2025 | December Risk Odometer

The Risk Odometer remained at +3 yet again and our Outlook at its highest level of “Positive” for the six consecutive month. Very little has changed in the past month to cause changes in our outlook. The recent government shutdown clouded some things but did not have a material impact on the stock market. Until risks on our radar significantly rise, or unforeseen ones materialize, we remain bullish.

Confirmed by our Risk Odometer, our bullish outlook is rooted in double digit earnings growth, massive capex spending, and resilient economic growth. The Federal Reserve is also supporting our outlook with an easing interest rate policy. They have lowered interest rates 1.75% over the past year and a half and are expected to lower them more in 2026, adding to our bullish outlook.

The markets are not absent risks though. Risks on our radar include a slowing labor market, high inflation and stretched valuations. Our biggest concern is concentration risk in widely held stocks which could have systematic effects if optimism around AI fades. We do not see that occurring in the near-term, therefore our optimism heavily outweighs the risks and we remain bullish.

We know the market will not go straight up forever. Corrections along the way are inevitable and should be expected. The stock market experiences 10% corrections every year on average. They are usually noise. We usually discount them or view them as opportunistic. We believe investors should not be willing to invest in stocks if they are not willing to experience a 20% drop in their account values. We try to remind our clients this when times are good, so they do not panic when inevitable corrections occur.

As always, we continue to believe our Risk Odometer provides guidance in making better investment decisions because it keeps us objective and disciplined. We use this methodology and advise our clients to do the same. Emotions are our enemies in investing.

It is important to understand that our Risk Odometer is not designed to anticipate small to medium corrections, typically those in the 5-15% range. Instead, it monitors for conditions which have typically preceded larger corrections. We believe trying to anticipate small to medium corrections sounds attractive but more often results in lost opportunity than savings.

The Equity Market Risk Odometer is our guide for judging risk in the equity market. It is used as a guide for investment decisions in our proprietary investment strategies. It is composed of various indicators based on leading economic indicators, earnings, technical price action, breadth, and volatility. Its score can range from +5 to -5. Readings greater than one are positive and readings less than or equal to zero are negative.

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_{This information does not have regard to the specific investment objectives, financial situation and the needs of any specific person who may view this information.  Statements, opinions, and forecasts made represent a particular observation and assessment of the market environment at a specific point in time and are not intended to be a forecast of future events or a guarantee of future results.  Statements regarding future prospects may not be realized and may differ materially from actual events or results.  Past performance is not indicative of future performance.}

_{FC Wealth Solutions and its representatives do not provide legal or tax advice.  You may want to consult a legal or tax advisor regarding any legal or tax information as it relates to your personal circumstances.}

_{Michael Fickell is an investment advisor representative of FC Wealth Solutions}

_{Securities and investment advisory services offered through FC Wealth Solutions, a registered investment advisor.}

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