Q4 2025 Market Commentary

CHARLES W. FISH, CEO/CIO/FOUNDER

January 6, 2026

 

“That men do not learn very much from the lessons

of history is the most important of all the lessons

that history has to teach.”

 – Aldous Huxley

 

Marc Brunel’s pulley block machine1, invented in 1805, was of great value to the Royal Navy, who required over 100,000 such blocks annually. The true significance of this invention was not that it produced superior pulley blocks, but that it made it possible for 10 unskilled workers to replace 110 craftsmen. Two hundred and twenty years later, we find ourselves in the midst of the so-called Fourth Industrial Revolution of Artificial Intelligence (AI).

 

The infrastructure this technology will require is incalculable. The capital requirements to be borne by states and municipalities will be huge. We are anticipating the volume of new municipal debt over the next several years will set new records. The steepness of the yield curve should increase with yields on short-term debt moving only slightly lower, while the long high-grade market could rise above 5%.

 

There were three quarter-point decreases in the Federal Fund rate in 2025. We anticipate two or three more rate cuts in 2026. The current budget bill will expire at the end of this month, however, and a renewed struggle over reinstalling the Affordable Care Act health insurance subsidies is bound to be contentious. Although the cash-strapped Medicare systems in every state will soon be granted a share of the $50 billion Rural Hospital Fund, it will hardly offset the $911 billion in Medicare cuts incorporated in One Big Beautiful Bill Act (OBBBA).

 

Many unknowns remain. We don’t know what the Supreme Court will rule on President Trump’s tariffs. The decision is not expected until this summer. While global inflation is poised to further contract, we don’t know if our own Consumer Price Index (CPI) will move much below its current 2.7%. We don’t know if Jerome Powell’s replacement as a Chairman of the Federal Reserve Board of Governors in May could erode some of its independence from the White House. The geopolitical implication of our removal of President Maduro from Venezuela aside, we don’t know the long-term financial burden we may be inheriting. Restoring Venezuela’s oil production to its historical peak is estimated to cost between $100 to $200 billion over the next several years. We don’t know how long it will take to recover these costs, but it could be decades.

With all of the unknowns, the traditional strategy of broad diversification appears to be the most reasonable path to follow. Part of your asset allocation should definitely commit to  short duration municipal bonds or other cash substitutes. England’s Industrial Revolution, that lasted from 1760 to 1840, gave way to subsequent revolutions driven by electricity and computers. AI will have just as profound an effect on the world. How long it will last; only time will tell.

 

1. For you history buffs, Marc Brunel’s son, Isambard Kingdom Brunel, eclipsed his father’s fame by designing and building a truly revolutionary iron steamship, the SS Great Eastern, launched in 1858. The massive ship dwarfed all other ships of the time. It gained fame by sailing non-stop from England to Australia and by laying the first transatlantic cable.

This commentary reflects the views of Charles Fish Investments, a wholly owned subsidiary of Brentview Investment Management, LLC. The contents herein are provided for informational purposes only and are subject to change without notice. They are not a solicitation or endorsement of any sector, security, or index. Past performance is not a guarantee of future results.