Market Thoughts: Let it ride

The Fed delivered as expected, easing 25bps. Their median projection pencils in two additional cuts this year. It was a very tight margin, 10-9 votes. The new joiner, Governor Miran, was the single dissenting vote. He argued for 50bps rather than the 25bps delivered.

Weakness in labor markets is the Fed’s primary concern. The balance of risks has shifted. As Jay Powell said at his press conference, the Fed opted for a ‘risk management’ rate cut. With future easing priced in, risk assets are well supported. I’m sure with a few air pockets ahead.

Big tech retains its lowrider purr, powering on the S&P 500. To lend perspective, the top ten names in the S&P represent about 40% of market capitalization. The big-10 outrunning the munchkin-490. I’d be grateful to see the munchkins play a little catch up.

What we’re seeing in Asian emerging markets rhymes with the S&P. 80% of the EM equity index is Asia. Like the S&P, EM index returns have been driven by big tech in China, South Korea and Taiwan. We maintain overweights in EM debt and more modestly in EM equities.

We’re revisiting the size of our overweights to big tech and financials. We’re also looking at industrials, utilities and defense companies. We have a lot going on under the portfolio hood as we ready for third-quarter earnings. Investors have high hopes for another strong earnings season.

Our portfolios are procyclically positioned. In multi-asset portfolios, given the strength of equity markets, we hold a tactical overweight thanks to drift. It’s an active choice to keep it. One that’s rewarded us. We own the downside if there’s a market drawdown, there’s no such thing as free money. We’re assessing whether to trim equities back to neutral. Right now we’re hanging onto it.

Gold’s a hot topic. It’s owned as a hedge against a weak dollar and rising inflation. Also, geopolitical risk. I understand each motive. It’s been on a remarkable run, having been dormant for about a decade. It’s a non-yielding asset unless you’re playing in the derivatives space with term structure. Gold is worth what the next buyer’s willing to pay for it. Emotion is objectively hard to price.

Individual investors best define their preference for gold. I’d say the same about crypto. I understand why investors hold each and why many don’t. Sizing allocations is a matter of risk tolerance. Also, your appetite for hedging against ‘bad things’ happening. Cash plays a similar role.

We construct our strategic asset allocation based on long-term capital market assumptions (LTCMAs) that we generate as a firm annually. It’s an exercise done in concert with our Asset Management colleagues. We publish a summary our advisors can share if of interest.

LTCMAs factor in where we believe we are in the macro cycle. We look at relative valuation gaps across asset classes and where assets and the economy are trending. We model inter-asset correlations and volatility. LTCMAs are a critical input to how we strategically build portfolios. They tie directly to goals based investing; the foundation of long term investing.

I removed commodities—including gold—from our strategic asset allocation years ago, adding to equities. Commodities over a full cycle have similar volatility to stocks. Their return profile is anything but. It rhymes with core bonds. As a long term investor I prefer to own equities.

Rallying risk assets. Fed policy rates again in decline. Investors revving enthusiasm to push markets higher. Others adding hedges. The collective chorus of the moment? Let it ride.

Unless explicitly stated otherwise, all data is sourced from Bloomberg, Finance LP, as of 9/18/25.

Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors.