October 11, 2025

My Thoughts on
the Market

Weekly Edition

How did the markets do?

• Stocks had a mixed week, first reaching new all-time highs and then followed by sharp losses. The US indices finished the week down 2 - 3% from the peak.
  • Friday was the sharpest selloff that we have seen since April.
• Bonds rose in response to the drop in stocks and were up nearly half a percent.
  • This is to be expected - generally when there is a selloff in stocks, we see a rally in bonds. This is referred to as a risk-off trade or flight to safety.

What headlines moved the markets?

• The government shutdown entered its second week, preventing the release of economic data such as jobs or inflation reports.
  • While this may seem concerning, historically shutdowns have a minimal long term impact on markets.
  • As frustrating as the political drama is, we have been through this before and likely will see it again someday.
• Minutes from the recent Fed meeting revealed division among officials about future rate cuts, with some worried about inflation persistence.
  • The Fed's cautious approach suggests they're prioritizing economic stability over aggressive rate cuts.
  • This reinforces the need for diversification and balanced portfolios that can perform in different interest rate environments.
• Gold is having an extraordinary year and hit an all-time high of $4,000 per ounce.
  • Central banks globally have been acquiring gold to shore up their own currencies and as a hedge against the weakening US dollar.
  • It is important to remember that gold is a commodity that historically has underperformed stocks and I caution folks not to fall prey to recency bias.

Personal Finance: should investors buy the dip?
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.

• Although it is impossible to accurately time the market over the long term, every now and then stocks go on sale.
  • On average, the S&P 500 has a 10% correction (short, sharp downturn) about once a year.
  • Friday was the greatest single day decline since the “Liberation Day” selloff back in April.
  • The selloff was triggered by new tariff announcements on China and a significant ratcheting up of bellicose trade negotiations rhetoric.
    • The good news is that the selloff was not caused by any changes to economic fundamentals.
• Could stocks go down further? Absolutely. But will they recover? Yes, they always have.
  • I do not recommend adjusting the risk of your portfolio (unless that’s something you were planning to do anyway) but this is a good opportunity to deploy any excess cash that is sitting on the sidelines.

Quote of the week
“Loss aversion refers to the relative strength of two motives: we are driven more strongly to avoid losses than to achieve gains.” – Daniel Kahneman, Nobel Laureate in Economics

• Most people feel the pain of losing money more acutely than the happiness of making money.
  • Investors have a tendency to panic and sell when the market goes down, realizing a loss.
    • They rationalize this by telling themselves that they are preventing greater losses, however that presupposes that the market will never recover to the prior level.
    • The only way for this strategy to be profitable is to buy back in when the market is at a bottom, when emotions are at their most pessimistic, which is extremely difficult to do.
  • It is better to ignore volatility, or even potentially take advantage of it by investing excess cash, than sell out of the market during a downturn.
    • The market is a constant tug-o-war of fear vs greed.

Conclusion

• Both political parties are showing cracks in their resolve to perpetuate the stalemate, so hopefully we will see a resolution to the government shutdown soon.
• Stay disciplined during periods of volatility, do not adjust the overall allocation of your portfolio in reaction to the market. However if you have excess cash in savings or from dividends and interest, you may want to consider investing it to take advantage of lower stock prices.

Have a nice weekend!

Kevin