“My guess is that I think all the ingredients are in place for some kind of blow-off.”
Paul Tudor Jones, CNBC Squawk Box 10/06/2025
How does that quote sound to investors before their morning coffee? What’s missing from the quotes is that he went on to say that in 1999, the Federal Reserve was hiking interest rates at that point in the cycle. Now, the Fed has just started its easing campaign, which should be supportive of risk assets. I was recently reading a research report, one of many I peruse through, and came across an interesting quote from the Treasury Secretary of the United States Kevin Bessent written to his colleagues at Keysquare Capital Management prior to him becoming the Secretary dated January 21, 2024. Secretary Bessent wrote, “Our base case is that a re-elected Donald Trump will want to create an economic lollapalooza and engineer what will likely be the greatest four years in American history.” OK, which is it – a crash or the greatest four years of economic growth of any president? Or does it really matter? The answer to that question will only be known over time. Our guess is that we will continue to see risk assets supported by a now dovish Federal Reserve and an Industrial Revolution that is in the early stages of explosive growth with massive cap-ex spending. This moment in time should benefit those that invest in risk assets and manage their risk carefully. We cannot overemphasize the need to have a wealth management plan and to speak with your advisor at least once per year. We have seen some extraordinary volatility this year as well as a record bounce in multiple markets off the dramatic lows that followed Liberation Day. Those lows were preceded by one of the fastest V-shaped rallies that I have ever seen in my 30 years of wealth management. During these times it is important not to be impulsive but to be disciplined in your investments and to follow your long-term goals set in your wealth management plan. If you do not have a wealth management plan, please contact us at Banyan Wealth. Below are some of the pros and cons we are following for the fourth quarter.
Pros and Cons:
Pros:
- The Federal Reserve appears to be starting an easing cycle of lower interest rates. “Don’t fight the FED”
- AI boom is still strong
- Homeowner balance sheets are the strongest in decades
- Checkable deposits are in good shape
- Seasonality is favorable heading into the fourth quarter
Cons:
- Weakening job market and ISM services/manufacturing sectors remain weak
- 9 sectors of the S&P 500 remain weak with only Technology and Communication Services exhibiting strength
- The Buffett indicator for valuations just surpassed an all-time high. Higher than the Dotcom bubble
- AI space is becoming more self-referential in its deals
- The US Dollar looks to have bottomed
Conclusion
Overall, the US economy is growing and earnings are still expanding which is a good thing for companies and investors. The growing economy and expanding earnings come with a Federal Reserve that is in the early stages of a rate cutting cycle. With that said, stick to your wealth management plan, stay disciplined and reach out to your advisor with any questions you might have.