Perspectives
Quarterly Market Newsletter
Third Quarter, 2025
Resilient and remarkable; that’s the story of our economy and stock market this past quarter. Despite the worst seasonal period in the year for stock returns, markets churned higher. You might even call it a “melt up.” See the Indices section of this letter; it tells a good story. Certainly, we’ve had bouts of volatility, but these have been expected and met with investor buying.
Bonds have also had good runs. Interest rates began receding long before the most recent cut by the Federal Reserve. And more are coming. Thankfully, for investors, there are still decent rates to be found. 4% seems to be a new benchmark for attractiveness. Lower than this, and investors turn away. In mortgages, 6 ½% is a trigger point for buyers to step up and buy. Any rate lower and buyers really get interested. Amazingly, both levels are available to both investors and housing buyers. Perhaps a sweet spot?
Artificial Intelligence has been the driving force in our economy! Capital expenditures for this are overwhelming, numbering in the hundreds of Billions. There seems to be an arms race among major technology firms to capture and deliver on the promises that this new technology seems to offer. We shall see!
Besides AI, the other great trend in investing is the interest that many investors have in value stocks. These are part of the left behind cadre of companies and sectors that fell outside of the “magnificent 7 group.” Industrials, mid-caps, small-caps, international, and others are playing catch-up. We at Riverplace Capital expect this latest trend to endure for some time yet. The technology sector may be waning a little.
Private equity and credit interests are now available to more investors. For years, these have been lucrative sectors for institutional investors. Now, almost anyone can buy into these vehicles. In the past, when something that was private and successful was suddenly marketed to the masses, it indicated that insiders were looking for the next group to unload their risks. We are watching this process and moving very cautiously. As for what we see coming, read our next section.
Forecast
Economy
The U.S. economy has been growing at a better than 3% rate. This is terrific for an economy of our size. We stated at the beginning of this year that a recession is very unlikely. Riverplace Capital still believes this to be the case. No doubt, some sectors have been hit hard by inflation and are struggling. However, this economy has been a case of haves and have-nots. The haves are outweighing the others and keeping growth moving forward. We may see an acceleration of growth and a broadening of sectors and companies once some of the promises of AI begin to be realized.
Remember, much of the money coming from the Infrastructure, Inflation Reduction, and Chips Act has yet to be spent. These dollars will also help further drive growth. It is hard to imagine a major economic decline with this in the pipeline. Three percent or better may be the new growth rate benchmark. The stock market is already telling us that more and more sectors and categories will benefit.
Equities
Fixed Income
Interest rates are coming down. The yield curve (the difference between short-term and long-term rates) is getting steeper. This is healthy and responds better to the actual risks in the economy. Obviously, it is harder to anticipate credit conditions the farther out one goes in time. Investors can make reasonable assumptions about the next few months or even years. However, ten years or more is simply anyone’s guess.
Quality credits are doing better than poorer ones. With so many uncertainties, this is likely to continue. Reaching for yield has come back to bite investors in their wallets time and time again!
Investment Strategy
Equities
A broader market gets returns from more places. Therefore, a more diversified portfolio is called for. This is what Riverplace Capital has employed for its clients. Two sectors that have previously been left in the dust by tech growth names are now important sources of returns. These are industrial and financial companies. Utilities are also picking up due to incremental demand for electricity from new data centers for artificial intelligence.
We expect even more sectors, like consumer and healthcare, to soon join the party. The broader the net, the more likely good returns can be caught.
Fixed Income
Riverplace Capital has been slowly introducing longer-dated maturity bonds into the fixed income portfolios that it manages. Three to five years is our new target. This range will allow us to capture attractive interest rates without taking much additional risk. Many short-term holdings are now maturing, so there is no need to sell any current holdings.
Should interest rates continue to drop, these slightly longer-dated bonds will keep paying at current interest rates. Quality will continue to be paramount. We at Riverplace Capital view fixed income assets to be a reducer of risk, not a category to add additional ones.
Wealth Management
Talk With Us
What is our stock market telling us? The stock market is the combined judgments of millions of investors with “skin in the game.” Several brokerage companies are setting up alternative markets for events that have nothing to do with financial securities. For example, traders can bet on the outcomes of elections, sporting events, and many other occurrences where players might have an interest. There is a recognition that collective judgment can predict better than can of one individual.
So, what now? In spite of what often seems to be mayhem, chaos, and turmoil, investors have sniffed out that our economy is doing just fine. Also, they have predicted that interest rates will soon decline. Furthermore, they predict that economic growth will include more and more sectors and companies. This is very important for portfolio managers.
Portfolios can now be constructed with greater diversification and still capture excellent performance. In fact, some sectors that were left behind by the intense focus on a few technology names are now playing catch-up and giving better returns. Many of these have been cheap and may soon become less so while reducing risk from too much concentration.
The stock market is also telling us that all the news events of the moment are distractions. The market is moved by factors that closely determine asset values, such as revenues, earnings, and the level of interest rates. Political news rarely rises to the level that it impacts the stock market for more than a short time. Riverplace Capital’s CEO writes the Lonely Bull blog every week to interpret events and make important observations that are important for investors. Let us know if you would like to receive this blog.
as of 10/22/2025
13.7%
Dow Jones Industrial Average
9.1%
Mid Cap Stocks (S&P 400)
4.6%
NASDAQ Composite
17.3%
Small Cap Stocks (Russell 2000)
2.9%
MSCI EAFE
22.34%
Barclay Aggregated Credit Index
6.9%
Inflation
2.9%
(Equity indices are nine-month returns excluding dividends)
I will tell you the secret to getting rich on Wall Street. You try to be greedy when others are fearful. And you try to be fearful when others are greedy.
- Warren Buffet
Notice
Are you ready to take a serious look at your financial prospects?
Riverplace Capital is offering a free financial plan (value $1500) for anyone, not just for our clients. Information is powerful, and knowing how well your needs are being covered can help you make better decisions during this time of heightened uncertainty and stress. You may want to analyze a variety of “what ifs.” Can you be more aggressive with your investments, or should you be more conservative? If you get sick, how well can you manage through the illness? Other questions may come to mind that cold, rational analysis can help you see through the fog of the moment.
Free is free, and no one is under any obligation to Riverplace Capital. The Bull and his partners want to help investors make the correct decisions. In other crises, we have seen too many people do great harm to their financial futures. This can be avoided with proper analysis and counsel. It is important to stay on a disciplined path. You may need to make changes; just do them as part of a rational plan. Let us help you.