Q4 Market Checkup for Dentists: Bonds, Stocks, and Why International Is Having a Moment

By Wes Read, with Brandon Hobson & Paul Lipcius — The Dental Boardroom

Once a quarter, we zoom out on the economy and ask two questions every practice owner cares about: What’s happening in markets? and What should I do about it? In Episode 130, Chief Investment Officer Brandon Hobson and Investment Committee member Paul Lipcius joined me to unpack the bond market, the stock market, and the surprising strength of international equities—and what it means for dentists.

1) Bonds & the Fed: What the Yield Curve Is Whispering

• The Fed recently cut rates 0.25% to a target range of 4.00–4.25%—still moderately restrictive. Markets are pricing in more cuts, but our base case is one additional cut this year, not two.
• Short vs. long rates: Savings accounts and short CDs react quickly to Fed moves; 10-year Treasuries move on growth and inflation expectations. Recently we’ve seen steepening—long rates inching up even as short rates fall—often a bullish economic signal (though it can also reflect inflation uncertainty).
• Inflation mix matters: Headline PCE sits near 2.7%, with services inflation about 3x goods. Despite headline chatter, tariffs haven’t clearly shown up in goods inflation yet in the data cited.
• Credit spreads are thin: The extra yield investors demand for investment-grade corporate bonds is ~0.75% over Treasuries—very tight by historical standards—implying the market views corporate balance sheets as healthy. High-yield spreads are also compressed, making junk bonds less attractive on a risk-adjusted basis.

Bottom line for dentists: Expect lower yields on pure cash and money markets as the Fed trims, while practice loans and mortgages key off the longer end (10-year) and may not fall in lockstep. Keep adequate reserves, but don’t over-park in cash if your IPS (investment policy statement) supports a longer horizon.

2) U.S. Stocks: Elevated Valuations Demand Discipline

• The S&P 500 trailing P/E > 30—levels previously sustained mainly during the late-’90s dot-com era.
• The index is top-heavy: the top 10 names ≈ 40% of market cap. Great businesses, yes—but concentration raises single-factor risk (growth/AI).
• A simple way to “feel” valuation: the earnings yield (inverse of P/E). A 30x P/E implies ~3.3% earnings yield—below the 10-year Treasury’s mid-4% range mentioned in the episode. That gap assumes very strong earnings growth to justify current prices.

What we’re doing differently:
Rather than blindly hugging the S&P 500, we tilt toward factors (e.g., value, dividends, fundamental indexing) and size (small/large caps) through ETFs. This helps reduce overexposure to mega-cap growth while hunting for under-loved, cash-generative businesses in staples, utilities, and energy.

Investor takeaway: You can be right about overvaluation and still lose by timing it wrong. Dollar-cost averaging and sticking to your IPS beats emotional in-and-out decisions.

3) International Equities: Strength with Better Starting Valuations

International has quietly been the star this year in our discussion:

• Emerging markets up ~25%; developed international ~23% in the period referenced.
• Drivers: a weaker dollar, more attractive valuations, and broader global growth.
• Leadership often runs in cycles: when international begins outperforming, it can last years, not months.

Our stance: Maintain a meaningful 20–40% allocation to developed and emerging international within equity sleeves, consistent with your IPS and risk tolerance.

Behaviors that Compound Results

Regardless of headlines, long-term outcomes hinge on controllables:

• Automate savings (401(k), DB plans, IRAs, brokerage).
• Live below your means to create investable surplus.
• Rebalance (sell some winners, add to laggards) to enforce “buy low/sell high” without emotion.
• Tax location: Place the right assets in the right accounts (taxable vs. tax-deferred vs. tax-free). Done well, research suggests ~0.5%–1.0% potential annual lift over time.
• Stay invested. Market dips are when your dollar-cost averaging does its best work.

At Practice CFO, we always invest for two clients—Present You and Future You. Diversification, factor tilts, international exposure, rebalancing, and tax-smart implementation are how we honor both.

Want a portfolio review or an IPS refresh tailored to your practice and timeline? Let’s talk.