2025 IN REVIEW – WHAT TO EXPECT IN 2026

[00:00:51]Well, welcome to this episode of Pilot’s Portfolio. I hope your new year is off to a great start. You know, I think for many people the new year is like this clean slate, right? So many folks begin thinking about their year and the goals of what they wanna accomplish, financially and otherwise, and so I’m glad that you’re starting off your year listening to this show because this is the show that we discuss all things personal finance for the professional pilot. So things that are happening at your airline that affects your earning potential, decisions that you have to make at the airline, right?
[00:01:30]So either kind of like what the American Airlines pilots had to make, the end of last year with their market-based cash balance plan or just decisions that you find yourself facing as you travel through the financial life cycle of a professional pilot. Right. So we talk about all of those things and at the end of the day, how does this apply to you? How does this apply to your financial planning and you guys meeting the goals that you have for yourself and your family? so my name is Timothy P. Pope. I am a certified financial planner and principal at 360 Aviation Advisors, where we specialize in the financial planning needs of the professional pilot. And in today’s episode, we are taking a quick look back at 2025 and some of the major. Decisions that we all live through together, or major movements in the market that we all live through together. And then offering a sneak peek of what you can expect in future episodes in 2026. But before we go further, quick favor.
[00:02:14]So if you have been listening to the show for a while and you find yourself coming back every couple of weeks, you know, because you find the content valuable. And pertinent, or maybe you are new to the show and in which case welcome perhaps you’re new and you still find the content valuable. So either way, if you could, wherever you listen to podcasts, drop a quick review of the show, that would be great. And rate it, it’s through your feedback that. We will continue to improve the show and make sure that you guys are getting the content that you want and the content that is helpful. So if you could leave a quick review, apple, Spotify, YouTube, wherever that would be great. Appreciate it.
[00:03:01]Oh, and another quick thing, shout out to the American Airlines, Miami based 737 Captain who posted their December mid month pay stub on social. Nice work, right? Like I, I haven’t read through all the comments. I’m, I’m not on, matter of fact, I don’t even know which platform you posted it on. I just received a text message from a planner who does not work with professional pilots, and they were like, hey, check this out. Look at the comments going crazy. And then I also saw a news article, actually picked it up, picked up the fact that and reviewed the pay stub. And then they, you know, wrote some article, blah, blah, blah, right. About it. So anyways, that was funny. Shout out to you. And by the way, we are taking on new clients, so if you need someone to talk to, you can find a link to schedule an appointment in the show notes. So, alright let’s talk about the markets in 2025. So the year started off with, the markets were actually declining. And then things kinda came to ahead around April where there was a really big. maybe just measured from the peak to the trough, there was about a 19% decline around April, right?
[00:04:04]So, in earlier last year, in 2025, there was a lot of uncertainty, there were tariffs, right? So there was uncertainty around policy. And the markets do not like unc. And if you were watching the markets closely during this time and listening to financial news media at the time, this could have been pretty An unnerving experience. The good news is in your 401k, at least, you’re putting money in and the company’s putting money in two times a month, regardless of what the market is doing. And that’s certainly one of the keys to success when it comes to long-term investing is to automate your savings. And it’s a really great thing that you didn’t make any sell decisions in April because the market came back
with a really big recovery and the s and p went on to finish the year right around 17% for the year. And beginning of the second quarter, huge declines. And then the rest of the year was a really big recovery. So 17% for the year, right around there. For the s and p 500, this is going to be its third year of double digit returns. All right? And so you can think about like the US stock market, you can say, hey, well I can probably expect somewhere between 10 and 12% on average. But you can see that, hey, every year we’re not gonna hit that average, right? So some years we’re gonna be way up ahead of it, and then some years we’re gonna be really really below that average, right? So, very rarely does it finish at a nice, nice 10 to 12%.
[00:05:36]Speaking about uncertainty here in the US, international markets really took off due to a weakening dollar due to, you know, trade decisions and trade policies there, and also uncertainty of what was happening inside of the US at the time. And so when you think about if you had a stock allocation to develop markets. In your portfolio where the large captive, about 17%, your developed markets position probably did around 34, 35%. So it’s like a two to one compared to US markets. And the thing is, you know, international kind of has lagged the US markets for quite some time. 2017 was the last time they had a big blowout year, but I think this just comes to policy matters and then allocating different parts of your portfolio to different regions also matters, right?
[00:06:30]So if we only had US positions in our portfolio, yeah, we would’ve done well. I mean double digits, right? Nothing to sneeze at and double digits above the long-term average is also great. But if we didn’t have the developed market positions, then we certainly lost out. Now here’s the other thing too, uncertainty. As I already mentioned, the markets do not like uncertainty. Due to uncertainty, precious metals a lot of times can be seen as this safe haven, if you will. So, you know, things like gold certainly increase when there’s uncertainty in the market, you think about trade policies as well and tariffs where there was an idea like, Hey, we import a lot of our silver. And silver has like applications in tech and other things besides just being a precious metal. And so when you think about, folks wanting to get ahead of. tariffs, there was some stockpiling happening and so silver really scar rocketed and precious metals far outpace the international markets. [00:07:31]But when you think about, okay, well would I want all of my portfolio in precious metals? Yeah, probably not. Would I want a 100% international portfolio? You know, for the long term, probably not. And so that’s where having a proper investment plan can really help you. Because you know, some folks will look at a precious metal fund and say, wow, you know, this fund did like 65% last year. You know, I’d love to jump into it. And they do. And then the following year it does not return 65%. and so then there’s disappointment and that’s a lot of times what happens is when we chase those returns, especially the eye popping returns, we chase them, we put big bets on them and then we end up disappointed. So a balanced portfolio, right? So yes, we’re gonna have some US companies, we’re gonna have some large companies, but we’re also want some medium and smaller companies. So the Mag seven, when we think about the concentration risk of tech companies and the fact that. just a few companies make up a huge percentage of the weight of the s and p 500. We certainly are gonna want, some medium and smaller companies in our portfolio, and we certainly are going to want, some international in our portfolio. [00:08:46]And that’s why rebalancing work is when,we create a portfolio, we know that not all parts of it going to behave the exact same at the exact time. So we create a mix that works for us. And what we’re really looking for in that mix is its risk profile and its return characteristics. And then when we have eye-popping returns, like our international does, you know, 35%, and we can unemotionally trim those gains. We can lock in those gains and then we can look at other parts of the portfolio that are down or just underweighted based off of
what we’ve set up. And we do that year, over year, over year. And over time, we’re locking in our gains. We’re taking gains off the table, and we’re keeping the risk profile appropriate to what we can handle. So that’s why rebalancing works, and it’s important to have a diversified portfolio there.
[00:10:47]Thinking about, 2025, the US bond market, you know, return between seven and 8%. You know, it’s a mix between of uncertainty. So when things are un unc, typically, folks will flee to safety. And so bonds are considered more safe than stocks. And you know, we already talked about the. Fleeing to the safe haven of precious metals and things. So typically that’s a response we can see in the market. But then also the fed cut rates several times in 2025. And as you guys will know, bonds usually have an inverse relationship with rates. So in 2022, when the rates were going up, the value of the bond funds went down in 2025. As rates were going down, the value of the bond funds were going up. ‘Cause they’ve got bonds in there that have a higher coupon, they’re paying higher interest. That becomes more valuable to investors. so some thoughts and recap there of the 2025 US International and bond markets. Let’s think about some other things that we went through together. Taxes.
[00:11:42]Okay, so we got a new tax bill. I’m not gonna spend a lot of time on this because. I did throughout the year, spent a decent amount on the tax bill that we received in July. But the point here is that policy decisions matter, and the big headline at the times was, hey, the tax rates of 2017 are going away. News flash, they were made permanent. And indeed, I’m using air quotes here when I say permanent, because they’re gonna remain until someone else decides to change them. I think one of the big takeaways here. Yes, bonus depreciation was made that was also made permanent, the a hundred percent bonus depreciation. But for a lot of you guys that are. High income W2 earners. A big tangible thing that you guys you’re going to see on this year’s tax returns. if you are living in a state with a high income tax and a high property tax, your state and local tax deduction moved from $10,000 to $40,000.
[00:12:35]So that’s gonna be nice that you’re gonna be able to. Deduct some of the taxes that you were already paying and you could actually see a real difference in your tax bill from what you came into 2025 expecting to pay and then come April of this year, what you’re gonna end up paying, right? And so tax policy matters. And I think the point here is that, you know, if your financial planning decisions are not being made through a tax lens. And, you know, with a tax central approach you, I think you’re making a mistake, You’re in this $10 million career. You can’t afford to ignore the impacts that taxes has on growing your wealth. And I’m not talking about arcane tax strategies that go heavy, into gray areas, for high W2, income earners. I’m talking about. a lot of the individual and cumulative decisions that you make, or maybe I should say, marginal decisions that have a cumulative impact that you make every year, And that you can’t afford to ignore. So things like, hey, should I be doing Roth 401k, or should I be doing pre-tax 401k? If I’m charitably inclined, how can I give to charity in a smart and tax efficient way? hey, I have this brokerage account. How can I build the brokerage account in a tax efficient way so as it grows those distributions, your capital gains, and your dividend distributions don’t end up on your 10 40 or it doesn’t end up more than it has to, right?
[00:14:01]So we want a tax efficient investment program there. And then when it’s time to take gains off the table, how do I harvest gains? and how do I rebalance that portfolio? Some other considerations are like backdoor Roth conversions versus brokerage account or pre-tax 401k versus Roth 401k. And then if you’re investing in property or alternative investments, there’s other decisions that you have to make there. And all of these decisions when you combine them and you make them year in and year out, they do have a cumulative and tangible impact. On the amount of after tax dollars that you get to keep It
compounds over time. So those are some things that we all went through together that I talked about on the show previously. But I think they do have a material impact on your financial planning. And here’s the other thing. So let’s switch to things that have happened in aviation. For a moment, when I think about 2025, I think about a heavy year of incidents and accidents.
[00:14:57]We started the year in 2025 with the DCA crash. We had the endeavor incident in Toronto. Thankfully there was no loss of life, but that was a hard landing, and the plane flipped over. We had the Air India 787 incident, and then. Near the end of the year, we had the UPS MD 11 engine separation. And these are just a few of the big ones, okay? And then there was a smattering of, of smaller incidents with smaller planes, okay? Loss of life is never a small thing. But really what this brings into focus is estate planning. And look, here in the us, especially in the 121 world, you guys are still the safest in the world, but things happened so I implore you, I said, don’t let updating your estate plan be one of those things that just kind of sits on your to-do list for a long time. If your assets are fairly simple and if things can be accomplished by just making sure your beneficiaries on your accounts and your life insurance are up to date, then do that.
[00:15:59]Right, If you have minor children and you need to elect guardians, okay, cool. Do that. Like if you own properties in multiple states or have more complex investments, or you have you know, a business in addition to flying take the time to make sure that you’ve properly accounted for what happens to your assets and things if something happens to you. One tragedy is that those you leave behind are managing the shock of your sudden passing. And a financial maze and the uncertainty about their financial future. So that’s one tragedy in of itself. But then a completely different tragedy is that those you leave behind allow money to be a wedge or a splinter in their relationship because your wishes are not clear. And siblings who were once close now aren’t talking to each other. Right? It happens. So when I think about some of the events that happened in aviation itself.
[00:16:53]Certainly I’m thinking about estate planning just because of those events there. Now let’s take a quick sneak peek for 2026. I share with you guys some of the things that you can expect. So in 2026, I’m excited to bring a mix of episodes, so solo episodes like this one. Where I can just pick a topic and I’m. I’m talking directly to you guys and ideally you’ve left a review where you’ve written in, you’ve asked questions, right? you’ve let me know some of the things that you want to hear about, right? So talking directly to you. We will do probably a few more interview episodes than we did in 2025.
[00:17:32]So we’ll do a few more of those from leaders in the space to help you think about financial strategies that relate to you. And more specifically, what action you can and should be taking, to implement some of those strategies. And then lastly, we’re excited to introduce some interviews from your peers. Okay, so folks that are living the same life that you are, that are having to make the same decisions that you’re having to make. And we want you to hear from them about how they’re addressing the financial questions of the day. because I think about comparison. Particularly, comparison of a financial sort, right? it can weigh on you on one hand, right? if we’re always comparing ourselves to somebody who might be a few steps ahead of us, that can weigh on us and not make us feel great, right? It always makes us feel like we’re behind. And that’s why I always say, hey, everybody should know their own why and then have their own financial plan.
[00:18:23]So, hey, you can hear. Other things that people are doing, you can appreciate those. Hey, that’s cool, that’s great for them, but you know that you’re doing what you need to to be successful in your own way, right? So on the one hand, comparison can weigh on you. On the other hand though, when you hear folks that are doing the same things that you
are, that have the same questions that you have, and you can hear how they think through those, that can be really encouraging. That’s what we want, we want to provide that platform so you guys can hear folks just like you and you can be encouraged by it. that’s gonna do it for this episode. We want to thank all of our listeners, and also special thanks to our sponsor, beacon Relocation, who helps you guys save money on your next real estate transaction and we’ll see you on the next one.