Dear Client, Prospect, Partner:
The markets continue to rise, and the S&P 500 continues to set daily all-time highs, rising 8.1% in Q3. The Nasdaq 100 surged nearly 50% from its April bottom, driven by AI enthusiasm. Small cap stocks rallied with the Russell 2000 up 12.4%. The momentum continues to carry on and we are cautiously optimistic that this run will continue. Tech & communication services led gains, while consumer services and health care lagged. Gold hit record highs, up 17% signaling investor caution and bond yields fell, boosting fixed income returns. Valuations do seem stretched, as in the US. Equities trade at a 3% premium to fair value. Small-cap and value stocks are undervalued and seem to hold some good opportunities. As a firm we will continue to diversify across several sectors and monitor AI-driven mega-cap tech stocks we own for signs of overvaluation. Other than the large market stumbling in the month of April 2025, it has been on a great recovery path from that rough month. We look forward to a strong finish in Q4.
There was not any jobs report for September due to the government shutdown. However, things are plodding along. Indeed’s measure of job postings show a decline of 8.9% from a year ago. Most of these jobs are from health care though and it’s not impacting many other industries. The posturing between the House and Senate continues as we enter week two of the shutdown. We expect the shutdown to end quickly, and it will be business as usual.
The Federal Reserve did cut the federal funds rate by twenty-five basis points on September 17th. This was celebrated and more rate cuts are expected over the next several quarters.
At the publication of this letter, President Trump is speaking in Israel with hopes of a peace treaty in the Middle East and he received a standing ovation by the Israelian parliament. Israelian hostages have been released and the treaty between Hamas and Israel has been announced. The rhetoric about China and the Gaza war had caused a little market volatility over the last week. Hopefully, this has subsided, and we can get back to stability in the markets. Enjoy this nice, sunny fall weather before winter arrives.
Sincerely,
J.B. L’Esperance, ChFC
If you have questions about our strategies or would like to open an account with Barking Sands Capital, please give us a call at 952.500.8854 or 248.687.1400 or email us at jb@barkingsandscapital.com