Some of these developments – such as the rapid shifts in tariff policy and on-again, off-again trade wars – are especially nerve-racking for investors tracking their portfolios. Others, including new tax-free Trump Accounts for kids, are a little less stress-inducing.

1. Beware the market bubble

This is a wildly exciting time to be an investor. The S&P 500 is up nearly 40% from its early April lows, and the growth in all things related to artificial intelligence (AI) has been off the charts.

That said, this market is starting to look a little frothy … and it’s looking more and more like a bubble with every passing day.

The S&P 500 trades at a price-to-earnings (P/E) ratio of 31, making it one of the most expensive markets in history by that metric. The index trades at a price-to-sales (P/S) ratio of 3.4, making it literally the single most expensive market in history.

Much of this is due to the outsize influence of the technology sector in the S&P 500, as tech stocks tend to have higher valuations. Indeed, technology makes up about a third of the S&P 500 today, whereas it comprised about 15% of the index back in 1999, near the end of the dot-com bubble.

Looking at individual stocks gives you even more extreme valuations. Palantir Technologies (PLTR) trades for roughly 650 times earnings, and Nvidia (NVDA) for well over 55.

Bull markets don’t end simply because stocks become expensive, and bubbles have a way of inflating far beyond what most investors believe possible. So there is no guarantee that the market will implode within the next 12 months.

That said, given how extreme valuations are getting, investors should keep a close eye on their portfolios and look for opportunities to rebalance in order to manage risk.

As Michael Taylor, investment strategy analyst, and Emily Todd, wealth and investment management analyst at Wells Fargo Investment Institute, remind us, “concentration risk is an often overlooked yet crucial aspect of asset management. Portfolios with sizable exposures – whether to an individual security or asset, sector or sub-sector, or geographic region – are vulnerable to significant losses.”

2. Trump Accounts: Free money for your kids

In what is arguably one of the biggest changes to the financial planning landscape since the introduction of the Health Savings Account (HSA) in 2004, Congress passed legislation over the summer that paved the way for new “Trump Accounts” for American children.

The Trump Accounts have some similarities with traditional IRAs, as well as 529 college savings plans. But they also have some quirks that make them unique.

Let’s cut to the most important part first. All children born between January 1, 2025, and December 31, 2028, will be eligible for a $1,000 seed payment directly from the U.S. Treasury.

Assuming the account grows at the S&P 500’s average compound annual return of around 10%, that $1,000 initial deposit would be worth over $490,000 by the time your kid hits retirement age. And if it falls short of that figure, who cares? It’s free money.

If you are a new parent or expect to be, keep your eyes open for more information on Trump Accounts. They are expected to be available starting July 4, 2026, but details about how to open an account should be available soon.

3. An entirely new way to trade stocks

The crypto ecosystem may be on the cusp of challenging traditional stock exchanges for the first time.

The U.S. Securities and Exchange Commission (SEC) is reportedly exploring ways to allow company shares to trade on the blockchain, similar to bitcoin and other cryptocurrencies.

This could be a very big deal for the industry because it has the potential to break Wall Street‘s monopoly on public listings. Companies could now possibly bypass Wall Street altogether.

Some pioneers, such as crypto-centric Robinhood Markets (HOOD), are already trading a limited number of tokenized stocks. But approval by the SEC could turn this trickle into a flood.

For most investors, the benefits will be somewhat limited. Trading on the blockchain won’t be materially cheaper than trading on the New York Stock Exchange (NYSE) or the Nasdaq. The bigger story here is that it opens the door to large-scale tokenization of other assets that don’t have a liquid market, such as real estate or hedge funds.

The SEC isn’t known for moving particularly fast, but we could have real news here before the end of the year.

And this isn’t the only potential change being cooked up by the regulators. The SEC is reportedly close to dismantling the $25,000 minimum equity rule for pattern day trading.

Following the 2000 crash of the dot-com bubble, the SEC required that investors have a balance of at least $25,000 in a margin account in order to make four or more day trades within a five-business-day window. The regulators wanted to prevent excessive risk-taking by smaller rank-and-file investors.

What will the result of this be?

A lot more short-term trading by smaller investors.

There’s nothing inherently wrong with short-term trading. If done in a disciplined manner, it’s not necessarily riskier than buy-and-hold investing.

Of course, the introduction of a legion of inexperienced traders into a market that is already resembling a bubble should give us pause. Consider this one more reason to keep an eye on the risk you’re taking as we head into the new year.

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