As we enter the fourth quarter of 2025, it seems that not even a federal government shutdown can slow down the momentum of the US stock market. Large cap stocks gained about 8% in the third quarter and continued to set all-times highs in the first week of October. Many other stock market segments, including international, mid cap and small cap US stock indexes, are also at or near their all-time highs. The Bloomberg US Aggregate Bond Index has gained a little more than 6% year-to-date, as the US Federal Reserve Bank reduced short-term interest rates in September by 0.25% and appears ready to lower rates again during the fourth quarter.
Even without the normal flow of economic statistics put out by the federal government, investors remain confident that the US economy is not headed toward a recession and corporate profits will continue to increase. While expectations for US corporate earnings were for low single digit gains, first and second quarter earnings both grew by more than 10% compared to 2024 results in the same periods.
The rise of Artificial Intelligence (AI) has resulted in a wave of investments by companies of all sizes that are seeking to achieve efficiencies to grow revenue and reduce expenses. While the promise of AI appears to be real, it also brings back memories of prior investment trends, like the Nifty Fifty stocks of the early 1970s and the dot.com boom of the late 1990s. The combined market value of the top 10 stocks in the S&P 500 Index currently represents 40% of the total index value. This concentration of stock value is unprecedented. So far, the earnings growth of these 10 companies has justified their lofty values, but maintaining a diversified portfolio of stocks could help to protect investors if or when these AI gains reverse.
In a year when both stocks and bonds are posting solid gains, the rally in the price of gold and other precious metals has been even stronger. Gold is often viewed as a safe harbor when global tensions rise and economic growth is uncertain. While it may be tempting to add gold to your portfolio, precious metals and other commodities are speculative investments. They provide no cash flow from interest or dividends and price fluctuations can be volatile. The same is true for Bitcoin and other cryptocurrencies.
We believe investors are well-served by maintaining a portfolio of cash for short-term needs, bonds for interest payments, and stocks for long-term growth. Owning real estate, whether your primary residence or investment property, adds diversification. In particular, investing in the stock market can offer many families opportunities to pursue a secure retirement and financial independence. While the daily volatility in stock prices can be nerve-wracking, having patience and a long-term perspective are key principles in strategies aimed at building wealth.
Christopher Borden is a financial advisor and Managing Partner with Canby Financial Advisors, a SEC-registered investment adviser. SEC registration does not constitute an endorsement by the SEC nor a statement about any skill or training. Chris can be reached at 508.598.1082 or cborden@canbyfinancial.com.
©2026 Canby Financial Advisors.
Disclosure: Diversification does not assure a profit or protect against loss in declining markets, and diversification cannot guarantee that any objective or goal will be achieved. This material is intended for informational/educational purposes and is not a recommendation for or against cryptocurrency. It should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Investments are subject to risk, including the loss of principal. Because investment return and principal value fluctuate, shares may be worth more or less than their original value. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. The S&P 500 is a stock market index that measures the performance of about 500 U.S. companies across 11 sectors. The Bloomberg US Aggregate Bond Index is designed to measure the performance of publicly issued US dollar denominated investment-grade debt. All indices are unmanaged and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance is not indicative of future results.
©2025 Canby Financial Advisors.