Flowing into the New Year

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Peak experiences can happen when least expected.

It’s interesting how some of life’s most rewarding in-the-flow moments can happen when least expected.  What started out as a stressful and dauting assignment a few weeks ago has turned out to be a life affirming moment.

I think I speak for many of us when I say that anticipating the eventuality of elder care (especially from a long distance) is daunting to say the least.  We know that life’s impermanence will eventually come knocking on our parents’ door, but we don’t know at what point they will lose their independence and what arrangements need to be made in anticipation of that moment.

My wife and I spent the past 3 weeks in Holland caring for my parents, taking the holiday “shift” from my siblings.  Our 98-year old dad would have otherwise been alone in a house that was no longer suitable or safe, while our 91 year-old mom was being treated for a stroke at a nearby rehabilitation facility. 

We arrived in Holland not knowing what her prognosis would be, nor whether they could continue to live in their home of 37 years (let alone convince them to move in the first place).  Furthermore, we had to navigate the nuances of the Dutch health care system, potentially pack up their house and move them during the holidays, all in a country that I have never lived in.  The past three weeks were a long string of if-then statements, and my new friend ChatGPT proved to be a helpful assistant.

It may be an odd analog, but despite the sad circumstances these past few weeks have left me in a state of flow not unlike what I experience following burning man.  Immediacy and service are two of the principles of burning man, and these were my driving force in Holland as I immersed myself into the tasks at hand. The end-of-the-year quiet at work certainly helped in this regard. Even as I am writing this at 35k feet on my flight home, it feels like the “decompression” that happens after the playa.

Our daily routine in The Hague was to make sure my mom had everything she needed at the revalidation center, while shopping, cooking, and cleaning for my dad, and of course driving him to see my mom for coffee and apple beignets at MECHROPA.  (The Dutch like their acronyms even more than we do at Fidelity, and this one stands for Medically Chronic Patients). In the background, we made plans to accommodate a variety of outcomes. Above it all, we needed to convince my parents that their future would be best living in a residential care community and not their house. It was a combination of left brain tasks and right brain persuasion.

Stress management is always important (in life and work), and I found a way to create a practice of daily mindfulness.  The drive from the house to MECHROPA is 13 minutes, along a beautiful boulevard that goes right past the World Court.  For this Boston driver, Holland has many hazards when navigating a car, including cyclists, pedestrians, trams, and buses (of which there are many, and they all have the right of way).  But unlike the wild west that is Boston traffic, the Dutch traffic infrastructure is extremely orderly, which makes it all the more obvious if you don’t know what you’re doing!  Anyway, I made it a conscious point to drive in the calmest and smoothest way, at a constant speed in anticipation of traffic lights and rotaries, with a zen-like awareness of my surroundings.  I must have done this drive 40 times, and it was a great hack right up to the final frenzy at the end.

About a week ago we got the prognosis that while my mom is doing OK mentally, she will likely remain wheelchair bound.  While that was not the outcome we wished for, it did make it clear that returning home was no longer an option.  This activated our contingency plans and just yesterday we moved both parents into a cozy apartment that is part of an assisted living community.  It was a bittersweet moment, and their incredibly dignified composure during such a challenging time will be a lasting example for the entire Timmer family. 

On that note, there are two more points that I think are worth sharing.

For someone who has not spent a lot of time with the elderly, spending these weeks “hanging out” with the patients in the hallways and cafeteria at MECHROPA was a most uplifting experience.  They became like characters in a Norman Lear sitcom from the 1970’s, each with their own quirks and attributes, and each day being another episode in the show.  Quite often we would transport them in their wheelchair or get them a coffee, while my parents were spending time together.  We became quite attached to them all, and I miss them already. There is so much to learn from the gratitude and humility that these older souls have.

Finally, this experience has taught me that it is never too late to learn and evolve, to come full circle. As a shy kid born and raised in Aruba, I was always intimated by the Dutch culture.  I didn’t feel “Dutch enough” and never felt at home when in Holland or comfortable around Dutch people and their knack for judgement.  This was one of the reasons I chose to study in the US and stay there afterwards.  But in recent years I have worked to regain my roots, not at the expense of being an American but in addition to it. I am putting the duality back in dual citizen. 

And these past three weeks were the icing on the cake, as this was by far the longest I have spent in Holland since I was a child.  For the first time, I felt like a local.  The Dutch are an odd but loveable people, as they embody a paradox of directness (which they call honesty) and kindness.

My apologies for that long monologue.  Since my flight will land soon, I will make the rest of this new year’s WAAR a speed round.

The year in review. 

The final act of 2025 was not much different from the months that preceeded it, with gold and international equities at the top, joining the barbell of US megacaps.

It was a great year for almost every asset class, except Bitcoin and REITs.

Secular bull, but above trend

The S&P 500 has remained in a decisive bullish trend, but elevated well above both the rising long-term and secular trendlines.  This has happened while market breadth is modest at best.

Earnings-driven rally

While multiple expansion propelled the first phase of this cyclical bull market, earnings have carried the day since 2024.

Peak earnings growth?

Earnings have grown at a 14% 5-year CAGR, which is about as good as it ever gets.

Global bull

What is perhaps not well appreciated in the market is the fact that the 5-year CAGR of the earnings payout (dividends plus buybacks) in the US is up “only” 10% and well below many other regions in the world.  This may be a compelling reason to consider being overweight non-US equities after a 10+ year period of US dominance.

Indeed, the MSCI EAFE index has been making sustained new highs, in both local currency and USD.

Run it hot in 2026

The consensus going into 2026 seems to be that the US will run it hot, from a combination of fiscal policy and a dovish Fed.  The output gap (actual GDP vs potential GDP ) is now the highest in 25 years.

And more dovish Fed (about to get even more dovish) is cutting rates well beyond what seems to be justified by either inflation or employment (per various iterations of the Taylor Rule below).  Run it hot!

Term premium

The question is what happens to the term premium and therefore long rates?  Is a low 4-handle wishful thinking for the bond market against a run-it-hot strategy?

History suggests that the Fed model (in which bond yields help dictate equity valuations) could be a driving force in the coming years.

Debt levels

Despite the onslaught of chronic deficits, the run-it-hot strategy seems to be doing what is intended, i.e., raise the denominator (nominal GDP) so hard that the debt/GDP ratio falls.  This has been happening for the US, Japan and Europe, but not so much for China.

Gold

Gold has been the star performer in 2025 as central banks and private investors gobbled up the yellow metal.

This has caused the purchasing power of gold to soar to new all-time highs.

Bitcoin

Bitcoin on the other hand, took the year off (or at least the past few months).  It is following the internet S-curve a lot closer now than the power law curve.

It’s interesting that a lot of Bitcoin folks are proclaiming that the four year cycle is dead and a new structural up wave is at hand.  I’m skeptical, not about the waning power of the halving cycle (with which I agree), but the idea that bear markets are no longer going to happen.  For now, the line in the sand for Bitcoin is $65k (previous high), and below that $45k.  The latter is the power law trendline. That’s still far away but if Bitcoin consolidates for the next year, that trendline could get closer to $65k and could become a do-or-die line in the sand for Bitcoin.  But that may (or may not) be a story for another day (or year).