Macro Minute: Week of October 6, 2025
This quarter was a great quarter to be invested. Most asset classes were up for the quarter, led by Gold up over 17%. The asset that most people own is U.S. large cap and it was up over 8%. The tech heavy Nasdaq was up over 11%. Not to be forgotten about, international markets were up nicely too, led by emerging markets up nearly 10% and the Europe Asia and Far East (EAFE) index up nearly 5%. Year-to-date, international markets continue to outperform U.S. even though they trailed this quarter. They have a lead of around 10% for the year, being helped by a falling dollar. Even the much-maligned bond investor was up about 2% bringing bonds up about 6% for the year. All-in-all, as I said in the opening, a great quarter to be invested.
The performance this quarter was boosted by the Federal Reserve resuming cutting rates. In addition to this, the market is expecting further cuts. This expectation is being enhanced by President Trump attempting to load the Federal Reserve with participants with a looser monetary policy stance. In addition to the monetary policy loosening, we have fiscal policy continuing to expand alongside continued deregulation. As many of my reading sources are quick to say, they plan to run the economy hot. One other factor that has been positive for economic growth is the CapEx that is being spent on AI datacenters.
While it is exciting to see so many positive developments in economic growth and markets, we must remember to be risk aware. We should note that the rate cuts are in response to weakness seen in the jobs data. We should also note that both tariffs and the choice to run the economy hot will result in sustained higher inflation causing future pressure on the long end of the bond curve. We must also be aware that investors get caught up in the exuberance and sow the seeds of market crashes when no thought is given to the price being paid to own assets.
While markets are momentum chasing, we need to make sure we do not get carried away in that momentum by having too much exposure in expensive positions and absolutely make sure not to use leverage in a way that impairs our ability to remain invested. At the end of the day, it is about staying invested for as long as possible to reap the benefits of compounding returns. Compounding returns beat high irregular returns over the long run. My preferred way of achieving compound returns is through smart portfolio construction that stays diversified and keeps appropriate risk levels. We must dance while the music is playing, we just don’t have to dance so fast that we have a heart attack on the dance floor.
DISCLOSURES:
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.