October 19, 2025 Letter to Clients
As we approach the final stretch of 2025, we hope you had the chance to unwind and spend quality time with family and friends over the summer and are currently enjoying all that autumn has to offer. With the last quarter now underway, we’d like to share our latest insights into the markets and what we’re watching in the months ahead. Alongside our market and economic commentary, we strive to periodically provide additional content with each letter that may be relevant to you and your loved ones. Included in this letter is a special supplement devoted to a topic we’ve been hearing more about recently, supporting aging parents. For those who are currently in this season of life, or will be soon, and would like to discuss in more depth how best to financially plan for an aging parent, please feel free to contact us.
Government Shutdown
As we write this letter, we are facing the most current government shutdown, and while rare, they have occurred more often in recent decades. A look at the impact of the shutdowns, strictly focusing on the financial markets and economy, is that they rarely have a lasting impact. History shows us that in past episodes the stock market tends to shrug off these shutdowns. Even during the longest running shutdown in 2018, markets and the broader economy held up relatively well, with stocks recovering once the uncertainty had passed. These events tend to grab headlines, but don’t change the underlying fundamentals that drive corporate earnings and long-term stock performance. For fixed income investors, a shutdown is very different from a debt ceiling crisis. The United States Treasury will continue to pay interest and hold bond auctions. One potential longer-term issue is how credit rating agencies view the government’s fiscal management. The country’s credit has already been downgraded once this year, and if the debates continue, further downgrades remain possible, however unlikely at this time. A prolonged shutdown could slow economic growth as the federal government plays a large role in overall spending, and when parts of it pause, a ripple can be felt through the economy. As of this letter, the markets had largely plugged along, fueled by artificial intelligence (AI) demand expectations, however had begun to experience some uncertainty, given that Wall Street is waiting on a reprieve from the lack of economic data being released because of the shutdown. Obviously, this is an ongoing event that we are watching closely and will pivot as necessary.
U.S. Stock Market Hits Record Highs in Third Quarter: Here's What's Driving It
The third quarter of 2025 was a remarkable period for the U.S. stock market, with major indexes hitting record highs. The S&P 500 broke through the 6,600-point mark for the first time, while the Dow Jones Industrial Average climbed above 46,000. One of the main forces behind this rally has been the ongoing boom in artificial intelligence (AI). Leading technology companies, particularly those focused on AI innovations, have seen their stock prices rise sharply thanks to solid earnings reports and increasing demand for AI-related products and services. Companies like NVIDIA, Microsoft, and Alphabet (Google) have taken center stage, driving much of the market’s gains.
Beyond these tech giants, many other businesses also reported better-than-expected profits, helping to support the broad market rally. It’s worth noting that the strength in the market is not limited to just a few large companies. Smaller companies and a wider range of sectors have experienced gains, indicating that the rally is becoming more broadly based as evidenced by strong gains in the small-cap stock Russell 2000 index, closing at a record high for the first time in years.
Another important factor had been the growing expectation that the Federal Reserve (the Fed) would lower interest rates soon. Lower rates generally make borrowing cheaper, encouraging business investment and consumer spending, which in turn can boost stock prices. That anticipation played a big role in lifting investor sentiment.
The Fed did deliver on the anticipated benchmark rate cut of 0.25% in September and signaled more cuts likely this year. While the markets had rallied in the weeks leading up to the announcement date, the cut wasn’t enough to cause a major move in stocks following the actual announcement.
Despite this positive momentum, there are risks. Stock prices are relatively high compared to historical averages, raising concerns that the market is overvalued and more vulnerable to fluctuations in the near future. Inflation remains a concern, partly fueled by tariffs and trade tensions, which could slow economic growth as they come to fruition. Additionally, new regulations on AI and ongoing geopolitical uncertainties add an extra layer of complexity and risk.
Interest Rates Cuts: A Look at the Job Market, Inflation & Impact for Investors
As previously mentioned, at its September meeting, the Federal Open Market Committee (FOMC) delivered a widely expected 0.25% interest rate cut and signaled the possibility of up to two more cuts later this year. While the rate reduction itself was anticipated, the market faced a wave of uncertainty due to the wide range of projections among committee members regarding the future path of interest rates. This lack of consensus makes it difficult for investors to place confidence in the rate forecast provided. As a result, after an initial drop in Treasury yields and the U.S. dollar, financial markets quickly reversed course as participants digested the more uncertain policy outlook.
Weaknesses in the labor market were the key drivers for rate cuts. In its accompanying statement, the Fed announced it had lowered the federal funds rate, the rate banks charge each other for overnight loans, to a target range of 4.0% to 4.25%, citing signs of a weakening labor market. Following significant downward revisions to payroll data earlier in the month, the Fed’s move to ease monetary policy comes as little surprise. As part of its dual mandate, the Fed aims to set interest rates that support full employment. Chairman Jerome Powell noted the committee is working to balance the risks inherent in that mandate, while acknowledging that there is no "risk-free path" when setting policy. He emphasized that the deterioration in labor market conditions since the last meeting was the key driver behind the rate cut, even as inflation remains elevated and the likely potential for it to spike again as companies start passing costs onto consumers.
A deeper dive into the weakening jobs numbers and stark revisions to recent payroll numbers indicate that the country has been creating far fewer jobs than previously reported. A slowing demand for labor has been met with a decrease in the supply of laborers. The flow of immigration has dropped significantly, and the measures of job growth have already shown signs of decline. August’s unemployment was reported at 4.3%, the highest level in almost four years.
On the inflation side of this interest rate decision, economists have been surprised by the modest pace of price increases. Although inflation has crept up recently, the tariff-related inflation, which was expected to show up full-force this summer, did not hugely reaccelerate inflation. This is most likely attributed to the uncertainty around tariff policies, which kept many companies from raising prices prematurely. Not wanting to risk losing customers by being the first to raise prices, many businesses have been in a holding pattern. Those businesses in a financial position to do so stockpiled inventory early in the year and have been drawing down those reserves. Others rerouted goods through countries with more favorable trade terms. Once we have more clarity on tariffs and trade deals, additional gradual price increases may begin. While this may avoid sudden consumer shock, it would contribute to steady, ongoing inflation in the coming months.
What the Fed’s Rate Changes Mean for You: When the Fed changes interest rates, it’s important to know what that affects. The Fed only sets very short-term interest rates, not the rates on mortgages, CDs, or long-term bonds. However, decisions can influence those rates over time. For 30-year mortgages, there is more of an indirect impact. The Fed’s lowering of the federal funds rate signals to the market that rates are trending lower, which in turn can lead to a decrease in the 10-year Treasury yield over time. Given that this yield is used to price long-term mortgages, a decrease can eventually lead to lower mortgage rates.
How This Could Affect Borrowers and Savers: If you have debt with a variable interest rate, like most credit cards or home equity lines of credit, you might see your interest payments go down when the Fed cuts rates, albeit not significantly. On the flip side, savers may notice lower returns on accounts such as high-yield savings, short-term CDs, or short-term government bonds.
Looking ahead, equity markets continue to navigate a delicate balance between optimism around AI-driven growth and anticipated monetary easing, and the mounting challenges of slowing labor income, persistent inflation pressures, and rising trade frictions. While further rate cuts may provide support, equity valuations remain elevated and market leadership narrow. With the convergence of multiple risks, including tariffs, softening consumer demand, and fading stimulus, we continue to believe a selective, quality-focused approach in a well-diversified portfolio is prudent. Near-term gains continue to remain possible, but maintaining disciplined risk management is essential as markets walk through a tightrope between opportunity and vulnerability.
In closing, we wish you and your family a wonderful Thanksgiving season and as always, we invite you to contact our office to discuss any questions, concerns, or significant changes in life as we welcome the opportunity to be of assistance and offer our guidance.
Warm Regards,
Steve LePage Colleen Bianco
Supporting Aging Parents
Many middle-aged adults find themselves balancing responsibilities for both their children and aging parents. This group, often called the “sandwich generation,” can feel overwhelmed as they manage caregiving alongside their own personal and professional obligations. Even when these roles don’t overlap, the demands of supporting children or aging parents can be daunting, especially as people live longer and require more extensive, and often costly, medical and personal care in their later years. While much attention is paid to teaching children financial responsibility, it’s increasingly likely that adult children will also need to provide informal assistance to their parents, as financial caregivers. In this letter, we’ll focus on the caregiving role specifically as it relates to supporting aging parents with financial management, particularly as health or cognitive issues emerge.
Managing a parent’s finances can be sensitive and complex. A good starting point is to ask whether your parents have a comprehensive financial plan. Such a plan outlines all assets and liabilities (current and future), matched against specific goals like retirement or healthcare. Financial plans often align with estate plans and can help you identify regular expenses and areas where support is needed. Some parents may be reluctant to share financial details. If your parents resist help, begin with simple, non-intrusive steps. Offer to help write checks or pay bills online and ask about the purpose of each expense or charitable donation. These small interactions can naturally open the door to deeper financial discussions and allow the adult child to gradually familiarize themselves with their parent’s finances.
You can also accompany them to the bank, meet key contacts, or offer help with questions. These connections can encourage open dialogue and reinforce a sense of control for your parents. We welcome our clients to invite their adult children, particularly the individual(s) who will at some point play a key role in financial decision making, to meetings. This can reinforce a sense of control for our aging clients while building a connection of support with their adult children. On that note, we strongly encourage all clients, especially our senior clients, to name a Trusted Contact Person (TCP). This person can be contacted in cases of concern, such as signs of exploitation or cognitive decline, but has no authority over the investment portfolio. It is a protective measure, not a loss of independence. Please phone our office should you wish to confirm if you have named a TCP and if you have not, we’ll gladly assist you with doing so. Clients of any age can name a TCP, and it is generally good practice to do so. Taking inventory of assets is advised if your parent is open to it. This can be as simple as creating an organized binder, notebook, or Word/Excel document. Note each of the accounts owned, where they are located and who has access. Note each source of income and the amounts and frequency received; common ones being pension and social security payments, regular IRA withdrawals etc… Note that each account, bank accounts included, has proper beneficiaries listed. A tip we regularly offer clients is to consolidate accounts as much as possible to simply finances. It is not uncommon for the senior generation to have accounts at multiple banks, particularly savings and CDs, but this can lead to forgotten accounts or accounts without beneficiaries named. Simplicity is key.
Integrating estate planning into the overall financial strategy is essential. This process includes creating or updating critical legal documents such as a will, trust, power of attorney and healthcare proxies to ensure wishes are respected, and assets are managed according to their intentions. Establishing this legal framework allows trusted individuals to step in and make decisions when a situation arises that requires it. Including these protections can reduce the risk of financial exploitation, while providing tools to ensure that wishes are followed and trusted individuals are empowered to act when needed.
Navigating the challenges of caregiving becomes more difficult with the growing risk of financial exploitation and scams. It is essential to stay vigilant about this threat given this exploitation is on the rise as new technology emerges. While internet or phone scams are common threats, be mindful that unfortunately exploitation can come from those closest to seniors, be it family members, trusted caregivers or simply those with regular access to your parents. For more information and tips on how to protect your senior loved ones, visit www.consumerfinance.gov and again, we invite you to reach out to discuss your family’s needs in this area.