October 5, 2025

My Thoughts on
the Market

Weekly Edition

How did the markets do?

• Stocks had a mostly positive week with the S&P 500 reaching new all-time highs but then receding some as government shutdown concerns became a reality.
• The Dow, which comprises large, mostly stable value companies, performed the best of the three US stock indices this week.
• Bonds remained steady as investors weighed Fed policy against political uncertainty from the shutdown.

What headlines moved the markets?

• The federal government shut down on October 1st, suspending the release of jobs reports and other crucial economic indicators based on government data.
  • I'm watching how this affects Fed decision-making, but remember that shutdowns are typically temporary disruptions.
• Powell suggested that current stock prices may be overvalued, echoing concerns about market levels.
  • While his comments caused some selling, strong corporate earnings continue to support market fundamentals.

Personal Finance: Tax Loss Harvesting
Disclaimer: taxes are complicated and unique to each individual. Consult with your advisor before making any major tax decisions. This is general educational information and not intended as financial advice.

• Capital gains, the profits realized when you sell an investment, are taxed differently than income, such as your salary, interest, or dividends.
  • Much like how tax deductions can reduce your income, realizing capital losses can offset capital gains.
• Capital gains are taxed at a lower rate than income taxes (in most cases) and can even be eliminated if planned correctly.
• Example: you buy stocks A and B each for $10.
  • Stock A appreciates to $12 and you sell it. You have realized $2 in gains, and you will (in most cases) owe a 15% tax on that $2 of gains.
  • Stock B declines to $8 and you sell it. You have realized $2 in losses and owe no taxes on the loss.
  • At the end of the year, your gains and losses are tallied up and you are taxed on the net amount.
• This is an overly simplified example for brevity - I go into more detail and explain how to strategically implement Tax Loss Harvesting in this month’s newsletter.

Quote of the week
“Only buy something that you'd be perfectly happy to hold if the market [or government] shut down for 10 years.” – Warren Buffett

• Short term speculation/reaction is where most investors lose money.
  • The average retail investor consistently underperforms the market year after year due to behavioral mistakes - buying high and selling low.
  • Dalbar, a market analytics group, has been conducting investor behavior studies for the past 40 years and the trend is clear - human nature doesn’t change. (Dalbar press release with 2024 data)

Conclusion

• Next week brings limited economic data due to the shutdown, but I'm monitoring company reports and any Fed communications for market direction.
• Don't let headlines or valuation concerns derail your long-term strategy - we've been through this before - stay focused on quality investments

Have a nice weekend!

Kevin