2025 Q4 Market and Economic Update

Economist and investor John Hussman stated it well, “The defining feature of every bubble is the same: a growing inconsistency between the long-term returns that investors expect in their heads – based on extrapolation of the past, and the long-term returns that properly relate prices to likely future cash flows – based on valuations. Every bubble smuggles the same tragic past into the same tragic future by packaging it with new wrinkles that convince investors that “this time is different.” Ultimately, they still end the same way.”1 How realistic are current expectations? The average Gen Z survey respondent expects to reach financial independence at the age of 32. 60% think that working a full-time job will not allow them to reach their goals.2 And apparently, financial independence doesn’t mean living in a tiny house and buying second-hand clothes. 72% think they will be wealthy.3 We could dismiss this as the fantasies of the young, but this mindset has infected the culture at large. In 2023, Natixis did a survey of investor expectations and Economist and investor John Hussman stated it well, “The defining feature of every bubble is the same: a growing inconsistency between the long-term returns that investors expect in their heads – based on extrapolation of the past, and the long-term returns that properly relate prices to likely future cash flows – based on valuations.

Continue reading here: 25Q4 Economic Update.pdf