Market Pulse

October 2025: Q3 recap

Following a volatile Q2, markets rose during the quarter with major indices reaching all-time highs. This optimism was based on a combination of strong corporate earnings, continued enthusiasm around AI and a Federal Reserve rate cut. Furthermore, despite the uncertainty surrounding U.S. trade policy, the economic data reflected minimal disruption due to tariffs. The Fed cut rates by 25bps in September, citing softening in the labor market, the potential for a slowdown in economic growth and sticky inflation. However, investors shrugged these signs off, viewing these instead as a catalyst for further Fed easing. Even amid this rally, concerns over heightened geopolitical tensions, inflation and rich stock valuations persisted.

Against this backdrop, the S&P 500 ended the quarter up 8%, boosted by continued strength in AI stocks and solid performance within the financial and healthcare sectors. The return differential between U.S. and international equities was notable, with developed and emerging markets outperforming the U.S. by over 3% for the quarter. Overall, the bond market experienced modest positive returns, driven mostly by expectations for more rate cuts.

Equities

U.S. equity performance has been supported by AI capital expenditures, and for the momentum to continue, these mega cap technology companies will need to keep spending on AI investment. MSCI ACWI, which represents predominantly large- and mid-cap global stocks, was up 7.6% in the second quarter. Style performance was mixed for the quarter. Within small-caps, value outperformed growth by a narrow margin of 0.41% for the quarter, large-cap growth outperformed large-cap value by 5.2% and mid-cap value outperformed mid-cap growth by 3.4% in Q3. International growth outperformed international value by 3.2% for the quarter. Emerging markets were up 10.6% for the quarter, helped by weakness in the U.S. dollar.

Bonds

Fixed income has delivered strong returns this year, and municipal bonds started to outperform recently after lagging taxable fixed income for the past nine months. Bond markets provided stability amidst the uncertainty. The Bloomberg Barclays Aggregate Bond Index, which is comprised mostly of government credit and U.S. Treasuries, was up 2.0% in Q3. Investment-grade corporates were up 1.5% for the quarter. High yield bonds were up 3.3% in Q3, while bank loans were up 1.8%. Credit-sensitive securities benefited from favorable technical, high demand and opportunistic refinancing activity.

Alternatives

Alternatives, which provide benefits like income generation and relative value, posted mixed results. Gold continued to perform exceptionally, reaching record highs driven by central bank demand, geopolitical tensions and a weakening dollar. Rising 17% in Q3, the commodity is up 47% for the year.

Summary

It is difficult to speculate where the market is going from here; however, in the short term we remain optimistic. The market continues to show resilience, riding higher on positive investor sentiment. Corporations have shown the ability to navigate through challenges and produce strong earnings, accommodative monetary policy supports continued spending, and growth may be slowing, but is not recessionary. Beyond the next three-six months, we are cautious as issues that remain a modest concern today can easily grow into a bigger problem down the road – geopolitical conflicts can worsen, tariffs exacerbate inflation more, unemployment rises faster or a yet to be identified issue comes into play.

Diversified portfolios are better built to weather a variety of market environments. Strategic allocations across different asset classes, sectors and geographies allow investors to capture opportunities in various parts of the market, help mitigate the impact of poorly performing assets, while stabilizing overall returns. Further confidence can be found by understanding the underlying holdings. As always, we remain focused on managing risk and identifying opportunities that align with your long-term financial goals.

Source: Morningstar Direct

September 2025

Authored by Jeremy Robert

Equities continued their upward trend in August, despite some intra-month volatility. Investors grappled with data reflecting increased economic uncertainty, as the labor market showed signs of weakness, growth continued to moderate, and inflation remained stubbornly high. Federal Reserve (the Fed) President Jerome Powell spoke from Jackson Hole, his message providing the market with more confidence that the Fed may begin cutting rates soon. However, their decision remains data dependent, as they consider conflicting economic metrics. Against this backdrop, the S&P 500 rose by 2%, while the technology-heavy Nasdaq rose by 0.9% in August. With the anticipation of interest rate cuts, small cap stocks (Russell 2000) posted a strong month, rising by 7.2%, offering investors some hope that there could be a broadening of market performance outside mega cap stocks. International stocks (MSCI ACW Ex US) had another strong month, delivering a 4% gain, adding to their lead over domestic stocks for the year. Fixed income (Bloomberg US Aggregate Bond Index) was higher by 1.2% as treasury yields were mostly lower for the month.

The Fed’s fight against higher prices continues to prove challenging as the implementation of tariffs is starting to create inflationary pressure. The Consumer Price Index (CPI) increased by 0.2% for the month, with the annual CPI coming in at 2.7%, which was unchanged from June according to the Bureau of Labor Statistics. Core CPI, which excludes volatile food and energy, increased by 0.3% for the month, and 3.1% from a year ago, which was a bit higher than forecasts for 3%. The monthly core rate experienced the biggest increase since January while the annual rate was the highest since February. Shelter costs continue to be a large contributor to the rise in the core index, increasing by 0.2% for the month of July. Inflationary pressures driven by tariffs were reflected in increases in several categories including household furnishings which rose by 0.7% after rising 1% in June. Other tariff sensitive categories saw more modest increases including apparel prices up 0.1%, and core commodity prices up just 0.2%, while canned fruits and vegetables were flat in the month. The jury is still out as to whether tariffs will cause a one-time price increase or will be the catalyst to inflationary pressures, driving prices higher again. We are still far away from the Fed’s 2% target, but markets continue to price at a strong chance the Fed will cut interest rates in September. The August inflation data combined with the labor market data will likely determine if the Fed will cut or hold rates.

The Q2 earnings season is almost wrapped up, with 98% of S&P 500 companies having reported results. Despite the economic uncertainty, corporations have proven resilient, showcasing their ability to navigate through difficult conditions. 81% of S&P 500 companies reported a positive earnings per share (EPS) surprise, and 81% of the companies reported a positive revenue surprise according to FactSet. For Q2 2025, the blended year-over-year growth rate for the S&P 500 is 11.9%, which is strong and would mark the third consecutive quarter of double-digit earnings growth for the index. The dominance of mega cap technology and communications services companies continues to distort the index growth figures since these companies have driven the bulk of the earnings growth. Not only are these companies the beneficiaries of the growth, but the mega cap technology companies are also the biggest investors as a significant portion of NVIDIA’s earnings were derived from Meta, Amazon, Alphabet and Microsoft. The market is forward looking, as are investors. Earnings guidance during the quarterly calls was mixed as 47 S&P 500 companies issued negative EPS guidance while 52 issued positive EPS guidance. Despite strong earnings, the market trades above historical valuation averages with the 12-month forward P/E ratio now trading at 22.4, which is above the 5-year average (19.9) and 10-year average (18.5).

The market continues to move higher despite weakening economic metrics and the flurry of actions by the administration. The labor market and inflation data will continue to dominate the headlines with both moving away from their intended targets but still remaining somewhat in line for now. Investors are concentrating on spending by the mega cap technology players, searching for signs they pull back investment because they anticipate a broader economic slowdown, reminiscent of 2022. For investors looking for more diversification and higher levels of income, fixed income continues to provide a ballast to risk assets. September has historically been a weak month for the stock market, so we would not be surprised to see volatility increase given the complacency experienced over the summer months.

Source: Earnings Insight, FactSet, Aug. 29, 2025

August 2025

Authored by Jeremy Robert

Stocks continued their strong run in July, up for the third month in a row, as the S&P 500 and Nasdaq reached new highs. Positive momentum was fueled by a strong start to the earnings season, the passage of the One Big Beautiful Bill Act and the easing of tariffs and trade tensions. The data continues to reflect a resilient macroeconomic backdrop, including moderating inflation. The tariff levels, even after negotiated deals, are much higher than seen since the 1930s, yet the expected impact on the economic and inflation data has not played out. However, investors are taking notice of the softness starting to show in the labor market. Artificial intelligence continued to dominate the headlines and boost market sentiment, leading the technology heavy Nasdaq to rise by 3.7% while the S&P 500 rose by 2.2% for the month of July. Small-cap stocks (Russell 2000) were up 1.7% as investors preferred large-cap stocks in this environment. International stocks (MSCI ACWI ex USA) were lower by 1.1% for the month, but still outpace U.S. equities for the year, up 17% year-to-date. Yields bounced around during the month but were relatively unchanged, which led to bonds (U.S. Aggregate Bond Index) finishing the month down by a modest 0.3%.

Inflation was higher in June, as the first signs of the administration’s tariffs are slowly starting to impact segments of the economy. The Consumer Price Index (CPI) increased by 0.3% in the month, bringing the 12-month inflation rate to 2.7% according to the Bureau of Labor Statistics. This was in line with expectations, but still higher than the 2.3% 12-month inflation rate recorded in April and higher than the Federal Reserve’s (the Fed) 2% target. Excluding volatile food and energy, core inflation rose by 0.2% in the month and 2.9% on an annual basis. Vehicle prices fell in the month, which could be attributed to a rush to purchase cars prior to tariffs going into effect. Additionally, tariff sensitive apparel prices rose by 0.4% and household furnishings (influenced by tariffs) increased by 1% for the month of June. Shelter prices increased by only 0.2% for the month but remained the largest contributor to the overall increase in prices, bringing the 12-month shelter inflation to 3.8%. Energy prices rose by 0.9%, still down modestly from a year ago, and food prices increased by 0.3% resulting in an annual gain of 3%. Although June saw a reversal of the previous several months’ trend of lower CPI prices, levels remained relatively tame. The Fed kept rates unchanged in June, leaving the Fed Funds target range at 4.2-4.5%. The Fed continues to be patient, needing more time to determine if the administration’s tariff policy will impact prices and drive inflation higher.

Earnings season is underway, as 66% of the S&P 500 companies have reported results for Q2 2025. Results have been strong with 82% of S&P 500 companies reporting a positive earnings per share (EPS) surprise, which is above both the five- and 10-year averages of 78% and 75% respectively. For Q2 2025, the blended year-over-year earnings growth rate for the S&P 500 is 10.3% according to FactSet, which would mark the third consecutive quarter of double-digit earnings growth for the index. Earnings growth continues to be led by technology and communication services companies, as these sectors are the center of artificial intelligence capital expenditures spending. On the other hand, consumer discretionary and healthcare sectors are the clear laggards in EPS growth. Investors continue to focus on earnings guidance given the uncertainty surrounding the economy and the administration’s economic agenda. For Q3 2025, 30 S&P 500 companies have issued negatives EPS guidance, while 27 S&P 500 companies have issued positive EPS guidance. The market continues to trade at higher multiples than recent averages with the forward 12-month price earnings (P/E) ratio at 22.2 above the five-year average (19.9) and 10-year average (18.5).

Volatility is likely to escalate as we move into the summer months, which has generally been a seasonally weak period for markets. Investors seem to favor risk assets despite a weakening labor market, tariff concerns and the inability for businesses to plan beyond the next few months. We have yet to see the full impact of tariffs and who will ultimately bear the burden, but the consumer is likely to see higher prices on goods imported from outside the U.S. We believe mega-cap stocks will most likely continue to dominate the market, driving the returns for the S&P 500, which will increase the magnitude of volatility in a market downturn. Despite the concentration in a handful of stocks, we continue to find opportunities across regions and sectors while participating in the artificial intelligence theme. Fixed income remains appealing, with historically high yields providing a cushion for potential moves higher in interest rates. We expect markets to be dynamic; therefore, our portfolios are built to withstand volatility and allow investors to stay invested during uncertain times.

Source: Earnings Insight, FactSet, Aug. 1, 2025

July 2025: Q2 recap

Authored by Melissa Santas Peterson

The changing economic and geopolitical landscape kept investors on their toes during the quarter. Markets were shocked in early April by a surprise tariff announcement, hailed as the “Liberation Day” tariffs. Uncertainty over the potential impact of these new costs dominated headlines, sparking volatility and raising concerns over global growth. Against this backdrop, the S&P 500 dropped 12% in a week, and bond yields spiked. However, markets quickly rebounded as policymakers moved to suspend tariffs, initiate trade talks and diminish recession fears.

Furthermore, the Federal Reserve adopted a wait-and-see approach, holding rates steady to maintain the target range of 4.25-4.5%. They cited mixed economic data and the need to balance concerns over tariff-driven inflation and slowing economic growth. Despite the turbulent start, the S&P 500 ended the quarter up 11%, boosted by healthy gains in large cap technology stocks. While technology stocks remain in focus, we're encouraged to see broader participation across the U.S. market as investors seek opportunities with more compelling valuations. The performance differential between U.S. and international equities narrowed significantly, with developed and emerging markets outperforming the U.S. by less than 1% for the quarter. In the bond market, investor focus shifted from expectations of interest rate cuts to concerns over the sustainability of government debt, resulting in muted performance across the credit spectrum.

Equities

U.S. equity performance was driven by strong returns in the technology and communications sectors as investor appetite for some of the high beta stocks returned and Q1 earnings results were robust. MSCI ACWI, which represents predominantly large- and mid-cap global stocks, was up 11.5% in Q2. Growth companies outperformed their value counterparts for the quarter as investor enthusiasm for stocks with exposure to AI returned. International stocks outperformed U.S. for the quarter due to their attractive valuations and more supportive fiscal and monetary backdrop. Emerging markets were up 12% for the quarter, helped by weakness in the U.S. dollar.

Bonds

Although uncertainty around Fed policy and broader economic conditions caused volatility and produced tepid returns in fixed income overall, it also provided opportunities. Bond markets provided stability amidst the uncertainty. The Bloomberg Barclays Aggregate Bond Index, which is comprised mostly of government credit and U.S. Treasuries, was up 1.2% in Q2. Investment-grade corporates were up 2.5% for the quarter. High yield bonds were up 3.3% in Q2, while bank loans were up 2.3%. Credit-sensitive and floating rate securities performed well, supported by a strong technical backdrop and high demand.

Alternatives

Alternatives posted mixed results, with REITs posting a slightly negative return for the quarter and gold continuing to rally due to a weaker U.S. dollar, persistent inflation and strong central bank demand.

Summary

While the market’s speedy rebound from recent lows may encourage complacency, we believe maintaining diversification and thoughtful positioning remains essential. There seems to be a disconnect between headlines and economic data. Uncertainty will most likely persist, with unresolved tariff issues, ongoing geopolitical conflicts and the delayed passage of the “One Big Beautiful Bill” continuing to pose potential risks. However, inflation, unemployment and GDP data continue to trend in the right direction. As we look ahead, gaining greater clarity related to tariffs, tax cuts and potential deregulation should create positive momentum for the markets.

As economic conditions continue to shift, diversified portfolios will help investors mitigate the risks of concentrated exposures while maintaining participation in areas with attractive valuations and the potential to outperform going forward. This quarter has illustrated how important it is to remain invested despite volatility and ambiguity.

Source: Morningstar Direct

June 2025

Authored by Jeremy Robert

Markets extended their recovery in May despite the uncertainty caused by the administration’s tariff policies, which seemed to change by the hour. Stronger than expected earnings, easing inflation and improving consumer sentiment allowed investors to look beyond the tariffs for the time being. However, concerns regarding the high level of tariffs in place, signs of weakness in the labor market and heightened geopolitical risk persist. Against this backdrop, the S&P 500 rose by 6.2%, while the Nasdaq posted gains of 9.6% as mega cap technology stocks rebounded after delivering strong earnings and reemphasizing their focus on artificial intelligence. Small-cap stocks also experienced a healthy rebound, with the Russell 2000 Index delivering a return of 5.2%, boosted by the proposed tax and regulatory changes in the U.S. budget reconciliation bill. Although U.S. markets outperformed for the month, developed international stocks (MSCI EAFE index) continued to post healthy gains, rising by 4.8%. Emerging markets (MSCI EM Index) rose by 4%, propelled by a weaker dollar. Interest rates continued to rise in May after a credit rating downgrade by Moody’s, a weak 20-year auction and investor attention returned to the significant fiscal deficit. This led bonds (U.S. Aggregate Bond Index) to finish lower by 0.6%.

Inflation continued to trend lower in the month of April, as the Consumer Price Index (CPI) registered a modest increase rising by 0.2% for the month, and 2.3% over the past 12 months. Year-over-year inflation continued to show signs of cooling, reaching the lowest level since February of 2021, according to the Bureau of Labor Statistics. The largest contributor to the increase in April’s inflation was shelter costs, which rose by 0.3% and accounted for more than half of the total increase in the CPI. Energy costs rose by 0.7% due to increases in natural gas and electricity prices, though gasoline prices declined by 0.1% from March. The much talked about egg prices fell by 12.7%, though they were still 49% higher than a year ago. While the recent CPI data has been relatively tame, the market continues to worry about the impacts the Trump tariffs will have on future inflation, especially given that not much progress has been made in trade negotiations. The recent inflation data and tariff uncertainty has the Federal Reserve in a wait and see mode, although we have started to see signs of weakness in the labor market. If we see the labor market deteriorate and no change in tariff policy, the Fed will likely have to choose between their dual mandate of stable prices and full employment.

Earnings season has just about wrapped up with 98% of S&P 500 companies having reported results. Corporations continued to perform above expectations with blended year-over-year earnings growth for the S&P 500 coming in at 13.3%, which would mark the second straight quarter of double-digit earnings growth for the index according to FactSet. 78% of S&P 500 companies have reported a positive earnings per share (EPS) surprise and 64% reported a positive revenue surprise reflecting companies’ ability to deliver strong results against an uncertain backdrop. However, we understand that earnings are backward looking and do not reflect the current tariff policy of the administration. Therefore, guidance was mixed for Q2 2025, with 51 S&P 500 companies issuing negative EPS guidance, 43 issuing positive guidance and many giving no guidance at all. Despite the strong earnings in the rear-view, analysts lowered EPS estimates by 4% from March 31st to May 29th. After the strong rebound by the S&P 500, the forward 12-month P/E ratio is 21.3, above the five-year average of 19.9 and 10-year average of 18.4.

Investors favored risk assets in May, encouraged by the partial rollback of tariffs, which helped to reduce fears of a recession. However, the current ambiguity causes challenges for corporations, consumers and investors as they seek to make plans for the future. In this environment, we expect our globally diversified portfolios comprised of high-quality businesses with strong fundamentals and management teams to perform well. We continue to own fixed income at these attractive yields understanding the importance of locking in a healthy level of income generation going forward. Lastly, we think it is advantageous to follow a disciplined investment approach as this will allow you to remain invested throughout the volatility, ensuring you are capturing the upside of the markets’ best days, which often occur shortly within its worst days.

Source: Earnings Insight, FactSet, May 30, 2025

May 2025

Authored by Jeremy Robert

Volatility increased significantly during April, as confusion surrounding the administration’s tariff policy rollout caused high levels of uncertainty. Because tariff levels were much higher than anticipated, the announcement was followed by a sharp market sell-off. This reaction led the administration to call for a 90 day “pause,” resulting in an immediate massive recovery in the U.S. equity market. Although economic data has not reflected any weakness yet, consumer sentiment surveys are telling a different story, showing that consumer confidence has plummeted due to economic uncertainty and inflation worries. Against this backdrop, the S&P 500 fell by 0.7% in April, while the technology heavy Nasdaq climbed by 0.9% for the month. As investors continued to look overseas for diversification and cheaper relative valuations, international stocks outperformed U.S. stocks as the MSCI EAFE Index rose by 3.7%, and emerging markets (MSCI EM) were flat for the month. Regarding fixed income, yields across the curve were volatile and spreads began to widen out for both investment grade and high yield debt. Bonds as represented by the U.S. Aggregate Bond Index were modestly higher by 0.4%.

The annual inflation rate in the U.S. was lower for the second consecutive month in March 2025, the lowest since September 2024. The Consumer Price Index (CPI) rose 0.2% for the month, bringing the annual inflation rate to 2.4%, lower than the 2.8% of the previous month and below forecasts of 2.6%. Gasoline prices declined 6.3% from February to March, while food prices (particularly groceries) saw an increase of 0.5% for the month, neutral from the prior month. Additionally, the core CPI, which removes volatile food and energy prices, fell from 3.1% to 2.8%, marking the lowest level since March 2021. Shelter is the largest component of inflation and continues to show progress, easing to 4% in March, the smallest increase since November 2021, according to The Bureau of Labor Statistics. Although the backward-looking data shows progress on inflation, the data does not reflect the impact of the current administration’s tariff policies which were enacted at the beginning of April. Economists believe that tariffs will likely lead to a “one time price hike” rather than continued acceleration of prices.

Earnings season is in full swing for Q1 2025, with 72% of S&P 500 companies having reported actual results. According to FactSet, the blended year-over-year earnings growth rate for the S&P 500 is 12.8%, which would mark the second straight quarter of double-digit growth for the index. Of the S&P 500 companies who have reported results, 76% reported a positive earnings per share (EPS) surprise, while 62% reported a positive revenue surprise. We continue to see the resilience of corporations in the U.S.; however, management teams have taken a more cautious tone in their forward-looking guidance since “Liberation Day,” noting the uncertainty that the administration’s tariff policies may have on business. Many companies have stopped providing guidance altogether or are providing multiple outlooks dependent on recessionary scenario versus the status quo. The forward 12-month price earnings ratio (P/E) for the S&P 500 is 20.2, which is above the five-year average (19.9) and 10-year average (18.3).

Looking ahead, we continue to see ambiguity in the economy which is impacting the behaviors of both corporations and consumers. We expect growth is likely to slow due to the impact of tariffs; however, the administration’s decisions going forward will determine how much GDP growth will slow. We have yet to see the “pro-growth” policies that were expected from this administration, policies like extending and enhancing tax cuts and decreasing regulation, which could revive positive momentum in the second half of the year. Investors can always find reasons to stay on the sidelines and therefore be hesitant to invest in the markets. However, strong recovery days have very closely followed the worst days in the market, so it is important to follow a disciplined investment plan. Our focus on maintaining globally diversified portfolios and strategically adjusting our fixed income positioning has helped manage through the volatility.

Source: Earnings Insight, FactSet, May 2, 2025

April 2025

Authored by Melissa Santas Peterson

Uncertainty surrounding government policies, rising global tensions and fears of an economic slowdown made for a turbulent start to the year. Concerns were exacerbated by the likely enactment of tariffs, leaving investors to speculate as to how this administration’s strategy will play out. Furthermore, the Federal Reserve decided to remain on the sidelines, maintaining the target 4.25-4.5% range, citing mixed signals, like strong labor market conditions, low unemployment, but elevated inflationary pressures. Against this backdrop, performance was mixed across global markets. The S&P 500 posted its worst quarterly performance since Q3 2022, experiencing a correction of more than 10% since its February peak. Negative returns were concentrated in the technology, communications and discretionary sectors, as investors continued to rotate out of growth stocks. The remaining eight S&P 500 sectors posted a positive performance. Conversely, international markets posted positive returns buoyed by fiscal stimulus, monetary support and improving economic backdrops. Bonds also had a strong quarter, as investors sought stability amid ongoing economic uncertainties.

The optimism we had heading into this year has waned a bit, as we consider the likelihood of persistent uncertainty hindering consumer spending and business investment in the short-term. To understand how the markets will move, the focus going forward will be on tariff policy, the labor market and earnings growth. We anticipate sizeable daily market swings will continue to be the norm, as perceptions change quickly in reaction to headlines. Speculating as to the impacts tariffs will have on the global economy will continue, all while investors hope for the roll-out of market-friendly priorities like deregulation, tax code changes and more supportive fiscal policy which could fuel economic growth.

It is natural to be concerned about the future of the U.S. economy and its impact on the market; its trajectory remains uncertain—as it always does. Risks are always present in the market, but during times like these, it is important not to let fear of losses drive one’s investment actions. Investing in a diversified portfolio, comprised of high-quality companies, and staying true to your strategic approach, can be an effective way to navigate choppy and ambiguous markets. Furthermore, for those who have a long-term horizon, volatile markets can present opportunities to put new money to work or rebalance portfolios.