MIKE TOWNSEND: The first month of the year has been anything but calm. Geopolitical developments—from Venezuela to Greenland to the ongoing Ukraine-Russia war to a threatened trade war with our Canadian neighbors—are upending the traditional world order. 

Domestically, we've got a criminal investigation into the chair of the Federal Reserve and the Supreme Court wrestling with whether the president can fire a sitting Fed governor, sparking genuine concern about the central bank's independence. On Capitol Hill and at the White House, immigration and affordability issues have dominated the headlines. 

Not surprisingly, a lot of investors are feeling overwhelmed by the sheer volume of things that are going on. And I agree that it feels like we are living in unprecedented times. I've spent 30 years thinking about how policy and political developments in Washington affect the markets. Normally, policy analysts find a comparable scenario in history to assess how policymakers reacted and the outcome they reached. We use that history to inform our thinking about how the current situation will play out. But right now, I feel like there are lot of things going on that simply don't have any historical analogue.

It strikes me that financial analysts are facing a similar quandary. Normally, they too would look at history and find a comparable environment. They would analyze how the market reacted then and use that information to assess how the market might react now, what might cause movement in the markets, and what the markets are just going to shrug at. 

If history cannot be a guide, and it feels like we as investors are in uncharted territory wherever we turn, how can we know where the opportunities are? And how can we best manage our investments?

Welcome to WashingtonWise, a podcast for investors from Charles Schwab. I'm your host, Mike Townsend, and on this show, our goal is to cut through the noise and confusion of the nation's capital and help investors figure out what's really worth paying attention to.  

Coming up in just a few minutes, I want to explore how investors can navigate the tidal wave of news that seems to happen every day—with Kasey McCurdy, a colleague of mine at Charles Schwab who focuses on helping advisors construct portfolios for investors that can weather the uncertainty of today's unpredictable market environment. 

But before we get to that conversation, here are three quick updates on issues I'm watching in Washington right now.

First, I did not expect to be talking about a second government shutdown—but it's very possible that's what's going to happen on January 31. 

The agreement to re-open the government in November following the record-long 43-day shutdown only funded government operations through January 30. But Congress was on track to meet that deadline just a few days ago. Over the past two weeks, the House passed the final six of the 12 appropriations bills to fund every federal agency and program through September 2026. And the Senate was expected to do so this week. 

But things fell apart last weekend. In the wake of the shooting of a second person by federal agents in Minneapolis, Senate Democrats announced they would refuse to support the final appropriations bill because it included funding for the Department of Homeland Security. Democrats are calling for restrictions on Immigration and Customs Enforcement agents as part of the funding bill. Even if a deal is reached to, for example, separate the Homeland Security measure from the rest of the package, which includes funding for the Pentagon, the Labor Department, and a half-dozen other Cabinet agencies, the House would be required to pass the revised version of the bills. And the House is in recess until February 2—after the shutdown deadline. 

Now it's always possible that some sort of last-minute agreement will be reached, but as I record this early in the week, a partial shutdown on January 31 seems increasingly likely. It's important to note that it would be a "partial" shutdown—six of the 12 appropriations bills have been approved by Congress, so agencies covered by those bills are already funded for the full fiscal year and would not be impacted by a shutdown.

Second, the Federal Reserve, as expected, kept interest rates at the same level after its first monetary policy meeting of 2026 this week. But somehow the monetary policy decision was just about the least interesting story out of the Fed in January. Bigger questions about the central bank's independence have dominated talk in Washington in recent weeks. First, we had the shocking news that Fed Chair Jerome Powell was under criminal investigation for possibly lying to Congress regarding the ongoing renovations of the Fed's headquarters. 

Then, on January 21, the Supreme Court heard oral arguments about whether the president can fire a sitting Fed governor. The president attempted to fire Fed Governor Lisa Cook last August, citing allegations of mortgage fraud. 

That case is not expected to be decided for months, and many court watchers believe that the case is likely to be remanded to a lower court. But with the case lingering out there and the president poised any day now to announce his nominee to succeed Powell as chair when Powell's term expires in May, it seems certain that the Fed will stay in the headlines for months—but for reasons having little to do with its monetary policy decisions. For now, the markets seem to be riding this out.

Finally, there was a bit of a strange development last week regarding one of the White House's recently-announced affordability initiatives. Earlier this month, National Economic Council Director Kevin Hassett announced that the administration was planning to push Congress to allow 401(k) plan participants to withdraw some of their retirement funds penalty-free for a down payment on a home. Now there are a number of complicated questions about how that would work and whether Congress would or could pass such a plan, but last week, the president himself threw some cold water on the idea, telling reporters that he preferred that people keep their retirement funds in their accounts. Of the plan, he said, "Other people like it … and one of the reasons I don't like it is that their 401(k)s are doing so well."

It's not clear whether the proposal will move forward on Capitol Hill—legislation has been introduced to implement the idea—but the president's comments are not likely to boost momentum. But the bigger takeaway is that it's a sign that while the administration gets that affordability issues are front and center for voters, finding consensus on ideas that are simple and quick to implement won't be easy. 

On my deeper dive today, I want to focus on how investors can navigate an environment where it feels like there are 10, 15, 20 market moving news stories every day. Yet the markets themselves seem to shrug most of them off. When I talk to investors, I hear a lot of things along the lines of, "I'm just not sure I have the stomach for this." And, "Every time something happens, I'm worried that this time the market is going to have a big drop."

We saw that happen January 20 when the S&P 500® dropped more than 2%, its biggest one-day drop since last April, on news the president was going to impose new tariffs on imports from seven European countries over their refusal to give or sell Greenland to the United States. But the next day, the president backed off of the tariff threats, and the market rebounded. A lot of investors are wondering what's the best way to invest in that kind of environment.

To help think through some of the big questions investors are wrestling with right now, I'm pleased to welcome to the podcast Kasey McCurdy, chief portfolio strategist for Schwab Wealth Advisory. In that role, Kasey focuses on investment management strategy, economic and market outlook, and portfolio construction standards to help Schwab's wealth advisors meet the needs of investors. Kasey has been with Schwab for nearly 15 years in a number of different roles, including as an investment consultant working directly with clients and as a portfolio manager focused on taxable bond funds. Kasey, welcome to WashingtonWise. Thanks so much for joining me today.

KASEY McCURDY: Mike, it's an honor to join the show. I got to say I've been binge watching West Wing all weekend in preparation for our policy discussion.

MIKE: Well, given the environment today, Kasey, I'm not sure West Wing is the right way to go. Maybe more like Game of Thrones. But Kasey, you've described your role at Schwab as kind of a coach for Schwab advisors and their clients. With what's going on in the markets right now, it seems that all investors would appreciate some coaching. As I said at the top of this episode, a lot of investors I speak with are feeling overwhelmed just by the sheer volume of things that are going on. In your role, you help put together portfolios in this environment, where a lot of the traditional and historical metrics are being upended or just aren't useful at all. Has everything that is going on from Venezuela to Greenland to tensions with our traditional allies like Canada and the EU to tariffs to challenges to Fed independence, just all of it, has that changed the way you think about putting together a portfolio? And if so, what are you doing differently?

KASEY: The world is moving faster than ever, isn't it? You and I could open our phones and see 10 different narratives about markets before breakfast. And I feel like that creates this feeling that everything is changing all at once.

I'll give you one example. I recently shared a chart with Schwab clients and advisors that showed how fast AI has been adopted relative to other technologies—think things like the internet and smartphones—and it's not even close. AI adoption has been at least twice as fast. So the pace of change is very real. But here's the important distinction for investors. The speed of headlines has increased much faster than the number of decisions investors actually need to make.

Most of what we feel that is urgent in markets, it's just noise. What actually matters works slowly over time. I know that flies in the face of today's instant gratification culture. So to your question, has the environment changed how we think about building portfolios? Not really at the principle level. We still believe strongly in long-term investing, diversification, and discipline.

What has changed is how intentional we are about risk management and resilience. We don't try to predict which headline will matter or which one the market will shrug off. Instead, we build portfolios that can absorb those surprises. That means thinking more broadly about diversification, being thoughtful about how much risk is being taken and where it's coming from, and then making sure your portfolios line up with your time horizon and cash needs—actual goals, not the news cycle. Most portfolios, they don't get into trouble because of what markets do. They get into trouble because of what investors do in response to markets.

MIKE: Yeah, I think that's very true. It's a great point. I want to dig into a couple of those trouble spots, couple of those surprises that you mentioned, things in the headlines that are worrying investors right now. Geopolitics, no question at the top of the list. As the year started, it was all about Venezuela. Then Iran was in the headlines for a few days. Then it switched to Greenland and our relationship with our allies in Canada and Europe. And all that has happened just in the first month of the year.

But we know that historically geopolitical risks are an ever-present part of investing and that they typically don't have a long-term impact on equity markets. So how do you think about geopolitical risk?

KASEY: Geopolitics is always near the top of what investors worry about, and that's especially true right now because the headlines keep rotating. Venezuela one week, Iran the next, and trade tensions with allies. It creates a sense that something new and dangerous is constantly emerging. One thing I try to remind investors is that geopolitical risk isn't new. What's new is how frequently we are reminded of it. If you simply look at how often the word "geopolitics" shows up in news, it's clearly rising. But that increase in attention doesn't automatically translate into lasting market impact. 

Historically, markets tend to react to geopolitical events in one of three ways. Sometimes you get an immediate reaction. It's quick, emotional, often volatile as investors rush to where they see perceived safety. In many of those cases, markets recover in days or weeks once the initial uncertainty fades. Other times, there's a medium-term reaction where fundamentals start to matter more—things like growth, earnings, or supply chains—and markets take longer to digest what's happened. And then more rarely, you have truly disruptive events where geopolitics alters the economic landscape in some lasting way. The key point is this: Most geopolitical headlines fall into the first category, not the last. They create noise and short-term movement, but they don't fundamentally change the long-term trajectory of markets. Geopolitics has always been part of investing. We just didn't use to get push notifications about it.

That's why when we think about portfolios, the goal isn't to react to every geopolitical headline; it's to build portfolios that are resilient and can carry on through these events. I feel like I need to get one of those shirts, "Keep calm and carry on." I often say that geopolitics tests investors patience more than it tests portfolio design. And historically, the investors that we've seen with better outcomes are the ones who resist the urge to treat every headline as a call to action.

MIKE: Yeah, I think that's a great point. I do want to talk about some of the headlines because I think these are kind of front of the mind for a lot of investors. And Venezuela strikes me as a particularly thorny issue. We have removed former President Maduro, but President Trump has mostly been supporting the old regime. We've taken control of Venezuela's oil. And according to the president, we are running the country, though it's not clear exactly what that means, who is doing the running, or what the end game is.

It's an example of what I'm talking about when I say that the traditional way I've thought about policy just doesn't seem to apply to a lot of things today. But as an investor, I try to think about the practical realities. The infrastructure in Venezuela is terrible. The politics are unstable. Oil companies have a long history of losing a lot of money there. Is it reasonable to think that they would invest now? Even if they did, it would probably be a decade or more of investment to get the oil infrastructure up to par. And it makes me wonder, is this oil worth it? If I own oil companies in my portfolio, do I want them to get involved in this opportunity or just walk away?

KASEY: That's a great question and one we're getting from clients a lot right now. And this one in particular is interesting because we're talking about concrete things like oil production, infrastructure, or supply, which sounds like something you should be able to model. I often frame it like this. If on January 1, 2020, I had told you that a global pandemic was coming, think border closing, economies shutting down, most people would have expected a pretty rough year for markets.

Instead, markets finished up double digits. So take this situation. If two weeks ago I told you the U.S. was going to take control of hundreds of millions of barrels of oil, you probably would have expected oil prices to fall meaningfully. That would have been the textbook reaction. Yet not much has happened. And it's not because markets are ignoring it. It's because global oil markets are incredibly complex. Think about the production capacity, infrastructure, geopolitics, investment timelines. Oil markets tend to price in what's actually plausible, not what's theoretically possible. And Venezuela is a good example of that. Even if everything went right, which is a big if, you're talking about years of investment before supply meaningfully changes. And the markets know that. They're not trading today on oil that might show up a decade from now.

So when clients ask, do we want oil companies leaning into this or walking away? My answer is usually it's not a decision you should solve in the moment. It's one you should solve with portfolio construction. In environments like this, we remind clients that uncertainty doesn't automatically mean opportunity, and complexity is a terrible place for overconfidence. Sticking to the plan, letting diversified portfolios do their job, and waiting for clarity is often the most disciplined move.

Said another way, when the situation is this complicated, the worst response is feeling like you need to have a strong opinion right now.

MIKE: Yeah, I think that's great advice. I struggle with another one in that same area. That's Greenland. Because, again, there's just not really a historical precedent to fall back on. I get the arguments for Greenland's strategic importance, but the practicalities just seem so daunting. It would cost a staggering sum to actually buy Greenland. But then you have to build out a workforce and infrastructure. You have to take care of the people who are already there. You've got to figure out how to extract minerals and other resources. It just all sounds like too much. The money to do all that would have to come from somewhere. And then of course, the other cost is potentially blowing up NATO, isolating the U.S. from its long-term allies. So are there investment implications to the Greenland situation?

KASEY: There's absolutely investment implications, but I don't believe anyone really knows the answer right now. You and I could probably spend the next hour sketching out the scenarios. You think best case, worst case, everything in between, we still probably wouldn't feel confident putting real money behind any of them. So when you step back, that's actually the point. The practical hurdles are enormous. Again, you're not talking about a transaction. You're talking about infrastructure and workforce and geopolitics, alliances. These are timelines that are measured in decades. The markets are very good at recognizing when something is theoretically interesting, but practically very far away. From an investment perspective, that's usually a signal to slow down. We don't invest on headlines, and we don't invest on hypotheticals that require everything to go right for a very long time. 

We invest on fundamentals, on repeatability, and on highly probable long-term success. If an investment case depends on perfect execution by governments over decades, it probably doesn't belong in a portfolio today. Interesting ideas and investable ideas are not always the same thing.

MIKE: But how do you tell the difference? Fortunes have been made when investors saw an interesting idea that turned out to also be an investable one. Is it research, risk tolerance, timing? What gives you the sense to go for it or to hold off?

KASEY: Well, rather than asking what does this mean for my portfolio right now, the better question is, is my portfolio built to handle uncertainty without needing to have an opinion on every geopolitical development? If the answer is yes, this becomes an interesting story, not an investment decision. That doesn't mean investors should never act. It means action should be driven by research. A clear understanding of the risk and whether an opportunity fits your time horizon and risk tolerance, not urgency alone. When those pieces line up, taking a measured position can make sense, but it should still live inside of a diversified portfolio.

MIKE: Related to all of these geopolitical issues, of course, is tariffs, which takes us in a lot of different directions. The president announced plans to impose specific tariffs on imports from seven European countries for not being cooperative about Greenland. Then he backed away from that a day later. We're still waiting for the Supreme Court decision on tariffs, which could result in $150 billion or more in refunds. Canada is cutting deals directly with China, and the president has threatened a 100% tariff on imports from our neighbors to the north. A number of experts have pointed out that 2025 may have been a bit of an anomaly when it comes to tariffs because companies had time to build up inventories and take other steps so that they could avoid passing the cost on to consumers. But those measures have mostly run out here in 2026. And some experts feel like price hikes this year are inevitable, and inflation could really start to rise. Have investors and the markets become too complacent about tariffs?

KASEY: Tariffs are a great example of how policy can feel very dramatic in headlines, but much more muted in reality. The economist Milton Friedman, he used to talk about policy working in long and variable lags, and tariffs fit that description well. It's absolutely possible that tariffs could contribute to inflation at the margin, but it's not our base case, and here's why. At the end of the day, tariffs are a tax. Over time, those costs tend to get absorbed by consumers, companies, or the supply chain, and often some combination of all three. We all know that prices have risen significantly since the pandemic. Things are expensive, and that certainly feels bad, but the increase has happened, and now when we break down year-over-year changes in inflation,  the bigger story recently has still been in services, things like housing, not goods. So goods inflation has been less than 2% per year for more than three years. And while it has picked up recently, it's coming off of a very low base. So the real question isn't whether goods prices rise—they probably will—it's whether they rise enough to offset the cooling we're seeing elsewhere in the economy. And right now, neither the data nor market-based inflation expectations suggests that's happening. 

One last perspective that I think helps keep this grounded. Goods today make up a much smaller share of the U.S. economy than they did decades ago. So even when tariffs affect prices, their ability to drive broad, sustained inflation is more limited than people often assume. Or put simply, tariffs can be noisy, they can be annoying, but they don't automatically mean runaway inflation.

MIKE: Now, one of the things that tariffs has started to make me worry about, and I've read articles from a number of experts who have been thinking about this, is that the world may be starting to wonder if the U.S. is worth the trouble. Look at Canada working more closely with China. Look at the dollar continuing to decline. I've always been dismissive of the concern that the dollar could lose its role as the world's reserve currency, but it's one of the most common questions I get from investors. Should we be more worried about that?

KASEY: Short answer? No. And I don't say that to be flippant. I say it because when you step back and look at how the global system actually works, the dollar's role is still very clear. 

The U.S. dollar is the reserve currency, and there's not a close second. Roughly 60% of global reserves are in the U.S. dollar. Around 80% of global currency transactions are in the U.S. dollar. Now, I recognize nothing lasts forever. You go back 100, 125 years ago, the British pound was the world's reserve currency. So these things do change over very long periods of time, but they don't change because of a few headlines or a handful of bilateral deals. Where I do think the more interesting conversation is happening isn't about the dollar being replaced tomorrow. It's about how money itself evolves over time. It's a more digital world. There's tokenization and new payment systems—those are real developments—but they're much more about how transactions happen than which currency anchors the system. So from an investment standpoint, I'd separate signal from story. There is plenty to debate around geopolitics and technology, but the idea that the dollar is on the verge of losing its reserve status just doesn't show up in the data nor in market behavior today.

MIKE: Well that's certainly reassuring. I want to try to bring this all together here. You think a lot about portfolio construction, basically how you would recommend investors spread out their money across a variety of different asset classes to maximize returns while also preserving a sensible allocation that meets the individual's goals, risk tolerance, etc. Right now, equities are basically flat over the first month of the year. Yields are rising. The dollar is declining.

Gold and silver are skyrocketing. Bitcoin is down 26% over the last six months. Is there anything out there that's good? How are you advising investors these days? Are there sectors you like more than others in this environment?

KASEY: First of all, you paint quite the picture, Mike. I feel like you might need to work on your Bob Ross impression, maybe add in a few happy trees there. 

Jokes aside, what you're describing is exactly the tension investors are feeling right now. We want our portfolios to grow, but we don't want to chase returns or take risks we didn't sign up for. And that's tricky when prices across most asset classes are near the high end of the last decade. The good news is, despite all that, we still see reasons for optimism over the next six to 12 months.

There are three big ones. First, policy. I know actions feel abrupt or messy right now, but markets have a way of reminding policymakers where the guardrails are. We've seen that already this year. 

The second, the Fed. Despite all the noise, rates have been steadily lowered over the last 18 months, and the Fed has shown a willingness to step in if markets become dislocated. Monetary policy works with a lag, but we're starting to see those effects come through.

And third, the consumer. Sentiment is low, like real low, to be honest. The vibes are not great, but spending has held up. Employment is still stable, and that matters far more for markets than how people say they feel. 

So with that as the backdrop, the way I'd leave listeners thinking about their portfolios is with a simple three-point checklist.

First, revisit your allocation. If you haven't rebalanced in the past few years, there's a good chance your portfolio has drifted more aggressive than you realize. The second, think about taxes. In years like this, tax efficiency can matter just as much as market returns, and it's often one of the easiest levers to pull. Third, stay diversified, but don't be afraid of risk assets if they fit your goals. We continue to see opportunities across equities, credit, and income-generating assets, especially where valuations are more reasonable like international equities or where cash flow is doing the heavy lifting like high-yield bonds or preferred securities.

The common thread through all of this is discipline. You don't need to have a strong opinion on every market move or asset class. You just need to have a plan that's built to work across a wide range of outcomes and then the patience to stick with it. This is exactly what we do in Schwab Wealth Advisory. We focus on helping investors build personalized plans, construct portfolios purposefully, and manage them with discipline over time. As I mentioned before, we invest on fundamentals, on repeatability, and on highly probable long-term success.

MIKE: Well Kasey, you really hit it out of the park on your WashingtonWise debut. I love that ending with a lot of really good ideas, I think, for investors. But one that particularly resonated for me, talking about the Washington policy world, is you said that markets have a way of reminding policymakers where the guardrails are. And I do think we're seeing that right now in Washington. I can't thank you enough for taking the time to talk today. It was a great conversation.

KASEY: Thanks for having me, Mike. It's been a pleasure.

MIKE: That's Kasey McCurdy, chief portfolio strategist with Schwab Wealth Advisory.

Well, that's all for this week's episode of WashingtonWise. We'll be back in two weeks with a new episode. Take a moment now to follow the show in your listening app so you get an alert when that episode drops and you don't miss any future episodes. And don't forget to leave us a rating or a review—those really help new listeners discover the show.   

For important disclosures, see the show notes or schwab.com/WashingtonWise, where you can also find a transcript.   

I'm Mike Townsend, and this has been WashingtonWise, a podcast for investors. Wherever you are, stay safe, stay healthy, and keep investing wisely.