Market Thoughts: Trick or treat?

Markets hit a bout of turbulence. We’ve seen some of the more crowded trades consolidate as investors trim back higher beta positions. Markets have been on a tear. Profit taking across outperformers is a sign exuberance remains rational.

We continue to hold modest overweights to equity and credit markets. I feel very comfortable with that positioning. In a recent session with my senior team, we revisited our constructive view of the macro landscape. It’s firmly intact.

Global growth is on a downward trajectory. There’s a lot being written about whether we have a soft or hard landing ahead of us. To borrow a line from an old Ben Folds ditty… we’ve landed.

The key question? Whether we see imminent risk of recession or reacceleration. Recession worries always get the attention. It’s human nature to lean into headline scaries. In particular, with Halloween right around the corner. BOO!

I’m more concerned about a modest melt up in the outlook over the next six to nine months than I am a downturn. That view’s based on a geopolitical environment that doesn’t worsen. For the world we find ourselves in, that’s unfortunately not a given.

The U.S. followed Europe in enacting more stringent sanctions on Russian oil. That may provoke an escalation in Russia’s effort to seize additional Ukrainian territory ahead of a forced ceasefire. My sense is sanctions only increase if Russia won’t sit down at the negotiating table. It’s an obvious observation, but one worth keeping in mind.

Tail risks around the war on Ukraine have risen. You can see that with the recent spike in energy prices. Given the supply glut seen across the oil market, the current run up in price offers opportunity for producers to hedge production. I don’t believe it puts us on a progressive path higher in price.

We’re seeing the opposite happen across the precious metals market. The leader of the pack? Gold. I view the selloff seen to date as an unwinding of speculative excess. As of this writing, the gold ETF (GLD) is up about 50% over the past year. On a five year basis it’s up some 16% annualized.

Some froth taken off the top of gold’s run up this year, like the consolidation we’ve seen in higher beta equities, is healthy. Like equity markets, I believe investors are better buyers should we see a more pronounced pull back in prices.

We’re early in the earnings season. To date the results seen continue to support equity markets. Wall Street revised higher its forecasts ahead of results. Something like 80-85% of companies reporting have exceeded projections. We appear on track for another quarter of low double-digit earnings growth. That helps validate current multiples. It’s supportive of risk assets.

Markets don’t only move in a straight line. That said, seasonality favors the brave. With the Fed readying again to cut rates, earnings strong, credit markets resilient and FOMO circling, markets appear well-grounded.

Are market levels bubbly? Yes. Are we in a bubble about to burst? It doesn’t feel like it currently. That’s an observation about the amount of risk to be taking in a portfolio. Not a cry to run away from risk assets. Especially as a long-term investor.

Short sharp pullbacks are expected. The context of a shock matters. What we’ve seen in equity, credit and commodity markets has been healthy. Similar to rebalancing risk in a portfolio, you want your ‘winners’ to run. Don’t let them become overly concentrated positions.

For what we’re seeing in flow of funds, investor discipline seems more the driver of recent consolidation than fear. That said, fear of missing out continues to circle. It’s playing out real time with continued net inflows into risk assets.

Trick or treat? Like a well filled bag of candy on Halloween, expect a few tricks thrown into the mix of treats. I’d make the same observation about the path of markets in the months ahead.

Unless explicitly stated otherwise, all data is sourced from Bloomberg, Finance LP, as of 10/23/25.

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.