Markets shrugged off what looks set to become the longest ever government shutdown to continue their march higher in October.
The S&P 500 index added +2% for the month to bring their year-to-date gain to +17.5%.
International stocks also tacked on another +2% to bring their full-year return up to +28.5% per the MSCI ACWI ex-US index.
Smaller company stocks were positive but continue to underperform, with the Russell 2000 Index gaining +1.8% in October for a 2025 return of just +12%.
Within fixed income, bonds got a boost from another Fed rate cut, with the Bloomberg Aggregate Bond index gaining +0.6% on the month for +6.8% YTD gain.
Commodity prices were also higher, with the Bloomberg Commodity Index jumping +3% in October (+12.5% YTD), led by gold prices topping $4,000 per ounce for the first time.
Our proprietary Three Dials allocation framework was unchanged during the month of September, as we outline below:
After the sharp tariff-induced selloff in April, the S&P has rallied over 30% without even a 3% pullback along the way, just the fifth time in the index’s history we’ve seen such a sharp and steady rise.
While conventional wisdom suggests that such a ride can’t last forever, momentum remains sharply on the side of buyers, and as such our Sentiment Dial stays Positive.
Despite a lack of available economic data due to the ongoing government shutdown, the Fed opted to cut interest rates by 25 basis points for the second time in as many months, citing softness in the labor market even with inflation remaining stubbornly above target.
With consumers still taking an increasingly pessimistic view, we keep our Fundamental Dial in a Negative position.
The last warnings of bubble-like tendencies in the AI space came from none other than OpenAI CEO Sam Altman, noting that despite the obvious long-term applications of AI, it is inevitable that some will overinvest and lose money during this phase of the boom.
With prices soaring while future revenue potential remains unclear, we leave our Valuation Dial in a Negative position.
On balance, our composite positioning remains somewhat defensive, with one dial in a Positive position but two dials remaining Negative.
Sources: Morningstar