Understanding Gold's Recent Surge and Currency Concerns

Sean Gross, CFP®, AIF® | Co-Founder & CEO

October 20, 2025

Gold prices have surged more than 60% this year, climbing above $4,300 per ounce alongside gains in numerous other asset classes. This remarkable advance has generated significant attention and raised questions among investors about whether this rally differs from previous episodes.

The current environment has been characterized by some as a "debasement trade," reflecting concerns that governments may be inclined to diminish currency values through expansive fiscal spending and supportive monetary policies. These factors, combined with a softer dollar, have drawn certain investors toward assets like gold, which are perceived as preserving value, particularly as equity market volatility has increased once more.

Although fiscal deficit concerns are valid, historical evidence demonstrates that forecasting gold's trajectory is challenging. Additionally, multiple factors beyond currencies and interest rates are contributing to broader market strength. For investors with long-term horizons, the key question isn't whether to choose between stocks and bonds versus gold but rather determining the appropriate allocation to each asset class within a well-balanced portfolio.

Most crucially, investors must recognize the distinction between short-term trading opportunities and long-term financial objectives such as generating income and achieving growth, particularly when an asset has already experienced substantial appreciation.

Historical context on currency debasement

Although currency debasement is an ancient concept dating back thousands of years, it remains a recurring concern that reemerges periodically. The traditional meaning of "debasement" describes governments reducing the precious metal content within coins. Historically, this practice enabled governments to produce more coins from identical quantities of precious metal, though it simultaneously diminished each coin's purchasing power.

Today, most currencies operate as "fiat currencies," deriving their value from confidence in the issuing governments rather than backing by gold or other precious metals. Contemporary debasement concerns therefore focus on whether governments might tolerate elevated inflation levels and currency weakness, as this approach would facilitate management of outstanding debt obligations.

This concept relates closely to theories that gained prominence following the 2008 financial crisis. Economists Reinhart and Rogoff, for example, described "financial repression" - policies maintaining artificially suppressed interest rates to diminish the real burden of government debt. Such policies disadvantage savers when interest rates fail to match inflation, eroding cash values. Given the national debt's continued expansion, investor concerns about these policies and the resulting search for value-preserving assets are understandable.

Despite these long-term concerns, current evidence regarding whether this is occurring today remains mixed. First, inflation measures remain persistent but not extreme. The Consumer Price Index, Personal Consumption Expenditures Index, and Producer Price Index all register at 3% or below. Second, bond markets aren't pricing in significant inflation expectations. The 10-year Treasury yield has recently declined to 4% or less, while Treasury Inflation-Protected Securities (TIPS) imply inflation expectations of just 2.3%.

Two additional factors merit consideration. First, central banks globally have been accumulating gold to strengthen their reserves. This trend has intensified amid geopolitical uncertainty and dollar weakness. Second, although the dollar has declined approximately 10% this year, it remains near the upper end of its twenty-year range. From a long-term perspective, the dollar maintains considerable strength relative to historical levels.

Forecasting gold rallies presents challenges

As a speculative investment, gold naturally attracts investor attention. Throughout recent decades, gold has experienced dramatic rallies with varying outcomes. During the late 1970s, gold surged amid concerns about stagflation and Federal Reserve independence. Prices peaked above $800 in 1980 - a level not revisited until 2007.

A comparable pattern emerged following the 2008 financial crisis as central banks implemented substantial stimulus programs. Many investors understandably feared runaway inflation and dollar collapse, neither of which materialized. Gold doubled between 2009 and 2011, reaching approximately $1,900 per ounce, before declining toward $1,000 over subsequent years. This occurred despite the Fed not beginning to reduce stimulus until 2013 or raising rates from zero until 2015.

The accompanying chart compares gold's performance to the S&P 500 since the 2007 market peak. Although gold has delivered strong performance during certain periods, providing diversification benefits, the S&P 500 has delivered superior returns over the complete timeframe. For investors focused on daily market movements, this outcome may seem unexpected. This underscores the importance of evaluating all asset classes from a comprehensive portfolio perspective.

Multiple asset classes have enhanced portfolio performance this year

The present gold rally, which commenced in 2024, has coincided with robust performance across numerous assets, including artificial intelligence-related stocks like the Magnificent 7, international equities, bonds, and cryptocurrencies. The accompanying chart illustrates how various asset classes have contributed to portfolio gains this year. While gold has certainly delivered strong results, individual stocks and other assets consistently outperform in any given year.

For numerous investors, gold serves as part of a broader commodities allocation, potentially connected to other alternative asset classes. The Bloomberg Commodity Index, for instance, initiated the year with a 14.3% target allocation to gold. Combined with other commodities including silver, industrial metals, energy, grains, and additional components, this index has appreciated 10.6% year-to-date.

Additional rationales support maintaining diversified asset class exposure aligned with long-term financial objectives. One fundamental consideration is that gold produces no income, unlike bonds or dividend-distributing stocks. Consequently, portfolios with excessive gold exposure sacrifice the longer-term appreciation potential of equities and the income generation of bonds.

The bottom line? Certain investors are troubled by dollar debasement concerns, especially given gold's continued rally. Investors should consider gold as one element within a flexible, diversified portfolio constructed to support long-term financial objectives.

Will a Prolonged Government Shutdowns Affect Portfolios?

Sean Gross, CFP®, AIF® | Co-Founder & CEO

October 6, 2025

As we look at markets and the economy, our goal is always to provide perspective for our clients. We understand that news headlines can send mixed messages, so we want to make sure you're informed of what is most important to your financial progress.

The government shutdown is at the forefront of the current news cycle and is now entering its third week. We expect these headlines to grow louder, adding to political noise and perhaps polarization. For investors, there are also growing concerns about a possible recession. To be clear, the goal of financial planning is not to take sides on which side of Washington is "right," but rather to make sense of it all, especially with an eye toward risks and opportunities.

Key Points to Consider:

• The current government shutdown is now in the top five longest shutdowns ever, primarily affecting government workers and their families, as well as those who depend on government services. By law, furloughed employees should receive all backpay once the shutdown ends.

• What makes this shutdown unique is that the federal government is pursuing layoffs, also referred to as "reductions in force" or RIFs. Without minimizing the impact on the lives of government workers and their families, the reality is that federal government employment only makes up 1.8% of the entire workforce. Recent reduction in force notices represent just 0.0018% of the total labor market, a small slice of the entire economy.

• Historically, government shutdowns have never had long-term effects on the stock market. The longest shutdown in history lasted 35 days during President Trump's first term from 2018 to early 2019. While the past is no guarantee of the future, the S&P 500 went on to gain 31.5% with dividends in 2019.

• Extended shutdowns can create modest economic growth headwinds as federal employees postpone spending and government services experience disruptions. However, much of this lost economic growth is simply postponed until the government reopens.

• The key drivers of investments, such as corporate earnings, valuations, interest rates, and inflation are unlikely to significantly shift because of the government shutdown. The shutdown is also distinct from the debt ceiling, which has led to credit downgrades in the past.

The chart below shows that historical government shutdowns have often had limited impact on markets, regardless of which party was in power.

Taken together, government shutdowns will likely attract media attention, present difficulties for federal employees, and interrupt essential services, but they historically represent temporary interruptions and have minimal financial market impact. Related to your situation, the government shutdown is not a reason to make changes to your financial plan. That said, if your financial situation or objectives have shifted, please don't hesitate to reach out and we'll explore it in detail together.

Government Shutdowns: What They Mean for Investors

Sean Gross, CFP®, AIF® | Co-Founder & CEO

October 6, 2025

The federal government is now officially shut down as policymakers work to reach a new funding agreement. This development comes during a year already marked by significant uncertainty surrounding government policies on trade, taxes, immigration, and other critical issues that impact both the economy and financial markets.

It's understandable that investors may be concerned about how political developments could influence their investment portfolios, particularly those who are worried about the growing budget deficit and national debt. By examining historical trends and understanding why markets typically move past these events, investors can maintain a balanced perspective even during times of political disagreement in Washington.

Although political tensions in Washington can generate uncertainty, historical evidence indicates that government shutdowns generally have a modest effect on financial markets. While these shutdowns can present real challenges for government employees, their influence on financial markets has been historically limited. For investors with long-term horizons, these situations underscore the importance of distinguishing between political perspectives and financial planning strategies. This distinction becomes particularly relevant when news coverage emphasizes contentious issues that have not traditionally influenced investment outcomes.

Markets and the economy have historically weathered government shutdowns

Each year, the federal government is required to approve a budget for the upcoming fiscal year, which starts on October 1. Although the government enacted the "One Big Beautiful Bill Act" earlier this year establishing tax and spending frameworks, a budget is still necessary to distribute actual funding to various departments and agencies. If this deadline is not met, the government may shut down, leading to interruptions in government services and the furloughing of employees.

Congress rarely meets the deadline for passing budget bills on time. This pattern is perhaps unsurprising given Washington's increasingly divided political climate, where finding common ground has become progressively more challenging. Throughout nearly five decades, Congress has successfully passed appropriations bills before the fiscal year deadline only on a handful of occasions, making eleventh-hour negotiations standard practice. A frequently employed workaround is a "continuing resolution," which provides temporary government funding while lawmakers continue discussions. Republicans are currently advancing a seven-week stopgap measure for this purpose.

The accompanying chart demonstrates that government shutdowns have been a recurring feature since 1980 across administrations of both political parties, with limited lasting effects on financial markets. The data shows this held true even during particularly contentious shutdowns, such as those during the Reagan years, Clinton's 21-day shutdown in 1995, Obama's 16-day shutdown in 2013, and Trump's 35-day shutdown spanning late 2018 to early 2019—the longest in history. From an investment standpoint, shutdowns have typically represented brief interruptions rather than fundamental challenges to economic expansion.

Underlying political disagreements drive shutdown scenarios

The present circumstances stem from disputes regarding spending priorities, with healthcare being a primary focus. Although immediate government funding remains the central issue, these budget confrontations reveal more fundamental disagreements about government's proper role and fiscal accountability. With federal debt currently approaching 120% of GDP, there is broad consensus about the necessity of fiscal discipline, yet significant disagreement persists regarding implementation methods.

A distinctive aspect of this situation involves the administration's instruction to agencies to develop permanent workforce reduction strategies beyond the usual temporary furloughs. This marks a shift from earlier shutdown approaches and may produce more enduring effects on employment and government spending. It should be noted that furloughed federal employees automatically receive back pay after a shutdown concludes, a provision established during the negotiations that resolved the 2018 to 2019 shutdown.

Some investors may view the prospect of a government shutdown alongside other fiscal concerns like the debt ceiling. Debt ceiling challenges arise when previously approved government spending requires payment, but the Treasury Department lacks authorization to borrow beyond a specified threshold. The sole remedy in such scenarios is for Congress to increase the debt limit, otherwise the government faces the possibility of defaulting on its financial obligations. These various fiscal challenges have led major credit rating agencies to lower the U.S. debt rating from AAA. Fortunately, the One Big Beautiful Bill Act also increased the debt ceiling by $5 trillion, postponing this particular concern for the foreseeable future.

Financial markets prioritize fundamentals over political developments

Despite concerns many investors hold regarding the nation's fiscal direction, government shutdowns have typically proven unremarkable for financial markets. The explanation is clear: shutdowns represent temporary interruptions that don't alter fundamental economic conditions.

Shutdowns may affect the release of economic data, potentially influencing critical information used by investors and economists, including the Bureau of Labor Statistics' employment reports and Consumer Price Index. However, this generally only postpones data availability, with normal reporting resuming after the shutdown ends. Extended shutdowns can also create modest challenges for economic growth, as federal employees postpone purchases and government services experience disruptions.

The Economic Policy Uncertainty chart shown above illustrates how tariffs and taxes earlier this year posed substantial challenges for investors. Nevertheless, with recent resolution on both matters, this indicator has declined toward its historical average. While the shutdown could potentially generate increased uncertainty, historical patterns indicate that even prolonged government disruptions have not typically affected investors significantly.

The bottom line? Although government shutdowns may capture media attention, pose difficulties for federal employees, and interrupt essential services, they have historically exerted minimal influence on financial markets. Investors are best served by maintaining focus on their financial strategies rather than day-to-day political developments in Washington.

September Market Chartbook

Sean Gross, CFP®, AIF® | Co-Founder & CEO

October 2, 2025

Click here to view our September Market Chartbook.

Q4 2025 Market Update: Managing Mixed Economic Indicators

Sean Gross, CFP®, AIF® | Co-Founder & CEO

October 2, 2025

Market volatility is an inherent aspect of investing, and 2025 has certainly demonstrated this reality. Though downturns—like the tariff-induced selloff—can feel unsettling, they often present chances to purchase assets at better prices. Conversely, when markets rebound and reach new peaks, investors may experience anxiety despite solid underlying fundamentals. In either case, maintaining portfolios designed to endure various market phases while keeping long-term financial objectives in mind becomes increasingly crucial.

Entering the year's fourth quarter, investors confront mixed signals. During Q3, the S&P 500 hit fresh all-time highs, buoyed by robust corporate earnings and artificial intelligence excitement. Simultaneously, the labor market has deteriorated notably since early summer, sparking worries about economic fundamentals and consumer financial stability. Yet GDP growth has remained solid, and inflation has been relatively contained.

Such market conditions highlight the value of long-term investment strategies and financial planning. Instead of responding to news cycles and economic data releases, investors should maintain well-designed portfolios capable of adapting to market transitions. This demands comprehension of the fundamental trends that will influence markets in coming quarters.

Primary Market and Economic Factors in Q3

• During Q3, the S&P 500, Nasdaq, and Dow Jones Industrial Average posted gains of 7.8%, 11.2%, and 5.2% respectively, all achieving new record highs in September. For the year through Q3, they have advanced 13.7%, 17.3%, and 9.1%.
• The Bloomberg U.S. Aggregate Bond Index increased 2.0% during Q3 and has risen 6.1% year-to-date. The 10-year Treasury yield closed the quarter at 4.15% after touching 4.02% in September.
• International developed market equities (MSCI EAFE) climbed 4.2% while emerging market stocks (MSCI EM) advanced 10.1% in the quarter.
• Gold surged to a record high of $3,841 per ounce, marking a 16% quarterly increase.
• Bitcoin finished at $114,641, below its August high.
• The U.S. Dollar Index dropped to 96.63 in September before closing at 97.78 for the quarter. Year-to-date, the dollar has fallen 9.9%.
• The Bureau of Labor Statistics' latest report showed just 22,000 net new jobs in August. Since May, monthly job gains have averaged only 26,800.
• The Federal Reserve reduced rates by 0.25% to a 4% to 4.25% range at its September meeting.

For long-term investors, overall market valuation levels represent a critical consideration. Beyond simply examining market prices, valuations reveal what investors receive for those prices in terms of earnings, cash flow, sales, dividends, and other corporate fundamentals. While elevated valuations indicate investor optimism, they also suggest expectations may be excessive in certain market segments.

Market valuations approaching historical peaks

The above chart illustrates this through the Shiller price-to-earnings ratio for the S&P 500. The current 38x reading significantly exceeds the 35-year average of 27x and nears levels last observed during the dot-com bubble. This metric offers a longer-term view than traditional P/E ratios by incorporating a ten-year earnings history adjusted for inflation.

These valuation levels aren't surprising given the powerful rally of the past two quarters. The S&P 500 has surged 34% since April 8, producing a double-digit annual gain. Technology stocks across multiple sectors have driven the market higher, just as they led the decline. The Magnificent 7 stocks, for example, have jumped 61% from their lows. Though investors increasingly question whether corporate artificial intelligence spending will yield positive returns, this has undeniably been a major catalyst for the broader market and business investment.

Importantly, valuations don't forecast near-term market direction and shouldn't be used for market timing. Rather, they function as essential inputs for asset allocation decisions. While broad market valuations are elevated, this doesn't apply uniformly across all market segments. Small-caps, value stocks, and international equities currently trade at more attractive valuations than large-caps, growth stocks, and U.S. equities. This presents opportunities for investors with diversified perspectives and extended time horizons.

Federal Reserve reduces rates as employment weakens 

In September 2025, the Federal Reserve lowered interest rates by 0.25%, continuing its easing cycle after maintaining steady rates throughout much of the year. This move reflects the Fed's effort to balance persistent inflation above the 2% target against a deteriorating labor market. Markets widely anticipated this rate cut, which has provided support in recent months.

Multiple factors distinguish this easing cycle as unique. Historically, the Fed has reduced rates in response to economic crises or recessions. While some weakness exists today, overall growth remains solid. Recent cuts therefore represent something distinct: an effort to normalize policy following the aggressive tightening cycle that commenced in 2022. This explains why the Fed is easing policy despite ongoing economic expansion and markets trading at record levels.

The deteriorating job market has been perhaps the most significant factor influencing the Fed's decision. Though the 4.3% unemployment rate remains historically low, job creation has decelerated sharply. August added merely 22,000 new payrolls, well below the 123,000 average from earlier in the year.

More striking still are payroll revisions which indicate 911,000 fewer jobs were created during the twelve months through March than initially reported, as the chart above demonstrates. The Bureau of Labor Statistics annually revises payroll figures based on more precise data than available during monthly job reports. While these numbers remain preliminary, a revision of this scale would mark the largest in history, revealing the job market has been weaker than previously understood.

Consequently, the Fed is reducing rates because, according to the latest FOMC statement, it "judges that downside risks to employment have risen." For investors, rate cuts generally support both stocks and bonds when the economy maintains strength.

Policy uncertainty and market volatility currently subdued

Following substantial volatility from tariffs and taxes earlier this year, economic policy uncertainty measures have improved. The VIX index of stock market volatility hovers near 16.3, below the long-run average of 18, while the MOVE index of bond market volatility has declined to 78, beneath the 87 average.

Long-term investors understand that calm market periods can shift rapidly. Recent years have witnessed numerous episodes of heightened volatility stemming from inflation, trade conflicts, Washington policy, the Fed, recession concerns, geopolitical tensions, and more. The current government shutdown represents just the latest event that could disturb markets short-term, even if long-term effects prove limited. Similarly, tariff policy outcomes and inflation impacts remain uncertain.

For investors, this uncertainty may feel uncomfortable, yet it's also what generates long-term portfolio results. Recent years also illustrate the gap between investor fears and actual market performance. Rather than treating uncertainty as something to avoid, successful long-term investors recognize it as a market characteristic that creates opportunities to position portfolios for future years.

The bottom line? With Q4 beginning, markets are trading near record highs amid conflicting economic data. This environment emphasizes the critical importance of maintaining proper asset allocation, a flexible investment approach, and remaining focused on long-term financial objectives.