Quarter 3, 2025 Review
So far, so good…
Q3 of 2025 closed with a positive return for those that were long the investment markets. The general stock market (as measured by the S&P 500) rose approximately 8 percent. The fixed income (bond) markets rose as well with a 2 plus percent return of the AGG index. Pretty much asset classes across the board posted positive returns. Was a continuation of the post April rise resultant from the 20 percent pullback. A pullback that would appear as a distant memory for most.
Looking ahead, Q4 will start with a government shut down as the primary headline. Will also feature the Fed interest rate decision drama, a stock market that (seemingly) hits new highs on a weekly basis, and the prolonged foreign hostility flash points. Below the surface, recessionary economic risks are evident with weak jobs numbers and AI impacting labor demand. Nothing is easy but it usually isn’t.
Our synopsis (for those that like cutting to the chase) is that things are more complicated than “normal”. The integration of AI (artificial intelligence) is beginning to impact the labor market at a level not predicted. “College graduate jobs” are being eliminated at a rapid pace. It’s not just the “lower skilled” call center jobs. That’s the rub. This is a mega trend with long term positive economic benefit but comes with a lot of short-term impact. Layering this in with a “routine” economic downturn makes the recession story more believable. Add a dollop of potential tariff negative price uncertainty and positive shifting trade balances and it becomes a Rubik’s cube of possibilities.
Looking at the investment landscape, the translation of the economics gives one pause. It would seem that the equity markets are hanging their collective hats on drastic interest rate cuts coupled with accelerating tech spending. While we believe those will be the case, one must wonder how much has already been priced in. As of this writing (October 1) the S&P500 is trading at a multiple close to 30. That’s a big number no matter how you spin it. Our belief is that the easy money has been made. We are in grind it out territory.
Translating it all, our plans for Q4 are to remain neutral, but on the conservative side of neutral. We expect to rebalance and reduce our equity weighting approx. 5 to 10 percent across all portfolios. While we don’t condone “market timing” we do follow the allocation logic that the economics and market realities give us. Our opinion is that there are times to take greater risks, and this isn’t one of them.
In closing, as we always say, if there is anything you need do not hesitate to reach out to us. We work for you and that’s an obligation we don’t take lightly. If you want to review your financial plans, estate planning, tax planning, or any other element, we are here for you. We like to talk so don’t be bashful.
Thanks for listening!
Ed, Frank, & Tammy
Edward Stiles
200 N Union St.
Kennett Square, PA 19348
cell 610-745-1931
Securities and Advisory Services offered through Commonwealth Financial Network®, member FINRA/ SIPC, a Registered Investment Adviser. Fixed insurance products and services are separate from and not offered through Commonwealth Financial Network
All indices are unmanaged, and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance does not guarantee future results. All references to markets, S&P500, NASDAQ, magnificent 7, stocks, equities, bonds, interest rates, Muni’s, AGG, and treasury securities, are notional and for informational and explanation purposes only.
This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.