BY STRATEGIC ADVISERS INVESTMENT TEAM — November, 2025
Market Conditions
As Q3 earnings season winds down, large tech companies, as well as banks and industrials were among the top sectors delivering strong results. The U.S. Federal Reserve (the Fed) cut interest rates by 0.25% at their most recent October meeting as they look to balance unemployment levels and inflation. Lawmakers reached a spending agreement to fund the federal government, officially ending the longest shutdown on record.
- Earnings growth remained strong: Of the companies that have reported, approximately 84% exceeded earnings estimates, marking the strongest quarterly earnings beat rate since 2022.1
- Inflation rose at a slower pace than expected: Although delayed, the September Consumer Price Index (CPI) report was released and showed that Core CPI (which excludes food and energy) came in at 3.0% on an annual basis, the slowest pace of increase in 3 months.2
- A pause on jobs data:Due to the shutdown, the Bureau of Labor Statistics (BLS) did not release its September and October jobs reports. However, they did release the Job Openings and Labor Turnover report (JOLTS) prior to the shutdown. This report indicated that both job openings and hiring continued to remain low which reveals a steady trend in the job market, but no additional signs of further weakness.3
What it may mean for your portfolio
The U.S. economy continues to expand, U.S. corporate profits are experiencing healthy growth, and stock markets have been rising to new highs. However, some investors are growing concerned about the potential for a correction in technology stocks. Others are still wondering how tariffs may impact the economy. Additionally, with the Federal government shutdown now over, there are questions around what that might mean for the economy.
First, some investors are concerned about a potential repeat of a technology stock correction, similar to what took place in the early 2000s. While recent valuations for U.S. technology stocks are above their long-term average, they have not reached the extremely stretched levels of the early 2000s. Additionally, earnings growth has been strong for technology stocks over recent quarters compared to poor earnings growth for tech companies two decades ago.4
Given these important differences between the recent rally in technology stocks compared to the early 2000s, we believe the risk of a similar selloff may appear less likely. However, it’s important to consider the potential for market volatility, and investors may benefit from diversification across many investments. This could potentially help mitigate the impact of tech stock volatility. Within our portfolios, the investment team remains well diversified across many types of U.S. stocks outside of technology. This includes investments in core, value, and smaller company stocks. Beyond U.S. stocks, exposure to international stocks and bonds may also help manage risk within accounts. We also have exposure to investments in commodities, alternatives, REITs, high-yield bonds and TIPS to provide further diversification.
As for tariffs, the supreme court recently heard a challenge to many of the tariffs currently in place. A decision may not come for several weeks or months. However, should some tariffs get rolled back, it may provide some relief for businesses that were impacted by those tariffs. The administration may pursue different kinds of tariffs to make up for the court’s decision. If so, investors may need time to assess the potential impact of new tariffs on the economy or corporate earnings.
So far this year, the impact of tariffs on the economy so far has appeared manageable, as stocks have continued to rise. For instance, inflation has moderately accelerated since the tariffs were put in place, but the U.S. and global economy both have continued to experience growth.5 While tariffs have the potential to impact the economy, markets may be driven more by the pace of economic growth and the outlook for corporate profits than the tariffs themselves.
Finally, with the government shutdown now resolved, the economy may see a modest rebound in activity as federal workers begin to receive backpay from the shutdown. This could potentially contribute to the recovery of economic activity that was impacted by the shutdown. Easing concerns around the shutdown could potentially influence investor sentiment.
Outlook
While there are some important concerns weighing on some investors, it may help to remember that stocks have experienced strong growth so far this year. A backdrop of healthy economic growth and rising corporate profits has supported this rising market, despite bouts of volatility along the way.
Investors may benefit from focusing on these key drivers of stock market growth. Bouts of volatility and some anxiety stemming from news headlines are common for investors. However, over the long run, stocks have allowed investors to grow their wealth over time. And staying diversified across a wide range of stocks and other investments may help protect investors from eventual bouts of market volatility.
As always, we are closely following and researching developments in the economy, earnings, and policy changes, as well as geopolitical events around the world. We believe the risks of imminent recession are low. However, we are prepared to act as the situation evolves.
Make a plan, stick with it, and stay invested
Market conditions can change quickly. Historically, the market has shown resilience even in the face of discouraging news headlines. We aim to guide clients through varying market conditions, including those that have seen strong performance over the past two years. As a result, we have maintained healthy exposure to stocks, even through bouts of market volatility. We believe that staying invested and managing risk through evolving market conditions can ultimately help you reach your financial goals over the long term.
