Strong earnings, steady growth, and a patient Fed.
Taking a closer look…
- Volatility returned last week as concerns around AI spending resurfaced. Significant investment in AI infrastructure has been a key driver of earnings growth, but investors remain cautious about how long this level of spending can continue and whether it will generate the anticipated benefits.
- The US Federal Reserve (Fed) is keeping its options open. Fed Chair Warsh addressed inflation at a recent International Monetary Fund (IMF) meeting but did not provide guidance on future interest rate decisions.1 Overall, markets interpreted this as positive news as they now believe the Fed is less likely to raise interest rates at its meeting this week. A patient Fed is generally a good thing for investors because it reduces the likelihood of negative market reactions. However, an increase in interest rates is still possible by the end of the year.2
- The US economy still appears to be growing at a healthy pace. Early estimates indicate 3.5% year-over-year growth for the third quarter.3 Higher temperatures increased demand for air conditioning, pushing up output from factories, mines, and utilities by 0.7% in September.4 Additionally, layoffs remain very low, with weekly unemployment claims coming in below expectations.5 Steady jobs help support consumer spending, which is a key driver of the US economy.
- Oil prices remain a wild card. Ongoing tensions in the Strait of Hormuz have led to volatile gasoline prices, which have been the biggest driver of recent inflation. Energy prices could continue to face pressure if geopolitical tensions persist.
- Corporate earnings season is off to a strong start. S&P 500 Index companies reporting so far have broadly exceeded expectations, highlighting continued business strength.6 Spending on AI continues to account for much of that growth. AI investment has extended beyond large technology firms, with smaller companies and value stocks outperforming growth stocks on a year-to-date basis.7
Institutional Portfolio Manager, Strategic Advisers
"It’s an interesting time to be an investor. Right now, stock prices are moving less in lockstep with each other than they have in years. Some stocks are rising while others are falling, even within the same industry. In this environment, success may depend increasingly on investing in specific companies, rather than the broader market alone."
Who we are
For over 30 years, Strategic Advisers and its dedicated group of seasoned investment professionals have helped clients reach their financial goals. Our team of portfolio managers, with specialized areas of focus in asset allocation and specific asset classes, along with our deep quantitative and fundamental research, drive our investment selection and risk management decisions on behalf of our clients.