Market Update

Executive Summary

• Equity markets crept higher in October (in large part due to big technology companies),
  continuing to exhibit the resilience we have witnessed since the tariff-induced drop in April of
  this year.
• Artificial intelligence (AI) continues to be one of the major financial storylines, as AI-related
  capital expenditures are supporting economic growth, and many of the large technology
  stocks are pushing market indexes higher.
• The Federal Reserve (Fed) lowered the federal funds target interest rate by 0.25% for the
  second consecutive meeting, as expected. However, Chair Jerome Powell’s cautious tone
  regarding future cuts tempered enthusiasm somewhat.
• Several potential market headwinds are still present as we approach year-end, such as AI
  overexuberance, the government shutdown, tariff fallout, and questions about private
  credit . While these are worth monitoring, it’s not yet clear whether they will have a
  meaningful impact on the market in the near-term.

Markets Continue to Climb

Stocks inched higher during October, once again led by large technology-related stocks that lifted
many market-cap weighted indexes. Well-known companies like Broadcom, Nvidia, Amazon,
Alphabet, and Apple all rallied throughout the month.[2]

As you’ll see below, after bottoming in early April down nearly 20% since the beginning of the year,
the Nasdaq Composite index (light green line) ended October up over 23% year-to-date (YTD). By
contrast, the S&P 500 Equal Weight index (dark green), which has far less exposure to technology
stocks than the Nasdaq Composite and S&P 500 indexes, held up relatively well during the April
downturn, but has climbed much more modestly since (up about 7% YTD).

Other parts of the market have also shown resilience. Bonds, as represented by the Bloomberg US
Aggregate index, advanced slightly during the month. In addition, gold (as represented by the S&P
GSCI Gold index) ended the month in positive territory, continuing its strong performance this year
even after falling from recent highs late in the month.[3]

Economic Update – The Fed Lowers Again

The Federal Reserve meeting in late October resulted in the second consecutive 0.25% reduction in
the federal funds target rate, as expected. However, Chairman Powell’s comments after the
announcement regarding the Fed’s next steps seemed to take the market by surprise.

Powell repeatedly emphasized strongly differing views amongst Fed participants, stating, “further
reduction in the policy rate at the December meeting is not a foregone conclusion, far from it.”
Powell went on to discuss the two dissenting votes (one in each direction), along with the dilemma
that sticky inflation but weakening labor markets presents to the Fed’s dual mandate. The stock
market fell in aftermath of the meeting, while yields on Treasuries jumped, as the comments cast
doubt on another interest rate cut before year-end.[4]

On a positive note, US economy continues to exhibit relative resiliency. We follow the GDPNow
model produced by the Atlanta Federal Reserve as an indicator for current quarter economic
growth, and their model now shows growth of approximately 4%.[5]

We mentioned that AI is a big story in equity markets, and increasingly, AI-related spending is
playing a substantial role in driving economic growth as well. For example, AI data center spending
was estimated at over $40 billion in Q2. [6]Yet another example is illustrated below in the year-overyear
change in real private fixed investments, showing that AI-related investment has made up the
lion’s share of private fixed investment recently.[7]

Given the outsized role that AI has played in both markets and the broader economy recently,
developments and narratives around the topic have significant potential implications moving
forward. While we believe that technological breakthroughs may push markets and economic
growth higher, setbacks may cause both a slowdown in economic activity and a drawdown in equity
markets.

The Path Forward

As described above, the resiliency in both international and US markets has defined 2025 to date.
We witnessed a shock in April as the Liberation Day announcement temporarily roiled markets and
created economic uncertainty. However, the subsequent rebound in economic growth and equity
valuations has been a pleasant surprise for most investors.

Given the potential headwinds and volatility that still exist, including high valuations and
expectations around AI, the government shutdown, potential tariff fallout, and worries about
private credit, we encourage investors to avoid complacency. As a result, we continue to advocate
for diversification while we observe how events and stories shaping markets unfold over the
remainder of the year. We appreciate your continued trust and welcome the opportunity to speak
with you in greater detail in the context of your specific situation.

Best Regards,

Michael P. Kolb, CFP® & Martin A. Wildy, CFA

[1] https://www.bloomberg.com/news/articles/2025-10-31/is-a-private-credit-crisis-brewing-tricolor-first-brandsshake-
wall-street
[2] Source: YCharts as of October 31, 2025
[3] Source: YCharts through October 31, 2025
[4] Source: https://www.bloomberg.com/news/live-blog/2025-10-29/fomc-rate-decision-and-fed-chair-newsconference
[5] Source: https://www.atlantafed.org/cqer/research/gdpnow
[6] Source: https://www.wsj.com/economy/u-s-gdp-grew-stronger-than-estimated-in-second-quarter-5ab397ad?
mod=Searchresults&pos=3&page=1, as of October 2, 2025
[7] Source: https://am.jpmorgan.com/us/en/asset-management/protected/adv/insights/market-insights/marketupdates/
on-the-minds-of-investors/is-ai-already-driving-us-growth/?utm_source=chatgpt.com published September 12,
2025

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