INSIGHTS

September 19, 2025

Q & Amy

Edition 18

Angus: The economy has slowed, hiring is flat, and the housing market is stalled, yet the S&P 500 is
up 13.29% including dividends as of September 16, 2025. Why is it performing so well?

Amy: The largest companies (the S&P 500) are in a stronger position than smaller companies (the S&P
600). They don’t rely as heavily on borrowing, so rising interest rates have had less impact on their
earnings. Technology stocks have been very strong, and overall profitability for these large companies is
near record highs. That consistency of earnings is what’s driving the market higher. Tandem will consider
the Fed forecast for future rate cuts to determine if a higher allocation to small caps is warranted.

Amy Bush, CFA

Chief Investment Officer

C. Angus Schaal, CFP^®

Senior Managing Director

Angus: How do the broader economy and stock market evolve from here?

Amy: Interest rate cuts from late 2024 are just starting to flow through the economy. After a nine month pause, more cuts are expected in 2025. That sets the stage for stronger investment and hiring by small and mid-sized businesses. Deregulation is another tailwind, especially for smaller firms. A recent change allowing full, immediate depreciation of capital spending is already boosting business investment — not just in AI but across industries. This under-reported development could lead to a stronger, more balanced economy due to improved profitability, productivity and potential GDP growth.

Angus: How are consumers holding up?

Amy: We’re seeing a split. Higher-income households, supported by stock market gains, continue to drive spending. Lower-income consumers are still struggling with inflation, higher borrowing costs, and tariffs, especially in areas like furniture and apparel. The good news is that job losses have been limited; however, food prices have risen 5% annually over the past five years, through July 2025.

Disclosures

Tandem Wealth Advisors LLC (“Tandem”) is an SEC-registered investment adviser.

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