Wall Street Fear-Mongering, Bitcoin's Slide & The Bond Market Comeback | Ep 23

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Financial media exists to grab attention. But sometimes an article crosses the line from attention-grabbing into genuinely irresponsible territory. This week's episode tackles one such piece from the Wall Street Journal.

When Fear-Mongering Goes Too Far

The article's premise was simple: markets need a good, long bear market to fix investor complacency. The problem? Nearly everything about the argument falls apart under basic scrutiny.

The piece claimed we haven't had meaningful bear markets since the 2008 financial crisis. That's demonstrably false. We've experienced five separate bear markets since 2008, including the 2022 decline that was nearly identical to the historical average: roughly 30% losses over about 300 trading days.

More troubling was the framing that positioned 2008 as the norm rather than the exception. The 2008 financial crisis gets compared to the Great Depression because it was a once-in-a-century event. Calling for similar catastrophes to teach investors lessons ignores the genuine human cost. Bear markets typically arrive with recessions. Recessions mean job losses, economic hardship, and real pain for millions of families.

The average bear market throughout history sees about a 30% decline lasting roughly a year to recover. That's healthy market functioning, not investor complacency. We don't need an 80% meltdown to reset psychology.

Bitcoin: Retail Investors Getting Smarter?

Bitcoin hit $100,000 earlier this year to relative crickets from clients. Now that it's declined to around $94,000, the questions are starting to flow. This represents an interesting shift in investor behavior.

Previous crypto cycles saw retail investors piling in at peaks, driven by FOMO and stories of massive gains. This time feels different. Many investors seem to recognize Bitcoin's volatility pattern and are waiting for pullbacks to add exposure rather than chasing all-time highs.

The fundamental challenge with Bitcoin remains its use case. The asset's value stems almost entirely from scarcity. There will only be so many Bitcoins in existence. But scarcity alone doesn't guarantee lasting value without utility. Investors considering crypto exposure need honest conversations about volatility tolerance and position sizing. A 50-60% swing in a month is par for the course.

For those holding Bitcoin at a loss, year-end tax loss harvesting presents an opportunity. Unlike securities, crypto doesn't face wash sale rules. You can sell Bitcoin to realize losses and buy back immediately if you want to maintain exposure.

The Quiet Bond Market Recovery

While Bitcoin grabs headlines, bonds are staging an understated but significant comeback. After the painful 2022 when bonds fell 15%, intermediate-term treasuries are up roughly 7% year-to-date combining yield and price appreciation.

That return might not sound exciting compared to tech stocks. But it's exactly what bonds should deliver: low to mid-single digit returns with stability. More importantly, bonds are resuming their traditional portfolio role.

The inverted yield curve that dominated conversations for over a year finally unwound. Short-term bonds were paying higher yields than longer-term bonds, creating an unusual dynamic. Many investors loaded up on short-term fixed income to capture those yields.

But interest rates and bond prices move inversely. As the Fed cuts rates, short-term bond yields fall immediately. Longer-term bonds, however, see price appreciation as rates decline. That's exactly what played out this year. Investors who extended duration into intermediate-term bonds captured both decent yields and price gains.

This matters for portfolio construction. The 2022 anomaly where stocks and bonds fell together shook investor confidence in diversification. But 2022 remains the outlier. Throughout history, bonds have provided ballast during stock market volatility. With higher starting yields than we've seen in years, bonds are better positioned to fulfill that role going forward.

Diversification Makes a Comeback

If 2025 has a theme, it's the return of diversification. Fixed income is contributing. International equities are outpacing U.S. stocks year-to-date. Sectors beyond technology are showing double-digit earnings growth.

The Magnificent Seven tech stocks are actually down 3% this year while the rest of the S&P 500 is up over 4%. That broadening market participation rewards investors who maintained balanced allocations through recent years when concentration in a handful of names drove returns.

This environment particularly benefits retirees and those nearing retirement. Balanced portfolios are behaving more predictably again. The tools available for managing risk are functioning as designed.

Planning for 2026 Contributions

The IRS released 2026 retirement contribution limits. Key changes include:

• 401(k), 403(b), and 457 plans: $24,500 (up $1,000 from 2025) 
• Age 50+ catch-up: $8,000 (up $500) 
• Age 60-63 special catch-up: $11,250 (no change) 
• IRA contributions: $7,500 (up $500) 
• IRA with catch-up: $8,600 (up $600) 
• Qualified Charitable Distributions: $111,000 (up $3,000)

The biggest change isn't the numbers. Starting in 2026, if your income exceeded $150,000 with any single employer in the prior year, your catch-up contributions must go into a Roth account. You can't defer them on a pre-tax basis.

This isn't necessarily bad. Roth contributions build tax-free growth for retirement. But it does require adjusting current-year tax planning for affected savers.

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