Fourth quarter brings unique challenges - election volatility, tax-loss harvesting, window dressing. Here's how I'm positioned and what I'm watching.

Fourth quarter 2025 is shaping up to be particularly interesting. Earnings season will test these elevated valuations. The Fed's next moves are uncertain. Holiday retail performance will be crucial. Let's talk strategy.

First priority is maintaining flexibility. I'm keeping 15-20% cash to take advantage of any market selloffs during year-end volatility. Tax-loss harvesting season creates opportunities as investors dump losing positions, and institutions engage in window dressing that can distort prices temporarily.

The holiday retail season will be crucial for consumer discretionary stocks. I'm watching consumer spending data closely. If we see weakness, it could signal broader economic concerns. If spending holds up, it confirms the soft landing narrative.

From a sector perspective, I'm overweight healthcare and consumer staples for defense. These sectors tend to hold up well when uncertainty rises. I'm also staying overweight technology, but being selective - focusing on companies with actual earnings rather than just growth stories.

Energy is interesting here. Oil prices have been volatile, but the supply-demand dynamics suggest support around current levels. I've got a small position in the major integrated producers like ExxonMobil and Chevron.

What I'm avoiding is financials and real estate. Banks are facing net interest margin compression as rates potentially come down. Commercial real estate continues to have structural issues. These sectors could work out, but the risk-reward doesn't look great.

My individual stock picks for Q4 are Microsoft, Google, UnitedHealth, Procter & Gamble, and Berkshire Hathaway. These represent a mix of growth, value, and defense.

On the trading side, I'm using any significant dips to add to core positions. The S&P 500 at 5500 or below looks attractive. Individual names on my shopping list if they pull back are NVIDIA under 800, Amazon under 160, and Apple under 170.

Risk management is critical. Use stop losses. Don't let small losses turn into big ones. Size positions appropriately - no single stock should be more than 5-7% of your portfolio unless you're very confident and can handle the volatility.