Galeanu Mihai/iStock via Getty Images Evaluating Trajectories Major US equity indices hit new highs with the S&P 500 Index (SP500), (SPX) rising ~8% during the quarter. Corporate earnings also marched to an all-time high, painting a compelling picture that all is well in US markets. Despite this strength, the market has felt a bit like The Cat in the Hat holding up a cup, cake, three books, and a fish on a rake as he precariously balances on a ball. An ever-expanding list of factors to juggle has cast a ...

Core Insights - The fourth quarter presents a compelling opportunity for investors, driven by historical seasonal strength in stock indices, AI momentum, anticipated Federal Reserve rate cuts, and robust corporate earnings [20] Defensive Investment Strategies - Defensive investors are advised to consider reallocating capital to sectors like consumer staples, healthcare, and utilities, which are less sensitive to economic shifts, although some sectors like utilities have seen increased valuations [1] Value and Growth Investment Strategies - Value-oriented investors should seek undervalued stocks with higher dividend yields for returns and protection during downturns, while growth-oriented investors should monitor stocks with strong earnings momentum, particularly in AI and high-growth sectors [2] Macroeconomic Concerns - Ongoing macroeconomic concerns include slowing consumption, geopolitical threats, and inflation pressures from new tariffs, with fears of stagflation being discussed among market participants [3] - Increased volatility is expected during Q4, particularly around earnings season, which requires effective risk management [3] Market Valuations - The market is currently trading at elevated valuations, leaving less room for error, where minor disappointments could lead to volatile reactions [4] - The anticipated Federal Reserve rate cuts are expected to help maintain growth and lower borrowing costs [4] AI Sector Insights - The AI boom continues to fuel growth and is expected to persist, supporting demand and productivity improvements, although there are warnings about potential "bubble-like" tendencies in highly valued AI stocks [5] Seasonal Patterns and Investment Timing - Historical data indicates that Q4 has often been a strong period for stock markets, driven by holiday spending and end-of-year optimism [6] - Investors are encouraged to utilize seasonal patterns as a timing tool for managing portfolios, particularly in the first and fourth quarters [11][13] Specific Market Segments - Small-cap stocks are trading at a discount relative to fair value estimates and could benefit from future rate cuts [9] - The consumer discretionary sector is expected to receive a boost from the holiday shopping season [9] - The financial sector may see benefits if long-term bond yields rise, creating a steeper yield curve [9] - Caution is warranted in mega-cap tech stocks due to their high valuations despite potential continued gains [9] Technical Analysis - The ETF SPY is testing its up-sloping 50-day simple moving average, indicating an upward path of least resistance [10] Trading Assets - Various assets such as ETFs (SPY, QQQ), index futures, and options provide versatile tools for trading stock indices during the upcoming seasonal buy window [19]

Group 1: Treasury Yields and Economic Indicators - The 10-year Treasury note yield fell below 4.00% for the first time in over a year, ending at 4.02%, while the 2-year note reached its lowest level since September 2022 at 3.46% [1] - An inverted yield curve, where longer-term Treasury yields are lower than shorter-term yields, is considered a reliable leading indicator for recessions, with the 10-2 spread turning negative before recessions [3][4] - The average lead time to a recession based on the first negative spread date is approximately 48 weeks, while using the last positive spread date yields an average lead time of 18.5 weeks [5][7] Group 2: Mortgage Rates and Federal Funds Rate - The Federal Funds Rate (FFR) influences borrowing costs for banks, which typically leads to higher mortgage rates when the FFR increases; however, recent trends show mortgage rates declining despite the Fed holding rates steady [8] - The latest Freddie Mac Weekly Primary Mortgage Market Survey reported the 30-year fixed mortgage rate at 6.27% [8] Group 3: Market Behavior and Federal Reserve Influence - Federal Reserve policy has significantly influenced market behavior, particularly in relation to Treasury yields and the S&P 500 [9]

Core Insights - The gold market is experiencing unprecedented activity, with Bank of America raising its gold price target to $5,000 per ounce and silver to $65 due to rising stagflation risks and geopolitical tensions [2][3] - Gold's Relative Strength Index (RSI) has reached a record high of 92.2, indicating an overbought condition [2] - Gold-backed ETF purchases surged 880% year-over-year in September, totaling a record $14 billion in inflows [2] Market Dynamics - Bank of America's research suggests that inflation driven by deglobalization and fiscal stress in the US could sustain the gold rally for another 12-18 months, despite expectations of short-term consolidation [3] - Risks to the market include potential hawkish moves from the Federal Reserve, tariff rulings, and outcomes of the US midterm elections [3] Industry Commentary - Market veterans, including JPMorgan CEO Jamie Dimon, have expressed bullish sentiments, suggesting that gold prices could reach $5,000 or even $10,000 under current conditions [4]

Group 1: Trade War Impact - The ongoing trade war primarily burdens exporters, with the US economy also expected to feel the effects by 2026, leading to GDP growth reductions of -0.4% to -1.3% for countries like Vietnam, Canada, and Mexico [9][22][29] - Global trade growth is projected to slow from 2% in 2025 to 0.6% in 2026, with the impact of tariffs expected to rise, contributing an additional 0.6 percentage points to US inflation by mid-2026 [9][23][24] - The effective US tariff rate is anticipated to increase from 10% to 14% by year-end 2025, affecting various sectors and leading to higher consumer prices [24][27][26] Group 2: Stagflation Concerns - Global GDP growth is expected to be 2.7% in 2025 and 2.5% in 2026, with inflation rates remaining elevated at 3.9% and 3.5% respectively, indicating a mild stagflationary phase [10][34] - The US economy is projected to grow at 1.8% in 2025 and 1.6% in 2026, marking some of the lowest growth rates since the early 2000s, primarily due to the trade war and inflationary pressures [34][38] Group 3: Central Bank Policies - Central banks face challenges from weak growth, persistent inflation, and rising fiscal deficits, with the Federal Reserve expected to cut rates three more times by mid-2026, reaching a terminal rate of 3.25%-3.50% [12][54] - The European Central Bank has halted rate cuts, while the Bank of England is expected to lower rates to 3.0% by 2027, contrasting with the Bank of Japan's continued rate hikes [12][54] Group 4: Corporate Financing Strategies - Companies are responding to high financing costs by enhancing operational efficiency, extending debt maturities, and exploring alternative financing sources like private credit [16] - A peak in global business insolvencies is anticipated in 2027, with expected increases of 6% and 4% in bankruptcies for 2025 and 2026 respectively [16] Group 5: Emerging Markets Dynamics - Emerging markets are generally in an expansionary cycle, with Asian exporters gaining market share in the US, although countries like Argentina and Brazil face rising imbalances [18] - China's GDP growth is projected to slow to 4.2% in 2026, necessitating policy support to boost domestic demand [18] Group 6: Defense Spending in the EU - The EU's "Rearm Europe Plan" aims to allocate €800 billion over four years for military procurement, but production constraints and low intra-European cooperation may limit growth in defense spending to 10%-20% by 2027 [15]

Trade War Costs - The ongoing trade war primarily impacts exporters, with the US economy also facing inflationary pressures, estimated to rise by 0.6% by mid-2026 due to tariffs [11][23][28] - Global trade growth is projected to slow from 2% in 2025 to 0.6% in 2026, with a mild rebound expected in 2027 [11][24] - The effective US tariff rate is expected to increase to 14% by year-end 2025, affecting various sectors and leading to higher consumer prices [24][27] Stagflation Concerns - Stagflation is becoming a reality, with global GDP growth expected at 2.7% in 2025 and 2.5% in 2026, alongside inflation rates of 3.9% and 3.5% respectively [12][35] - The US is likely to experience prolonged inflation above target levels, with inflation expected to remain around 2.8-3.0% in 2026-2027 [38][39] Central Bank Policies - Central banks face a complex situation of weak growth, high inflation, and rising fiscal deficits, with the Fed expected to cut rates to 3.25%-3.5% by mid-2026 [2][13] - The ECB and BoE are also navigating similar challenges, with the BoE likely to lower rates to 3% by 2027 [2][13] Corporate Financing Strategies - Companies are adapting to high financing costs by optimizing operations, extending debt maturities, and exploring alternative financing sources [3][17] - A rise in global corporate insolvencies is anticipated, with an increase of 6% in 2025 and 4% in 2026 [3][17] Capital Market Outlook - The capital market is not in a bubble, but high valuations are concentrated among a few tech giants, with a projected 15% annual earnings growth [3][18] - Emerging markets like Argentina and Brazil are facing rising imbalances, requiring close monitoring due to potential vulnerabilities [3][19] Political Risks - Political events, including upcoming elections and trade protectionism, pose significant risks to economic stability, with a 45% probability of heightened protectionism impacting growth [3][20] - Geopolitical tensions, particularly involving NATO and Russia, as well as conflicts in the Middle East and between China and Taiwan, could exacerbate economic uncertainties [3][20]

Core Insights - The current market uncertainty and volatility, particularly due to tariff news and stagflation, are prompting investors to seek steady income sources [1] - The American Century Multisector Income ETF (MUSI) offers a diversified income strategy with a focus on current income and total return [2] Fund Strategy and Performance - MUSI charges a fee of 37 basis points and invests in a variety of assets including high yield bonds, bank loans, and emerging market debt, without a specific target duration [2] - As of September 30th, MUSI provided a 5.9% 12-month distribution rate and has returned 6.7% year-to-date, outperforming both its category averages and the Bloomberg U.S. Aggregate Bond Index over the last three years [3] - The fund's flexible, model-based approach allows it to adapt to changing interest rates and economic conditions, making it a potentially strong investment option [3]

Market Outlook - The Chief Investment Officer at Truist Wealth, Keith Lerner, indicated that fears regarding a government shutdown are currently muted, with investors not overly concerned [1] - Historically, during the 20 past shutdowns, the S&P 500 has remained flat and increased 50% of the time, suggesting that short-term volatility should not prompt drastic portfolio changes [1][2] - The upcoming earnings season, starting in two weeks, is expected to be a significant market driver [1] Economic Impact - Concerns about stagflation are present, with Moody's indicating that each week of shutdown could impact quarterly GDP by approximately 0.1% [2] - Despite the shutdown, the Atlanta GDP estimate for the quarter remains around 3.9%, indicating that the shutdown may not drastically alter economic conditions [2] - The shutdown adds to economic uncertainty in the short term, complicating the overall outlook due to less available data [2] Sector Focus - The primary theme for the firm's bullish market outlook is centered on AI and technology, which are expected to continue strong profit growth despite the government shutdown [3] - The technology sector has seen a 30% increase over the past year, which is not indicative of a bubble, as true bubbles typically exhibit closer to 100% year-over-year growth [3] Growth Stocks - A list of the 12 best growth stocks to buy now has been compiled, focusing on those popular among elite hedge funds and analysts [4][6] - The methodology involved using the Finviz stock screener to identify top growth stocks, ranked by the number of hedge fund holders as of Q2 2025 [6][7] Company Highlights - **Infosys Limited (NYSE:INFY)**: Collaborating with Telenor Shared Services to modernize HR operations through Oracle Fusion Cloud HCM, enhancing employee productivity and experience [9][10][11] - **LiveRamp Holdings Inc. (NYSE:RAMP)**: Launched new AI capabilities, including agentic tools and segmentation, to improve customer outcomes and enable secure data collaboration [12][13][14]

Gold ( GLD ) has performed exceptionally in recent years due to rising inflation, geopolitical issues, macro uncertainty, a declining U.S. dollar, and potential stagflation. I remember back in 2008/2009 during the Great Financial Crisis, older guys in the office were talkingContributing analyst to the iREIT+Hoya Capital investment group. Dividend Collection Agency is not a registered investment professional nor financial advisor and these articles should not be taken as financial advice. This is for educati ...

Meanwhile, some newly released minutes from last month's Federal Reserve meeting showing officials strongly inclined to lower interest rates with the only dispute seeming to be over how many cuts were coming this year. That's two or potentially as many as three. The Fed deciding on September 17th to lower interest rates by 25 basis points.Joining us right now to talk treasuries and rates is Kamal Shri Kumar. He's the president of Shri Kumar Global Strategies. Would you be lowering rates twice, three times l ...