Q3 2025 Podcast

I'm Todd Hoffman, Founder and Wealth Manager of the Hoffman Private Wealth Group at Steward Partners. Thank you for tuning in. This podcast is designed to inform and inspire, offering our perspectives on the current investment landscape while highlighting the risks and opportunities we see on the horizon. 

First, I hope all of you are having a terrific summer. 

Today, we're diving into the latest market landscape and major trends shaping the markets and our portfolios. I’m joined again by my co-host, Jenna Makras who, like me, is a Wealth Advisor on the Hoffman Private Wealth Group Team. 

A minute of banter with Jenna and Todd about making this our first Market update with both Audio and Video. Also, Todd is working in Colorado and Jenna and the team in Florida.   

Jenna: Todd, Q2 was challenging for investors, it seemed like the early part of the quarter was one of the more stressful periods, it was filled with wild market swings and genuine fear in the markets we have not seen since 2022.  Then before you knew it, we were at the end of the quarter and things had already bounced back as if the craziness never happened. Can you explain what happened?  

Todd: I totally agree Jenna, the second quarter was a wild ride, and from my standpoint, not a fun one. I think the severe volatility really took a lot of investors by surprise. It was really one of those periods that if you never looked at your accounts, you would have been better off.  

What happened was Politics, Tariffs, threats of trade restrictions, and concerns of Trade wars with what seemed like every country we do business with.  This led to a Technology meltdown and huge pressure on anything related to the AI sector.  There were even pundits saying a Chinese startup called Deep Seek was going to derail the entire AI trade,  

To be fair, there were several issues in the third quarter. First, many economists have reported on CNBC and the Wall Street Journal that they had predicted the Federal Reserve would cut interest rates 4 times in 2025.  Meanwhile the Fed has delayed these rate cuts with Bernacki arguing that the economy, including Employment, is still too strong, and with concerns of Trade Wars and new inflation from Tariffs, it is too soon to cut rates. While this has frustrated the markets looking for stimulus to drive the markets higher, the fact is, having a strong economy is a good thing.  

Then came Dogecoin, with Elon Musk and Vivek Ramaswamy stirring up volatility proposing deep cuts to federal programs, and Trump pushing his “Big Beautiful Tax Bill. This has caused controversy on both sides of the aisle. Democrats who are unhappy with proposed cuts to social programs, Medicare, and Social Security, and the Republicans who argue the cuts don’t go far enough at decreasing the growing Budget Deficit. 

On top of that, we’ve seen rising tensions in the Middle East, including a new conflict involving Israel and Iran, leading to the U.S. launching airstrikes. 

In my mind more surprising than all of this happened in one quarter is that the markets have already regained their losses, according to FactSet.   

Jenna: Wow, that is a lot to unpack! So where do we go from here?  

Todd: Recently we have seen more encouraging developments. The administrations firm trade stance has brought most of our trade partners to the negotiating table and we’re hearing about lowered trade barriers and lower Tariffs between the US and our trade partners.  We are also hearing about major international companies building plants in the US, including Hyundai, Stellantis, Toyota, Rivian, and Isuzu— according to the Wall Street Journal. Assuming these trade negotiations do result in fair agreements and new factories, this, in combination with lower interest rates over the next 6 to 9 months, I feel the markets are poised for strong periods of returns—like what we saw following the pandemic, in 2020 and 2021, and in 2023 and 2024, after the Fed’s rate hikes in 2022.  

 

Jenna: You brought up interest rates.  The Fed hasn’t cut rates yet in 2025, even though according to FactSet the markets had them priced in. You also mentioned new rate cuts in the next 6 to 9 months, can you explain?  

Todd: The Fed’s decision to delay interest rate cuts has caught many by surprise. While inflation, as measured by CPI and PPI, is lower than in recent years, according to the Fed, it hasn’t declined enough to meet their threshold for easing. Additionally, with ongoing tariff pressures and concerns for potentially elevated import costs, the Fed has stated they still have concerns that inflation could reaccelerate. 

Now that we are seeing recent progress on trade negotiations, there’s growing optimism that these headwinds may ease. Further, if we see meaningful trade agreements reached, the inflationary pressure from tariffs could diminish, allowing the economy to follow a more natural disinflationary path. 

Looking ahead, the current Fed Chair’s term ends early next year. Given that President Trump will decide who the next Fed Chairman is, his appointee is likely to adopt a more market-accommodative stance, favoring rate cuts and a looser monetary policy. While it’s too soon to predict a policy shift, if there happens, this would likely be helpful to drive equity markets higher.  

Jenna: What’s the latest on President Trump’s new tax bill—officially called the “One Big Beautiful Bill Act”? 

Todd: The bill passed the Senate by a narrow margin and is now facing challenges in the House, with a July 4 deadline for final passage. 

The Key Highlights: 

1. Tax Cuts and Reforms

• $4.5 trillion in tax reductions over the next decade, primarily by making the 2017 Trump tax cuts permanent, which were otherwise set to expire at the end of 2025. 
• No taxes on tips and overtime pay: Workers in the service industry can deduct up to $25,000 in tip income and claim new deductions for overtime pay, with the benefits phasing out for higher earners. 
• SALT deduction cap raised: The cap on state and local tax (SALT) deductions would increase from $10,000 to $40,000 for five years. 
• Child tax credit increase: The credit would rise to $2,200 per child, up from $2,000, instead of dropping to $1,000 if the bill does not pass. 
• Auto loan interest deduction: Taxpayers could deduct interest on loans for domestically manufactured vehicles. 
• Elimination of taxes on Social Security benefits for retirees. 
• The Largest tax breaks go to high earners: Households making over $217,000 would see average cuts of $12,500, while those under $35,000 would get about $1505. 

1. Cuts to Social Safety Net Programs

• $1.2 trillion in cuts to Medicaid and food assistance (SNAP), including stricter work requirements and tightened eligibility, even for some parents and older Americans. 
• The Congressional Budget Office estimates these cuts could leave up to 18 million Americans without health coverage by 2034. 
• The bill aims to focus Medicaid and SNAP payments on pregnant women, people with disabilities, and children. 

1. Rollback of green energy incentives with Billions in tax credits for wind, solar, and electric vehicles to be eliminated or phased out much sooner than under current law and new Fossil fuel incentives increased and the EV tax credit would end on September 30, 2025, instead of 2032.
2. $350 billion boost for border and national security, including $46 billion for the U.S.-Mexico border wall. $45 billion for 100,000 new migrant detention beds and Funding to hire 10,000 new Immigration and Customs Enforcement agents by 2029.
3. Debt and Fiscal Impact

• The Congressional Budget Office projects the bill would increase the national debt by $3.3–$3.4 trillion over the next decade, with some estimates (including interest) as high as $5.3 trillion. 

 

Jenna: With everything happening lately, why are the international markets performing better than the US? 

Todd: I’ve been highlighting for some time that international stocks are much more attractively valued on a price-to-earnings basis when compared to U.S. stocks after the US stocks already enjoying years of strong gains. With the ongoing political uncertainty in the U.S. many investors have decided to seek better opportunities abroad, and according to FactSet, we’re seeing robust investment inflows into the international markets. Europe and Asia have benefited from clear policy actions and interest rate cuts which have increased investor confidence. It’s notable that, despite conflicts in Ukraine and the Middle East, investors haven’t been deterred. Ultimately, capital tends to flow where valuations are compelling and resistance is low—and right now, this is the international market. In our own portfolios, we’ve increased international exposure, and unless the Fed starts cutting rates soon, we’ll likely continue to add to these positions. 

Jenna: You’ve been bullish on bonds in the past. I know a lot of this assumed we would see rate cuts drive prices higher, What’s your current thoughts?  

Todd: As I mentioned, I don’t think we see rate cuts until late, or next year.  As a result, we have again shortened the maturity of the bonds in the portfolios and given that the strength of the economy we have been taking advantage of lower credit with higher yielding bonds.   

Municipal bonds have faced challenges this year as state and local governments have ramped up issuance and flooded the municipal markets to fund infrastructure and try to get ahead of potential tax changes. According to JP Morgan, Municipal issuance in 2025 Muni could reach $560 billion, about 30% higher than their five-year average. Encouragingly, the most recent drafts of the new Tax Bill have removed the concern that Trump threatened to make Municipal Bond interest taxable, and this should help to boost Municipal Bond prices.    

Jenna: I have noticed you have done a lot more trading in the portfolios than you normally do, can you share why? 

Todd: I have been more active in trading this year to help navigate the heightened market volatility. This approach has allowed me to stay defensive when needed, while also taking advantage of opportunities to purchase quality investments at attractive prices not seen in some time.  I have had the opportunity to add several companies to the portfolios which I believe will drive significant returns over the next couple of years. Additionally, I’ve utilized tax swaps to help minimize our clients’ tax burden.  

Tax Swaps are a strategy where we sell a security at a loss to realize a capital loss for tax purposes and then reinvest the proceeds into a similar—but not “substantially identical”—investment. The goal is to maintain market exposure while capturing the loss to offset current or future capital gains, reducing overall tax liability. 

For example, if we sell a large-cap U.S. company at a loss, we might buy a different large-cap company with similar exposure. That way, we stay invested without violating the IRS wash-sale rule, which disallows the loss if you buy the same or a substantially identical security within 30 days. 

Jenna: During our last Podcast you didn’t add any jokes. I didn’t think our clients would miss them HA HA, but to my surprise we had several emails saying they wanted them added back, so what do you have for us today? 

Todd: What do you think I would say if you said you want to open a bakery?  

J- What? 

It might not be the best way to make a lot of dough!  

T - Why are pennies always optimistic? J Why? They make sense in every situation. 

T- What do farmers use when they do their taxes? J What? A?cow-culator. 

T- Why does Donald Trump need to carry a pencil? J Why? In case he needs to draw a line in the sand.  

Jenna: 

So – It seems like despite the fact the Second Quarter being very stressful, you feel good about how the year will turn out, is that correct? 

Todd: Yes, but to be clear, we have made many strategic moves in our discretionary portfolios. And whether you're in one of our Growth, Growth & Income, or Fixed Income models, I believe you’ll be pleased with where things are headed, but it is unrealistic to think there won’t be bumps in the road along the way as we resolve the Trade and tariffs and until inflation continues lower.   

Jenna: We have added several new people to our team in recent years, has anything changed working with the Hoffman Private Wealth Group? 

Todd: That’s a great question, Jenna—and the answer is yes. As our team has grown, so has our ability to deliver more value to our clients. 

We now have dedicated team members focused on keeping our calendars full and proactively reaching out to remind clients to schedule annual reviews. We’ve also added specialists to help in key areas like insurance planning, covering needs such as long-term care and disability—and we have staff for completing financial plans, helping ensure our clients stay on track toward their goals. 

This growth has allowed us to deliver a more comprehensive, hands-on approach. Our goal is to serve as our client’s personal CFO, bringing together our client’s investments, tax strategy, and estate planning, even coordinating everything with our clients’ CPA’s and Attorney’s.  

For our higher net worth clients, we’ve expanded advanced investment capabilities to include access to private market opportunities—investments you won’t find in the public markets. These may include private equity, hedge funds, things like ownership stakes in professional sports franchises. 

If that’s something you’re curious about, we’d be happy to have that conversation with you. 

Jenna: Todd, do you have any takeaways for the second half of 2025? 

Todd: 

1. This year has showed us once again- Markets can be very frustrating – but often during these times of volatility we discover some of the best opportunities!  
2. All of us at the Hoffman Private Wealth Group are committed to your success and in addition to your investments, we are here to help you address any Estate, or Tax Planning Issues or concerns you may have.   
3. From the bottom of my heart and from everyone on the team, we thank you for the opportunity to serve your needs and we look forward to hearing from you. We don’t take your business for granted and we value your relationship and friendship.  

Thank you for listening to the third Quarter Hoffman Private Wealth Group Market Update. 

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