What We’re Watching This Quarter
If you’ve been feeling whiplash trying to make sense of markets lately, you’re not alone. In fact, it’s what we’ve been hearing from clients all year. So far, 2025 has been one of those rare periods where nearly everything in financial markets seems to be working, yet there’s a persistent unease among many investors.
While financial headlines are focused on record stock prices and AI breakthroughs, the reality is a bit messier. We’re seeing strong corporate earnings alongside stubbornly high inflation. International stocks are finally having their moment while the dollar weakens. Precious metals are soaring while stocks also push higher. Everywhere you look, there’s a push and pull between optimism and pessimism.
Let’s break down what we’re seeing and what it means:
Investors Can’t Decide If They’re Nervous or Excited
Here’s something unusual: gold has shot up to a record high above $4,200 per ounce while the S&P 500 has also posted double-digit gains. That doesn’t happen often. It suggests investors are simultaneously betting on growth and seeking safety. Another example? Money market balances have ballooned this year to a record $7 trillion, representing a lot of cash on the sidelines and hesitancy to buy into rising markets.
Big Tech is Playing the Role of Economic Stimulus
Something interesting is happening with all that cash the major tech companies have been sitting on. Instead of using it for acquisitions like many expected, they’re pouring it into AI infrastructure, with hundreds of billions of dollars in the first half of 2025 alone. That’s real money flowing into data centers, semiconductors, energy infrastructure, and the whole supply chain that supports this buildout. It’s almost like a private-sector stimulus program, and it’s led to chip designer Nvidia growing so much that it now represents almost 8% of the S&P 500, bigger than any other stock. Now, the big question is whether these massive investments will translate to long-term profits or if we’re watching a bubble inflate in real-time. While we don’t pretend to know the answer, elevated valuations and concentration among a few large tech companies make us more cautious about stock returns moving forward.
International Diversification Rewarded
Remember when everyone was questioning why to bother with international stocks? Well, this year we’re hearing the reverse – why not add to international? Despite strong performance locally, foreign stocks have outperformed US stocks this year by over 10%. Part of this is simply valuations; foreign stocks were cheaper. But the weakening dollar has also helped, giving an extra boost to international returns for US-based investors. The takeaway here isn’t to suddenly pile into what’s been working recently. It’s that sticking with a diversified approach, even when it feels frustrating, tends to pay off over time.
Bonds Are Doing What They’re Supposed to Do Again
After a rough few years, bonds are acting like bonds again. The 10-year Treasury yield has dropped from 4.6% to 4.0% this year, which means bond investors have enjoyed both steady income and some price appreciation. Corporate credit also looks solid, with companies in financial shape to handle unexpected hiccups.
Looking Ahead
There are several things on our radar that could shake things up: the Supreme Court is hearing arguments in November about presidential tariff authority, the government shutdown on its third week could create fiscal pressures, and we’re heading into a 2026 election cycle that will likely turn up the political temperature. We’re not making dramatic changes to try to predict where markets will go short-term. Instead, we’re staying focused on clients’ ability to take sensible risks, companies with strong fundamentals that can navigate uncertainty, and building cash balances where needed.
If you’re wondering whether your portfolio is positioned appropriately for this kind of market, or you just want to talk through what you’re seeing and hearing, please reach out to your advisory team.
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