it’s easy to overlook the blind spots.

Revenues & Profits: Can We Reach the Promised Land? Despite the growth, there is a staggering gap between spending and earning. Analyst Azeem Azhar points out that AI companies are projected to generate $60bn in revenue against $400bn in spending for 2025. That’s a 6-7x gap—far wider than the dotcom bubble (4x) or the railroad boom (2x). Even if revenue catches up, will it translate to profit, or will we see a “race to the bottom” where large language models (LLMs) become commoditized?

Is Demand Real? Adoption is still in its awkward early stages. Only roughly 10% of firms are using AI to produce goods, though 45% pay for LLM subscriptions. According to the Stanford AI Index and McKinsey, the majority of firms are seeing only modest cost savings (≤10%) and negligible revenue gains (≤5%). Will AI adoption ever truly scale into broad, durable profit expansion?

How Long is Your (Useful) Life? Hyperscalers like Microsoft and Google have boosted profits by extending the “useful life” of their AI assets in their books. If innovation renders chips obsolete in 24 months, these companies will face massive write-downs. More importantly, they are funding this short-lived hardware with 30-year debt, leaving investors holding the bag for “obsolete” infrastructure that won’t be paid off for decades.

The AI Ouroboros There is an increasingly circular dance where Microsoft invests in OpenAI and then books cloud revenue from them. Nvidia buys stakes in the startups they sell chips to. This means a chunk of today’s “booming” revenue is an internal recycling of capital where true economic profit from external customers remains hypothetical.



Cloudy with a Chance of IOUs: While the biggest players usually use cash, we’re seeing a pivot toward the bond market. Oracle and Meta have emerged as outliers, using long-term bonds and project finance to bankroll their data centers. As free cash flow wilts under the weight of AI spend, their stock prices are feeling the gravity. Furthermore, the industry is using Special Purpose Vehicles (SPVs) to hide this leverage off-balance sheet, adding a layer of obscurity to the trillions being spent.

Conclusion: A Massive Collection of What-Ifs

Ultimately, the AI story comes down to “what-ifs.” What if AGI finally shows up and productivity explodes? Or, what if demand never materializes and the hyperscalers finally blink? With cracks showing—like OpenAI’s recent “Code Red”—it’s impossible to say if we’re headed for a minor correction or a systemic burst.

Our 2026 Recommendations:
  1. Keep a seat at the table: Exposure to market-cap weighted indices allows you to benefit if the “promised land” materializes.
  2. Diversify your sources of risk: Anchor beyond US tech. Gold, international markets, and bonds offer a necessary buffer if signs of excess turn into a choppy ride.

Rebalance systematically: Rebalancing is a controllable hedge. When sector weights become excessive, returning to target allocations helps lock in gains and reduce concentration risk.

Phillip Law, CFA

Senior Portfolio Manager, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

2026 Investment Outlook: AI, Economy, Inflation

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With 2025 in the rear view mirror, we look towards the new year. What lessons did we learn and what trends deserve attention? How do we allocate portfolios based on that knowledge? In this piece, we’d like to share three areas of focus heading into 2026:

  1. Artificial Intelligence and Bubbleness
  2. The State of the US Economy
  3. The Biggest Risks to Asset Markets (Namely Inflation)

2025 Recap: Laughing in the Face of Di-worsification:

After years of US led-dominance, we saw narratives across asset classes flip on their heads. For the first time in years:

  • US Stocks underperformed developed international and emerging market geographies.
  • Gold, held for its diversification benefits, shined more brightly than most major asset categories. 

Source: YCharts

The year reminded us that “di-worsification” – a term long used to parody the idea that diversifying into less correlated, non-US assets only made portfolios worse – isn’t a universal truth. In 2025, holding different asset segments helped weather volatile trade policy, weakening dollar, and US deficit concerns.

Ultimately, we left 2025 with a more fragmented globe where nations now emphasize national security and independence over globalized efficiencies. In this new regime where the global economy is de-synchronized, we believe diversification is more essential than ever.

Looking to 2026: What of AI and Its Bubbleness?

The topic of artificial intelligence being a bubble is almost inescapable. AI Hyperscalers, bolstered by massive spending commitments on AI investments,  drove over 60% of the S&P 500’s growth and was a key lifeline for the economy in 2025. With AI hyperscalers and key players constituting a significant portion of the S&P 500, the ecosystem will likely continue to define US markets in 2026. So is it a bubble?

We have a separate piece that deep dives into the AI Bubble question which I’ve summarized below:

The Bull Case:

Proponents argue that this time is different compared to other speculative manias. The players here are profitable, cash-printing businesses whose valuations are not only reasonable, but also are pricing in achievable growth. Furthermore, there is ample demand for infrastructure, particularly data centers, unlike the railroad and dotcom bubbles. This all will enable revenue to follow, which has already exhibited enormous growth rates.

The Bear Case:

Despite tremendous growth, AI companies are spending way more than they’re making, (higher than past bubbles). Demand from businesses remains uncertain, with early studies showing only modest cost savings/revenue gains. Also, most revenue booked today is a result of circular investing amongst AI players. Meanwhile, AI companies are using aggressive accounting methods for their chips, which puts future earnings estimates at risk. Lastly, debt is now being used to finance spending, officially adding a shot clock for return on investment to materialize.

What to Do?

Within the deep-dive, we reach two conclusions: 

1. Focusing on the “bubble” label is often unproductive. Even if excesses exist, timing the eventual “burst” is a fool’s errand—will it be in one year or five? Selling too early means potentially missing out on healthy gains.

As Peter Lynch noted, “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”

2. The AI dilemma is ultimately a huge collection of what-ifs, but we believe keeping a seat at the table while diversifying sources of risk and return in other parts of the portfolio such as international stocks, bonds, or gold is prudent.

How’s the US Economy?

Objectively speaking, the economy is in a healthy state heading into 2026. Let’s look at a few primary indicators:

  • A Productive Economy – GDP grew at an astonishing annualized rate of 4.3% in Q3 2025 and is projected to grow ~2% (long-term average) in 2026. We expect AI spending to continue as hyperscalers add to productivity and other businesses increase adoption.
  • The Spending Surprise – Despite rising concerns around job security and waning sentiment, Americans are still spending. In late 2025, retail sales surged 3.5% year-over-year and we observed a healthy uptick in credit card balances.
  • Fiscal & Monetary Stimulus: 
    •  Heading into 2026, we’ve unlocked tax credits from the One Big Beautiful Bill (OBBB). We take estimates with a grain of salt, but if $100bn in total tax refunds and a $3,750 average tax cut per filer could further stimulate consumer spending.
    • The market currently anticipates two rate cuts, which will lower the cost of borrowing for both businesses and consumers (maybe more, pending Federal Reserve politics).

With a solid launching pad to start the year followed by additional liquidity in consumers pockets, we believe the US economy is well-equipped heading into 2026.

What About the Risks?

We believe the primary, non-wildcard risk to asset markets is inflation. Although inflation has stabilized from recent years, it remains sticky compared to pre-pandemic levels (around 2%), with the Fed’s preferred measure recently estimated at 2.8%.

The current economic backdrop does allow more sensitivities to a spike in inflation.

  1. Trade fragmentation and tariffs – while most businesses seemingly absorbed the price increases of tariffs in 2025, we’ve begun to see some price hikes passed to consumers in recent inflation prints. 
  2. Is Stimulus a Double-Edged Sword? – While increased liquidity for consumers can be helpful, it may also fuel inflation. The prior stimulus checks led to double-digit drops in equities and bonds (2022) as we raised rates to fight policy-driven inflation.
  3. Financial Repression – With US Debt-to-GDP approaching 120%, there is a risk that policymakers resort to “financial repression” – intentionally allowing higher inflation to “inflate away” the real value of government debt.

With US equities trading expensively and bonds vulnerable to inflation, I’d park this risk in the low probability, but high impact camp. To mitigate this risk, owning a portion of your portfolio to hedges (gold, commodities, natural resources) can cushion against a potential 2022 repeat.

Conclusion:

Ultimately, the backdrop seems favorable for US equity markets heading into 2026. Even if markets are frothy, the solution to managing potential excesses and drawdowns is not in timing them, but instead: a) building adequately diversified portfolios b) aligning allocations with your risk tolerance and financial objective and c) rebalancing into weakness to harness the long-term growth of capital markets at more advantageous price levels.

That’s our 2026 outlook. Our advice remains: use these investing principles as your foundation. This will allow 2026 to be less about watching tickers and more about the life you’re building. Hit that PR, read those books, or learn to cook—aim to achieve your best self. While we can recommend investments and share outlooks, there’s no substitute for investing in your own growth and happiness.

Phillip Law, CFA

Senior Portfolio Manager, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Should I Be Using a Health Savings Account?

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Choosing a health care plan at work can be a bit of a headache—charts comparing premiums, copays and deductibles isn’t exactly light reading. One option you might have encountered in this process is the high-deductible health plan (HDHP). The name might sound intimidating. After all, who really wants to pay high deductibles? But when paired with a health savings account (HSA), an HDHP can be a powerful tool to help you save for your health care now and your future.

What is an HDHP?

An HDHP is a type of health insurance plan that comes with lower monthly premiums but higher out-of-pocket costs. In other words, you’ll pay less each month, but you’ll be on the hook for more when you actually visit a doctor. These plans shift more financial risk to you in exchange for upfront savings—and they often come with access to an HSA.

An HSA allows you to set aside pre-tax money to pay for qualified medical expenses like doctor visits, prescriptions, dental care and vision services. Unlike a flexible spending account (FSA), which is “use it or lose it,” the money in an HSA is yours to keep. It rolls over from year to year, stays with you if you change jobs and often has investment options.

What makes HSAs especially appealing are their triple tax benefits:

  • Tax-deductible contributions.
  • Tax-free growth on investments inside the HSA.
  • Tax-free withdrawals at any time if the money is used for qualified medical expenses.

These features make HSAs one of the most tax-efficient savings vehicles available. But there’s another way to get more from your HSA: It can serve as a powerful retirement savings vehicle. 

Should You Use a High-Deductible Health Plan?

Before we get to the benefits of an HSA as an investment vehicle, how do you decide whether to use an HDHP in the first place? Choosing between a traditional plan and an HDHP depends on a few key factors.

First, compare the total potential cost under each plan. That means looking at monthly premiums, deductibles, coinsurance and out-of-pocket maximums. HDHPs typically offer significantly lower monthly premiums but come with higher deductibles. If you’re generally healthy and don’t expect to need much medical care, this tradeoff could work in your favor.

But be honest with yourself about your cash flow. If you had a sudden medical emergency, would you be able to cover the high out-of-pocket costs until your insurance kicks in? For people with chronic health conditions or frequent doctor visits, a traditional plan might offer more predictable costs.

Using an HSA as a Retirement Account

Once you’ve maxed out your traditional retirement accounts, an HSA becomes an excellent next stop. HSA contribution limits are $4,300 for self-only coverage and $8,550 for family coverage in 2025. You can leave that money in cash or invest it. You can, of course, use it to pay for qualified out-of-pocket medical expenses at any time. But you can also leave it in the account untouched, letting it grow and enjoy the power of tax-advantaged compounding—just as you would with an IRA or 401(k). 

Health care is one of the biggest expenses in retirement. So building a tax-free fund dedicated to future medical needs makes a lot of sense. According to recent estimates, a 65-year-old retiring in 2024 can expect to spend around $165,000 on health care in retirement—and that number is only expected to rise.

Here’s the kicker: When you turn 65, you aren’t limited to using your HSA for medical expenses. You can make withdrawals for non-medical expenses, and these will simply be taxed as income, just like withdrawals from a traditional IRA or 401(k). In short, your HSA can function like a traditional retirement account with the added perk of tax-free withdrawals for medical expenses at any age.

Your HSA as Part of Your Investment Strategy

Your HSA is a financial asset, whether it’s sitting in cash or invested in the market. As such, it can play an important role in your strategies for long-term asset allocation, diversification and rebalancing. Managed well, it can contribute meaningfully to your future financial security.

You can manage your HSA investments on your own. Or, depending on your HSA provider, we may be able to manage the assets within the account on your behalf. Even if direct management isn’t possible, we’re here to help you evaluate your options, choose appropriate investments and determine how best to incorporate your HSA into your long-term plan.

If you’re not sure whether an HDHP and HSA are right for you, let’s talk. Together, we can evaluate your health needs, cash flow and retirement goals to determine the best path forward.

Bryan Cassick, MBA, CFP®

Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Financial Planning for Open Enrollment: A Guide to Making Smart Choices

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Open enrollment is your annual opportunity to review and select your employee benefits for the upcoming year. While it might seem like just another task on your to-do list, the choices you make now can have a significant impact on your health and finances. Don’t simply “roll over” last year’s elections without a review. A proactive approach will ensure your benefits align with your needs and goals. 

Analyzing Your Health Insurance Options

Start by assessing your current situation. Think about your health needs from the past year: how many doctor’s visits did you have? What were your prescription costs? Do you anticipate any major life changes, such as getting married or having a baby? These factors will help you choose the right plan.

Understanding Key Terms

Before diving into plan specifics, it’s crucial to understand a few key terms:

  • Premium: The fixed monthly cost you pay for your insurance plan.
  • Deductible: The amount you pay out of pocket before your insurance coverage begins.
  • Copay: A fixed amount you pay for a doctor’s visit or prescription after your deductible is met.
  • Coinsurance: A percentage of costs you pay for covered services after the deductible is met.
  • Out-of-Pocket Maximum: The maximum amount you will pay in a year before the plan covers 100% of costs.

Comparing Plan Types: PPO vs. HDHP

The two most common types of health plans are a Preferred Provider Organization (PPO) and a High-Deductible Health Plan (HDHP).

  • A PPO typically has a lower deductible but higher premiums. It also offers more flexibility for seeing out-of-network doctors. This type of plan is generally best for people who use a lot of medical services, as the costs are more predictable.
  • An HDHP has a higher deductible but lower premiums. While you’ll pay more upfront for care, this type of plan makes you eligible for a Health Savings Account (HSA). An HDHP is often a great choice for generally healthy individuals or those who can comfortably afford the higher upfront costs if a major health event were to occur.

To help with your decision, compare the total estimated annual cost of each plan. For example, calculate the premiums plus potential out-of-pocket costs for a year with no major health events versus a year with a major surgery. This simple exercise can reveal which plan offers the most financial sense for your situation.

Maximizing Your Tax-Advantaged Accounts

In addition to health insurance, open enrollment is your chance to enroll in or update contributions to valuable tax-advantaged accounts.

Flexible Spending Accounts (FSA)

An FSA allows you to use pre-tax dollars for qualified medical or dependent care expenses, which lowers your taxable income. The key rule to remember is “use it or lose it”—funds typically do not roll over from one year to the next. Carefully estimate your upcoming year’s expenses to avoid forfeiting any money.

Health Savings Accounts (HSA)

An HSA is a powerful financial tool with a triple tax advantage:

  1. Contributions are pre-tax.
  2. Funds grow tax-free.
  3. Withdrawals for qualified medical expenses are tax-free.

Unlike an FSA, an HSA is portable, meaning the account belongs to you even if you change jobs. This makes it an excellent long-term savings tool. After age 65, you can withdraw funds for any reason without penalty, although non-medical withdrawals are subject to income tax. Remember, an HSA is only available if you are enrolled in an HDHP.

Reviewing Other Important Benefits

Don’t stop at health insurance; open enrollment is the perfect time to review your other benefits.

Retirement Contributions

Check your retirement contributions to your 401(k) or 403(b). If your employer offers a matching contribution, be sure you’re contributing at least enough to get the full match—it’s free money! Consider increasing your contribution rate by at least 1% each year. Small, consistent increases can make a huge difference over time.

Life and Disability Insurance

  • Life Insurance: Review your coverage needs based on your dependents and debts. Your employer may provide basic coverage, but you might need supplemental, voluntary coverage to fully protect your loved ones.
  • Disability Insurance: This benefit protects your income if you are unable to work due to illness or injury. Review your short-term and long-term disability options to ensure your income is protected.

Final Steps and Action Plan

Making your benefit selections requires a few final steps to ensure you’re fully prepared.

  1. Check Beneficiaries: In case of a major life change like a marriage or divorce, update the beneficiaries on all your accounts (retirement, life insurance) to ensure your assets go to the right people.
  2. Gather Your Information: Have all your plan documents, a list of your regular doctors, and an estimate of last year’s medical expenses ready. This information will help you make a more accurate and informed choice.
  3. Make Your Choices and Submit: Be mindful of the deadline and submit your final selections on time.

By taking the time to review your options and make informed decisions, you can ensure your benefits package is working for you and your financial well-being. Be sure to reach out to your advisor to discuss any of these items in more detail.

Justin D. Rucci, CFP®

Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

The “Big Beautiful Bill”: What It Means for Your Finances

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The “One Big Beautiful Bill Act” (OBBBA), signed July 4, 2025, is poised to significantly impact nearly every aspect of your financial life. From your tax bill to your healthcare and your children’s future savings, understanding the nuances of this bill is crucial for effective financial planning.

Here’s a breakdown of what the OBBB means for you:

Tax Planning: More in Your Pocket, But Mind the Details

The OBBB makes permanent many of the individual income tax rates and brackets from the 2017 Tax Cuts and Jobs Act (TCJA), providing long-term clarity. But there’s more:

  • Expanded Standard Deduction: The standard deduction sees a permanent expansion, making tax filing simpler for many and potentially reducing the need to itemize.
  • Temporary Deductions (2025-2028): Get ready for some new, but temporary, tax breaks.
    • No Tax on Tips/Overtime: If you earn qualified tip income (up to $25,000) or overtime premium pay (up to $12,500 for individuals, $25,000 for joint filers), you may be able to deduct it. Keep an eye on income phase-outs.
    • Senior Tax Deduction: Individuals 65 and older meeting income thresholds ($75,000 single, $150,000 joint) can claim an additional $6,000 deduction, aiming to offset federal taxes on Social Security.
    • Auto Loan Interest Deduction: A temporary deduction of up to $10,000 for interest on loans for U.S.-assembled vehicles is available, subject to income phase-outs.
  • Increased SALT Deduction Cap: For five years, the State and Local Tax (SALT) deduction cap temporarily increases to $40,000 (from $10,000), with income-based phase-outs. This is a win for residents of high-tax states.
  • Enhanced Child Tax Credit: The Child Tax Credit permanently increases to $2,200 per child and will be indexed for inflation.
  • Business Tax Incentives: Businesses will see the reinstatement of 100% bonus depreciation and permanent Section 199A (Qualified Business Income) deduction, encouraging investment.
  • Estate and Gift Tax Relief: The unified credit and Generation-Skipping Transfer Tax (GSTT) exemption thresholds are permanently increased to $15 million per individual, offering substantial relief for high-net-worth individuals.

Your Action Plan: Review your current tax strategies with a financial advisor to maximize these new permanent and temporary provisions. Consider whether itemizing still makes sense for you.

Healthcare & Social Programs: A Shifting Landscape

The OBBB includes significant cuts to federal funding for vital social programs:

  • Medicaid Changes: Expect cuts to Medicaid funding and new work requirements for many adult beneficiaries. If you or your loved ones rely on Medicaid, be aware of potential reduced coverage or new eligibility hurdles.
  • SNAP (Food Assistance) Adjustments: The Supplemental Nutrition Assistance Program (SNAP) also faces federal funding cuts and expanded work requirements.
  • Affordable Care Act (ACA) Implications: New eligibility verification requirements are imposed for ACA marketplace coverage, and enhanced tax credits for ACA coverage are set to expire. This could lead to higher out-of-pocket premium payments for many, particularly older adults. The CBO estimates these changes could lead to a significant increase in the uninsured population.

Your Action Plan: Reassess your healthcare and benefits planning. Explore alternative options if you’re impacted by changes to Medicaid or ACA, and adjust your budget accordingly.

Retirement & Savings: New Avenues and Program Shifts

The bill introduces both opportunities and challenges for your long-term financial goals:

  • “Trump Accounts” for Children: A brand-new savings option for newborns. These “Trump Accounts” receive an initial federal contribution of $1,000, with parents able to contribute up to $5,000 annually. Classified as IRAs, gains are tax-deferred until age 18. This is a new consideration for long-term savings for your children.
  • Student Loan Program Overhaul: Federal student loan programs are undergoing significant alterations, potentially ending subsidized and income-driven repayment options. Limits are also placed on Pell Grant eligibility. Current and future students will need to adjust their education financial planning.
  • HSA and 529 Expansion: Good news for healthcare and education savings. Eligible uses for Health Savings Accounts (HSAs) and 529 education savings plans are expanded, offering more flexibility.
  • Social Security Outlook: While the bill provides some temporary tax relief for seniors, its overall impact on the national debt could accelerate the insolvency of Social Security. This is a long-term consideration for retirement planning.

Your Action Plan: Evaluate “Trump Accounts” alongside existing savings vehicles like 529 plans. If you have student loans or are planning for higher education, understand the new repayment and eligibility rules. Review how you leverage your HSA and 529 plans for maximum benefit.

Investment & Business Considerations: Adapting to Policy Shifts

The OBBB also brings changes that could influence your investment portfolio:

  • Clean Energy Tax Credits: Many clean energy tax credits from the Inflation Reduction Act are being phased out, which may impact investments in renewable energy and electric vehicles.
  • Fossil Fuel Promotion: The bill promotes increased domestic oil and gas production, which could influence investment strategies in the energy sector.

Your Action Plan: Consider how these policy shifts might affect your investment portfolio. Diversification and a long-term perspective remain key.

Overall Financial Planning Implications: A Holistic Approach

The “Big Beautiful Bill” is a game-changer. It necessitates a comprehensive review of your financial strategy.

  • Review Tax Strategies: Don’t miss out on new deductions!
  • Reassess Healthcare and Benefits Planning: Understand potential impacts on coverage and eligibility.
  • Evaluate Savings Options: Explore new opportunities like “Trump Accounts” and expanded HSA/529 uses.
  • Update Estate Plans: High-net-worth individuals should revisit their estate plans due to increased exemptions.
  • Adjust Investment Portfolios: Align your investments with the new economic realities. If you’re a client of ours, we’ve already done this for you.

The “One Big Beautiful Bill” is far-reaching. Given its complexity, consulting with a qualified financial advisor and tax professional is highly recommended to understand how these provisions specifically impact your unique financial situation and to adjust your plans accordingly. Schedule time with a Warren Street advisor today. .

Justin D. Rucci, CFP®

Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Sources:

https://www.whitehouse.gov/wp-content/uploads/2025/03/The-One-Big-Beautiful-Bill-Legislation-for-Historic-Prosperity-and-Deficit-Reduction-1.pdf

https://apnews.com/article/what-is-republican-trump-tax-bill-f65be44e1050431a601320197322551b

https://dart.deloitte.com/USDART/home/news/all-news/2025/jul/obbb-signed

https://www.bairdwealth.com/insights/wealth-management-perspectives/2025/10/the-one-big-beautiful-bill-act-how-it-may-impact-you

https://www.lathropgpm.com/insights/tax-update-one-big-beautiful-bill-act-signed-into-law-what-does-it-mean-for-you

https://www.loeb.com/en/insights/publications/2025/07/the-one-big-beautiful-bill-act-breaking-down-key-changes-in-the-new-tax-legislation

https://blog.zencare.co/obbba-bill-medicaid-therapy-cuts

https://www.investopedia.com/parents-and-the-big-beautiful-bill-11767091

https://www.crfb.org/blogs/obbba-would-accelerate-social-security-medicare-insolvency

https://www.americanprogress.org/article/what-trumps-anti-environment-one-big-beautiful-bill-act-means-for-your-wallet-health-and-safety

https://budgetlab.yale.edu/research/long-term-impacts-one-big-beautiful-bill-act

I’ve Got a Lump Sum in Cash, Should I Invest It Right Away?

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What should you do if you’ve just received a big bonus at work, inherited some money, sold a business, or come into a financial windfall? Should you invest it all at once, even if the market feels high or low, or take a gradual approach by investing in smaller increments over time?

This is a common question we hear from clients and investors alike. It’s no surprise—deciding how to invest a significant sum of money can feel overwhelming. What if you invest it now and the market drops? Or, what if you wait and the market takes off? It’s natural to worry about making the wrong choice or missing out on potential gains.

Both investing a lump sum immediately and spreading it out over time come with their pros and cons. Let’s explore some key factors to help guide your decision.

Start with Your Goals

Before making any investment decisions, consider your financial goals.

If you need the money for short-term purposes, like upcoming college tuition, the market’s volatility could be a concern. In this case, conservative options like short-term bonds, bond funds, or CDs might be better suited to protect your funds.

For long-term goals, such as retirement, investing in the stock market may be a better choice. Despite short-term fluctuations, the market has historically trended upward over time.

Compare Lump-Sum Investing vs. Dollar-Cost Averaging

Investing a lump sum means your money is fully exposed to the market immediately, allowing you to benefit from any immediate gains if the market is rising. However, since markets are unpredictable, a downturn could occur soon after you invest.

If the risk of short-term losses makes you uneasy, dollar-cost averaging (DCA)—where you invest a fixed amount at regular intervals—might be a more comfortable approach. For instance, you could invest $12,000 by putting in $1,000 monthly over a year. This way, you buy more shares when prices are low and fewer when they’re high, helping you manage the average cost over time.

Keep in mind, though, that research shows lump-sum investing outperforms DCA 68% of the time. If maximizing returns is your main goal, lump-sum investing could be the better option. However, if you’re worried about losses and potential emotional reactions, DCA may be worth the slight reduction in expected returns.

Don’t Wait to Invest

Historically, stocks and bonds outperform cash over the long term, so it’s important to start investing as soon as possible. Holding off is essentially an attempt to time the market, which is notoriously difficult. In 2023, equity fund investor returns trailed the S&P 500 by 5.5%, largely due to market timing efforts.

Both lump-sum investing and DCA help you avoid this pitfall, letting you benefit from the market’s long-term growth. The key is choosing the strategy that aligns with your risk tolerance and long-term plan.

If you’re unsure which strategy is best for you, reach out—we’d be happy to help you decide.

Justin D. Rucci, CFP®

Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.