NWP Monthly Digest | July 2025
Who’s Ready for the Boom?
Scorecard
The U.S. stock market has recovered all the losses incurred during the late-February decline, which reached its lowest point shortly after Liberation Day. There are persistent warnings in the headlines about tariffs, trade disputes, geopolitical tensions, fiscal deficits, and elevated valuations, yet stock prices keep pushing higher. Why? Several key factors are playing a role.
Today, the Senate narrowly passed “the big, beautiful bill,” with Vice President JD Vance casting the tiebreaking vote, providing a short-term boost that traders assume will quickly show up in share prices—even if it adds trillions to tomorrow’s deficit.
Washington's political rhetoric now appears largely performative. Wall Street refers to the administration's negotiation pattern as TACO (Trump Always Chickens Out)—initially making bold threats, then settling for moderate outcomes. Markets increasingly dismiss escalations as theatrics rather than genuine policy threats.
AI-driven enthusiasm continues to bolster the technology sector, aided by expectations of falling interest rates. Inflation remains above the Federal Reserve's target but has substantially eased, reducing fears of stagflation reminiscent of the 1970s. The economy’s resilience has prompted markets to anticipate two Federal Reserve rate cuts in 2025, combining accommodative monetary policy with expansive fiscal stimulus, which is generally beneficial for economic growth.
Valuation is the lone headwind. The U.S. stock market (measured by the S&P 500) sells for more than twenty-two times expected 2025 earnings—rich by historical standards, especially when paired with a backdrop that is less than perfect. But analysts have responded by shifting the lens to 2026, when consensus calls for $290–$300 in earnings. At about twenty-one times those profits, the market still isn’t cheap—but more palatable if all the optimistic assumptions hold.
What Center Court Can Teach Wall Street
So much for the scoreboard—what should investors actually do with it? Many are unsure. Should they stay the course with their stock exposure? Make changes to their asset allocation? Wait for clearer signals or act preemptively? These questions don’t come with easy answers. But maybe Centre Court can offer a little perspective.
I was watching Novak Djokovic play at the French Open this year—I’m a huge tennis fan, for those who don’t know me. Djokovic, now nearing forty, was clearly taking a more aggressive approach in his matches—higher-risk strokes that could end points quickly and spare his legs. It was evident this was a deliberate strategy, rather than playing it safe and trying to grind down his opponents, which would risk letting young players like Carlos Alcaraz or Jannik Sinner dictate play and either beat Djokovic outright or wear him down, jeopardizing his next match and shot at the title. He chose boldness against world #1 Jannik Sinner—the only path to the trophy—but ultimately fell short.
Roger Federer faced the same crossroads late in his career. His tactical tweak in 2014 earned him three more majors in his mid-thirties after a five-year hiatus. No longer did the fear of losing steer him off course from the best path to winning. Rafael Nadal, a player who dominated the head-to-head matchup against Federer until Federer started playing aggressively, recently said 2017 was the best Federer had ever played and admitted that, on the other side of the net, he felt he had no answers. At that time, Federer was 36 years old—pretty remarkable. Yet, on championship point at Wimbledon 2019, the moment got to him, and the second match point was one that I’ll unfortunately never forget: Federer hit a forehand from the middle of the court—but played it too conservatively, didn’t place it well, and was slow to get to the net, which gave Djokovic an easy look to get the ball past Federer. In that moment, Federer was no longer playing to win and instead was hoping Djokovic would make an error—something tennis fans know nearly never happens with Djokovic at the most crucial points of a match. Heartbreaking for a Federer fan like me to see. 😭
There have been many legends of tennis, but for my era, there were Roger Federer, Rafael Nadal, and Novak Djokovic—known as the Big Three. Though each player had a unique style—Federer's versatility, grace, and effortless shot-making embellished the beauty of the game; Nadal’s intense topspin groundstrokes and relentless drive; and Djokovic’s all-around skills, consistency, and strategic play—they all showcased intelligent tennis. And the numbers don't lie.
Excluding serves, all three had a winner-to-error ratio around 1.2—that means for every unforced mistake they made, they hit about 1.2 shots that their opponent couldn’t even touch. That’s a level of consistency and skill that very few players in history have matched. Their opponents, by comparison, averaged just 0.8! These numbers prove why each was nearly impossible to beat on the big stages. They not only delivered spectacular shots consistently but also put opponents in uncomfortable positions, making it difficult for them to hit winners and forcing errors.
Another trait that set the Big Three apart was their ability to play with a remarkable margin of error. The center of a tennis net stands 36 inches high, and I was amazed to learn that Djokovic’s average groundstroke clears the net by 63 inches, meaning his shots average 8–9 feet above the ground! Even more impressive, Federer averages 70 inches, while Nadal’s shots soar 90 inches over the net on average—higher than a basketball hoop. This approach allowed them to play aggressively, dictate the game, and maintain enough margin to minimize errors and keep their opponents off balance.
Translating Strategy into Portfolios
It's been six years, and I still can't let this go. When Federer hesitated against Djokovic, he revealed a behavioral bias known as prospect theory—where the pain of a loss outweighs the joy of a win. This often leads investors to sell winners too early and hold on to laggards. Similarly, Federer played overly conservatively on match point because the pain of making a crucial error outweighed the pain of letting his opponent take control, leading to a strategic error that ultimately cost him the title.
Imagine if tennis players earned $10 million for winning a Grand Slam, but the player with the most winners (unreachable shots) received $100 million or even $1 billion. The game would change entirely, and the Big Three would hit seemingly risky shots—as that would be the smartest strategy to maximize earnings. Investment management operates in much the same way, where the strategy investors pursue should tie back to their investment goals, whether it be rates of return or how the performance factors into your financial plan.
Rate of Return:
The example above is akin to a strategy an investor would pursue if they’re purely targeting returns in the portfolio. Using this lens, the only consideration is the level of returns experienced or the relative returns to a benchmark. Usually—but not always—investors adopting this approach are institutional money managers whose objective is to outperform a specified benchmark without regard to a client's particular investment goals.
A few clients asked me whether they should buy Tesla after it dropped 15% on June 5, following a dramatic fallout between Elon Musk and the President, which felt like something out of a reality show I’ll dub The Real Billionaires of America (sadly, not yet on TV, but it sounds catchy, so hopefully it’s coming soon). I’m glad for those who bought and saw the stock rebound, but I often ask: Was that decision aligned with any clear investment goal? If Tesla doubles, will that change their retirement timeline? Was the risk worth the potential gain—or was the real goal simply the rush of a potential rebound?
Going back to the tennis metaphor, this is less like a Djokovic take to win a Grand Slam title and more like the game of Nick Kyrgios, known for his incredible shot-making ability and flashy, aggressive style. However, his inconsistency and tendency to go for wild, unpredictable shots sometimes cost him matches and prevented him from consistently reaching the top tier. Don’t get me wrong—he’s doing just fine—but he never fully met the expectations set by his talent. Perhaps winning a Grand Slam wasn’t his goal, but if it was, his inconsistent strategy shows he lost sight of that during matches. This isn’t to say you shouldn’t pursue these types of investments, but it’s important to keep your goals in mind, recognizing that these decisions are analogous to a highlight-worthy ESPN play of the week.
Planning Perspective:
And that brings us to the other viewpoint. While the rate of return matters, the measurement of success from a planning perspective is isolated to whether or not you achieve your financial goals. Are you more likely to accomplish your goals by taking an aggressive approach and playing to win, or by playing not to lose?
Unfortunately, there’s no straightforward answer here because it all ties back to an individual’s financial goals, willingness to take risk, and financial position. Monte Carlo simulations test thousands of possible outcomes, helping us boil complex questions down to clear, actionable insights.
For example, while the Big Three played more aggressively toward the end of their careers, a Monte Carlo simulation predicting their chances of winning a Grand Slam at 38 by playing conservatively—avoiding dictating points and ending them early with winners—might show less than a 5% success rate. In contrast, playing aggressively and selectively taking risks with shots that have a 60% chance of success could increase their probability to 10–20%. Still a low probability, but nearly a 200–400% improvement. A calculated risk worth considering.
Similarly, for a client’s financial goals, Monte Carlo simulations might reveal a 70% chance of success with less stock exposure but a 90% chance with increased stock exposure. Playing to win could be the best approach, provided the client is comfortable with the risk. On the other hand, it’s not uncommon, especially for wealthy individuals, for these simulations to highlight that excessive speculation and overexposure to equities could be the only threat to achieving their goals.
What Are the Consequences of Failure?
Significant Consequences:
The consequences of failure are of paramount importance. Although Djokovic can afford to swing out—win or lose—he heads home wealthy with more Grand Slams than any other player. He has every reason to play aggressively since he’s no longer young, and his body can’t endure what it once could, so being aggressive is his only chance to win another Grand Slam. Another professional tennis player might not have millions in the bank and could be focused on providing for their family or saving for their kids’ education. What if this player has a 1% chance of winning a tournament by playing conservatively and a 4% chance by being aggressive? Similar to the scenario above, playing aggressively improves the odds of winning the tournament, but let’s assume they also have a 90% chance of winning the first round conservatively and only a 50% chance aggressively (with cash payouts increasing each round). Now, imagine they need the prize money from the first round to fund their child’s college education. Failure here could be devastating, shifting their goal to minimizing the risk of losing in the first round. For Djokovic, it’s all or nothing. These two players clearly have very different priorities.
For those working towards financial goals, running out of money can have devastating consequences. Financial flexibility—the ability to cut expenses, access external resources, or extend working years—can be a valuable tool as it reduces the downside of taking risks. Those lacking flexibility must be mindful of the risks involved in financial planning. These risks can become even more significant when adopting an aggressive investment strategy. In such cases, trying too hard to win might end up being the only way to lose.
Some clients have saved more than enough and possess the wealth to take risks, but they remain unwilling due to risk aversion. This situation requires careful attention. While they have positioned themselves well for their financial goals, paradoxically, extreme caution becomes their main threat—similar to Novak Djokovic playing too timidly against an opponent he would normally beat 99% of the time. If he doesn’t take calculated risks, he might face an early exit due to this tactical failure—sometimes, the fear of losing leads to mental lapses that hinder our ability to reach our goals… Federer😤
Minimal Consequences:
And, of course, there are financial plans where individuals have everything they need and may view some of their investments as house money or aspirational dollars. These individuals are in a position to put money into Tesla if that’s something they wish to do. It’s their prerogative, and my goal is to provide feedback, which may sound something like this:
Despite the recent collapse in its stock price, Tesla still holds a market value of around $917 billion, with only about $6 billion in income over the past 12 months. This translates to investors paying over $152 for every dollar of earnings. In contrast, the S&P 500—considered a benchmark for the U.S. stock market—is priced at about $22 for every dollar of earnings. Betting on Tesla’s future requires significant optimism, especially considering the company’s 25% drop in revenues and an 82% decline in income just last quarter. While healthy earnings growth is expected over the next five years, investing in Tesla stock—even after its dip—remains a leap of faith due to its uncertain outlook and the high expectations it needs to meet to justify its valuation. Could Tesla achieve this? Absolutely. If it does, those bold enough to take the chance will be rewarded.
Financial Success Is Within Your Control
None of the Big Three wins every rally, but each calibrates aggression to maximize match‑point probability while still clearing the net by safe margins. Portfolios should do the same: swing hard when the added risk materially improves the odds, keep plenty of court between the ball and the tape, and measure victory by whether the chosen goals become reality.
Know your goal. Commit to your plan. Execute with purpose. That’s your best chance of winning the match.
“Your mindset is crucial—it frees you to fully commit to the next point with intensity, clarity, and focus.” — Roger Federer
Noble Wealth Pro Tip of the Month
Changes Ahead
Starting next year, the ACA premium tax credit subsidies will revert to the pre-2021 rules, which means there will be a 400% Federal Poverty Level (FPL) income cap, regardless of the actual premium amount. This marks a significant change compared to 2025, when households qualified for premium tax credits as long as their benchmark silver plan premiums exceeded 8.5% of their Modified Adjusted Gross Income (MAGI), allowing some higher-income households to receive a small subsidy. Beginning in 2026, anyone with an income above 400% of the FPL will no longer be eligible for premium assistance, leading to higher out-of-pocket costs for those individuals.
If you could be impacted by this change, taking a proactive approach may help you maintain eligibility or mitigate any impact of the change. Here are some strategies to consider:
Maximize contributions to retirement accounts or Health Savings Accounts (HSAs).
Carefully evaluate the timing and impact of any Roth conversions.
Reduce capital gains through loss harvesting or more measured trading.
Business owners may benefit from accelerating deductible expenses or deferring income when appropriate.
Those expecting to see their subsidies disappear may want to build cushion into their monthly cash flow and emergency savings, and explore other coverage options, such as group plans through an employer or spouse, or review other available exchange plans.
Those seeking to qualify for a subsidy should anticipate more stringent verification requirements. Have your documents ready—including proof of income, Social Security number, and citizenship status—to avoid disruptions in your coverage.
Fun Facts of the Month
Who pays? In the New York Federal Reserve’s district, one-third of manufacturing firms and 45 percent of services firms reported fully passing on all tariff-related cost increases to customers. Conversely, roughly a quarter of firms in both sectors said they fully absorbed all tariff costs (New York Fed).
More doctors, please. The two industries that have seen job postings fall the most (over 37 percent) from their pre-COVID baseline (February 2020) are software development and information design and documentation, both of which are threatened by artificial intelligence. The category with the largest increase during the same period is physicians and surgeons (Indeed).
Office overhaul. With U.S. office vacancy rates still near record highs at 19 percent, office conversions (to retail or residential) and demolitions are set to exceed new office construction in 2025 for the first time in at least 25 years, according to CBRE Group (CNBC).
Transferring wealth (and brokers). Between now and 2048, Generation X, Millennials, and Generation Z are poised to inherit 83.5 trillion dollars from their parents. Along with the transfer of assets, 81 percent of next-generation high-net-worth investors plan to switch from their parents’ wealth management firm within two years of receiving their inheritance (Capgemini).
An expensive family. The average annual household income needed for a family of four to live comfortably is 233,100 dollars. The most expensive state is Massachusetts (314,000 dollars), and 15 states require an income of at least 250,000 dollars. The cheapest state is Mississippi (187,000 dollars), and only seven states require an income of less than 200,000 dollars (SmartAsset).
MLB dips, Judge rules. Through May 28, the Batting Average on Balls in Play (BABIP)—excluding home runs and strikeouts—for all Major League batters was .290, on pace for the lowest since 1992. Aaron Judge’s BABIP, however, was .467, which is on pace to exceed Babe Ruth’s single-season record of .423 from 1923 (MLB.com).
“Near” bear markets. The S&P 500 just had its seventh “near” bear market since World War II and its sixth since 1990 when it fell 18.9 percent from February 19 to April 8. In the year after the six prior “near” bear markets (declines of 18.5 to 19.99 percent), the index was higher all six times, with an average gain of 32.9 percent (Bespoke).
Big Blue on top. IBM is currently the best-performing stock in the Dow Jones Industrial Average this year, up 28 percent. The next closest stocks (Microsoft, Visa, Boeing) are up just 13 percent. IBM has not finished a year as the best-performing Dow stock since 1996, when it rose 66 percent (Bloomberg).
Going abroad. The June Bank of America Fund Manager Survey, covering managers overseeing 587 billion dollars in assets, found that 54 percent expect international equities to be the best-performing asset class over the next five years, compared to just 23 percent who expect U.S. stocks to lead (Bank of America).
White-collar woes. According to Live Data Technologies, U.S. public companies have cut the total number of white-collar employees by 3.5 percent over the last three years. During that period, the number of managers at U.S. public companies has shrunk by 6.1 percent, while executive-level roles have declined 4.6 percent (Wall Street Journal).
Housing market gets worse. U.S. housing starts and building permits both fell to their lowest levels since the spring of 2020 in May, and the June reading for homebuilder sentiment missed estimates badly and hit a two-and-a-half-year low. Sentiment in the South and West both reached 13-plus-year lows (NAHB, U.S. Census).
Beef: it’s “how much?” for dinner. USDA ground beef prices hit a record 5.98 dollars per pound in May as U.S. cattle inventories reached their lowest levels since 1951. Ground beef prices are up 16 percent year over year and 51 percent since the end of 2020, compared to overall inflation (U.S. CPI) of 23.4 percent (USDA, Fresno Bee).
Going platinum. In the 20 trading days ended June 12, platinum rallied 29.95 percent for its largest four-week gain since April 2020 and just its sixth four-week gain of 25 percent or more since 1986. In the year after the five prior occurrences, platinum’s median gain was 15.4 percent, with positive returns four times (Bespoke).
Nuclear up, solar down. The current budget bill working its way through Congress phases out solar energy subsidies while boosting incentives for nuclear power. Since Election Day 2024, the Invesco Solar ETF (TAN) has fallen 23 percent, while the VanEck Uranium and Nuclear Energy ETF (NLR) has risen 24 percent (Bespoke).
Death and taxes. The House and Senate tax bills both include provisions to increase the exemptions of assets subject to the estate tax. When the estate tax was first imposed in 1934, 0.9 percent of adult deaths (about 8,600) were impacted. In 2019, the most recent year for which data is available, only 0.08 percent of deaths (about 2,100) were subject to the tax (Washington Post).
Persistence pays. Florida Panthers head coach Paul Maurice holds the NHL coaching record for most losses (767), but with the Panthers winning the Stanley Cup last week, he is also the first head coach or manager in MLB, NBA, NFL, or NHL history to win multiple championships after none in his first 25 seasons (OptaSTATS).
What We’re Reading and Enjoying
The Change Ninja Returns | Tammy Watchorn
The author explores various neuroscience techniques that can be applied to both business and non-workplace settings to overcome social fears or make big professional decisions with confidence. Here, actionable strategies help you prepare for whatever challenges life throws your way. A few examples:
You can't always control what life throws at you, but you're responsible for how you respond.
Don't ask for someone else's solution to your problem—something I myself have been guilty of over the past month.
Don't let fear paralyze you. Identify where it comes from and shift your mindset.
Manage potential risks by identifying and eliminating them one by one.
Several of these takeaways are relevant in my profession since some of my clients may become overwhelmed by the possibility of falling short of their retirement goals. Looking at the actual risks and worst-case scenarios might help you devise a solution to eliminate or manage those risks so you can achieve your goals. I just wrapped up a meeting with a client who was ecstatic when they realized their financial plan was in solid shape due to the changes they’ve made in addressing the risks to the plan. For most, a successful retirement is not a Cinderella story where you can close your eyes, tap your heels together, and everything will work out—it takes effort and awareness.
Another story: My wife and I have only really driven one car for most of the past five years, but as our kids get older, our Tesla sedan is feeling smaller and smaller. We’re resorting to using “Old Blue,” a Toyota Highlander that is about 20 years old. My oldest son likes to play with any gadget in the car, so I’ve been planning how I would address the situation if he locked himself in and we couldn’t get in. I know the solution is simple—I’d try to direct him on how to unlock the car, and if that fails, in the middle of a hot summer with no AC, if there’s no immediate solution to get into the car, we’d have to break the window, which is unfortunate but necessary.
Of course, this did happen when my wife was at Costco. She was in tears, panicked, and didn’t know what to do. In those moments, it’s tough to know how to respond unless you’ve come up with a solution in advance, which was the case. Luckily, she was able to tell him how to unlock the doors, so we didn’t have to break the window. It’s a good lesson.
