October 2025 Investment Update
Discipline Rewarded in Strong September
September 2025 proved to be an exceptionally strong month for U.S. equities, defying historical weakness for the month and rewarding investors who stayed disciplined. The strong performance across the board, with both the S&P 500 and the Nasdaq Composite recording their best September in over 15 years, highlights the importance of maintaining a strategic, long-term focus, even when market commentators warn of seasonal dips.
Market Recap
Our investment discipline, which focuses on areas of relative strength, continued to provide benefits. As markets digested the Federal Reserve’s next move, the growth and cyclical sectors where we are strategically positioned continued their momentum from August.
September delivered broad-based gains across the U.S. markets, extending the rally through the traditionally difficult late-summer period:
- S&P 500: +3.5%
- Nasdaq Composite: +5.3%
- Dow Jones Industrial Average: +1.7%
(Source: Market Watch, September 30, 2025)
Our overweight positions largely outperformed the benchmark S&P 500 during this rally:
- Small-Cap Stocks: +4.15%
- Healthcare: +4.55%
- Biotech: +5.10%
- Materials: +3.92%
This strong divergence underscores the benefit of our intentional exposure to sectors poised for growth and relative value, particularly during periods of resurgent market confidence.
Contributing Factors
Several themes shaped market direction in August:
Federal Reserve Rate Cut
The Fed proceeded with an expected interest rate cut of 25 basis points, signaling the official resumption of the rate-cutting cycle. This move, which was interpreted by investors as supportive of equities, helped drive sentiment despite the CIO’s view that inflation is “not totally under control yet.”
AI Frenzy
The major technology indices were propelled higher by a continued surge of capital into AI-focused companies and megacap stocks, with the Nasdaq Composite leading the charge for the month.
Government Focus
Near the end of the month, the market showed surprisingly muted activity around the expected government shutdown deadline. Historically, shutdowns have had limited long-term impact on the economy or the stock market, though the situation remains a crosscurrent we are monitoring.
Portfolio Positioning: Focus Unchanged
Our investment team continues to follow our system, and our allocations for September remained the same as the prior month.
Core Allocations - No Change
- Diversified large-cap U.S. equities
- Small-cap U.S. equities
- Fixed income tailored to your risk profile
Areas of Emphasis
Small caps, materials, healthcare, and biotech, all of which outperformed the broader market in September
These allocations reflect our conviction that these sectors offer attractive long-term growth prospects and strong valuations relative to the broader market, even as overall market prices continue to rise.
Note: Asset allocation and diversification do not guarantee a profit or protect against loss in declining markets. All investments involve risk, including the potential loss of principal.
Looking Ahead
As we head into the final quarter of the year, we remain watchful of a few critical crosscurrents:
- The Federal Reserve’s Path: While the rate-cutting cycle has resumed, the pace and magnitude of future cuts will be strictly tied to inflation data. We remain alert to any shift in policy language or economic data that could disrupt market expectations.
- Government Funding and Debt: The possibility of a government shutdown remains a near-term political risk that, while historically minimal in economic impact, could create volatility.
- Housing and Cyclical Momentum: We will continue to evaluate the real estate sector’s drag on economic growth and closely monitor the momentum in our preferred cyclical sectors (like Materials and Small Caps) to ensure they continue to justify their overweight positioning.
Our investment team will continue to evaluate data and trends carefully, making adjustments as needed while keeping your long-term financial goals at the center of every decision.
Your financial goals remain our priority. If you’d like to review your portfolio or talk through current market conditions, please don’t hesitate to reach out to your advisor. Thank you for the trust you place in our team.
Important Disclosures
This communication is for informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security. Strategic Advisory Partners (“SAP”) is a registered investment advisor. Registration does not imply a certain level of skill or training.
Past performance is not indicative of future results. No investment strategy, including trend following, can guarantee profits or protect against losses. Market indices mentioned are unmanaged and cannot be invested in directly. Index performance does not reflect transaction costs, fees, or expenses.
Forward-looking statements, including projections of market performance, earnings growth, Federal Reserve actions, and economic conditions, are based on various assumptions and beliefs that may not prove to be accurate. These statements should not be relied upon for making investment decisions.
Investment decisions should be based on an individual’s own goals, time horizon, and risk tolerance. Diversification and asset allocation do not ensure a profit or protect against loss.
This material has been prepared from sources believed to be reliable but is not guaranteed as to accuracy or completeness. This information may change at any time based on market or other conditions.
©2025 Strategic Advisory Partners. All rights reserved.
