Most major stock indices advanced in the third quarter, but those gains masked a more difficult September. Rising interest rates and elevated energy prices weighed on stocks and bonds, while market leadership remained concentrated in a small group of large technology companies.
Despite those uneven returns, corporate earnings remain a strong foundation for our constructive outlook. Profit estimates have risen faster than share prices, making valuations more reasonable. We continue to see substantial opportunity in the AI investment cycle, while recent selling has created attractive entry points in quality companies across other sectors.
As always, our focus is on managing risk while positioning portfolios to compound over time. In this quarter’s letter, we discuss:
- Why resilient consumer spending, productivity gains, and rising earnings estimates support our positive outlook
- What narrow market leadership means for diversified portfolios—and how we are using volatility to improve holdings
- How the AI investment cycle compares with past technology booms—and why we believe substantial opportunity remains ahead
- How greater clarity after the midterm elections could support markets heading into 2027
- Why higher bond yields offer attractive income opportunities, with short- and intermediate-term maturities providing flexibility
Please contact us if you want a copy of the entire letter.