Washington has given us yet another government shutdown; the September 30, midnight shutdown capped off a month in which the unexpected came to the forefront: The Fed lowered rates while remaining circumspect about the future, citing a balance of inflationary and labor market risks. GDP growth surprised to the upside, and stocks cheered the news with all-time highs throughout the month – a month which has a reputation for volatility. The month finished on a sour note, though, as the Conference Board measure of consumer confidence dropped, with the present situation index lower than all but one month since the the 2021 COVID recovery. Payroll data from ADP also showed a decline in employment when an increase was expected.
Despite the pending shutdown, mixed data and plenty of political turmoil, stocks did quite well in September. Perhaps
Stocks advanced for the fifth straight month as the Fed’s rate cut spurred optimism:
The year’s winners drove September performance:
Our Navigator framework informs our outlook.
Economy: US Economic data surprised to the upside in September, but auto and credit card delinquencies highlight potential areas of economic weakness. The outlook for earnings remains solid even though growth forecasts for 2026 look overly optimistic.
Technicals: While the stakes are high in the current government shutdown, history suggests decent returns will follow. Global equity market breadth may be pausing after a strong move higher. Meanwhile. Profitless technology stocks more than doubled in value during the 3rd Quarter, a sign of heightened speculation.
Sentiment: While the Fed recently cut rates, inflationary pressures are preventing the Fed from adopting an overly dovish mindset. Investor sentiment continues to hover around neutral levels. Despite rising uncertainty, small business optimism continues to recover.
Valuation: Bond yields remain attractive relative to large cap stocks’ earnings yield, but a significant valuation premium persists for the largest stocks relative to the broad market where attractive opportunities remain. Additionally, the growth-to-value Price/Earnings spread remains at high end of its historical range.
We’re inundated with daily headlines proclaiming the transformative potential of artificial intelligence. It’s easy to get swept up in the excitement—or to reflexively compare today’s environment to the dot-com bubble. Both reactions deserve thoughtful consideration.
Companies are investing heavily to keep pace with the AI boom. Microsoft is projected to spend $62 Billion on capital expenditures in 2025, more than triple its 2020 outlay.
A historical review of technology sector performance around the dot-com era is instructive. The chart to the right breaks it into three phases: the five years post-Netscape, the subsequent five years, and the full decade. Tech stocks delivered over 50% annualized returns in the late ’90s, only to lose 16% annually from 2000 to 2004. Over the full ten-year cycle, technology landed squarely in the middle of sector performance[3].
At OneAscent, we emphasize long-term investing. While valuation may have limited predictive power in the short run, it’s a powerful tool for long-term allocation. Recent AI-related announcements—like Nvidia’s $100 billion investment in OpenAI (which will, notably, fund purchases of Nvidia hardware)—have driven tech valuations sharply higher.
We don’t know how the AI boom will end, but capital spending booms typically leave some companies – those who over-spend – out in the cold.
We think it makes sense to invest according to long-term return expectations, not just current momentum. Let’s talk about where we see opportunities.
The combination of supportive fiscal policy and recent rate cuts has helped propel the S&P 500 higher. Yet beneath the surface, risks remain. Softening employment data and rising delinquencies in subprime auto loans and credit cards point to potential cracks in consumer health. Inflationary pressures and growth concerns continue to coexist, requiring thoughtful portfolio positioning.
In this environment, we believe investors should look beyond the concentrated leadership of U.S. megacap technology stocks. Valuations in other areas of the market remain compelling, and we’ve positioned portfolios accordingly.
Our Navigator process helps guides both short- and medium-term tactical adjustments:
Our goal is to build portfolios that are resilient and capable of compounding effectively over time. While risks remain, the strong rally since the April lows proves again the value of discipline and diversification.
This material is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client. These materials are not intended as any form of substitute for individualized investment advice. The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own. Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors. OneAscent can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.
[1] Source: Edward Jones: Weekly Stock Market Update | Edward Jones
[2] Source: Bloomberg, OneAscent Investment Solutions – the chart goes through the trough of the bursting of the NASDAQ in October of 2002.
[3] Source: Bloomberg
[4] Source: Market Returns reference the following indices: Large Cap – S&P 500, Mid Cap Growth – Russell Midcap growth, Mid Cap Value – Russell Midcap Value, Small Cap – Russell 2000, Developed – MSCI EAFE, Emerging – MSCI Emerging Markets, Aggregate – Bloomberg US Aggregate, High Yield – Bloomberg High Yield
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