September Market Recap
In September, all three major indexes reached record highs, powered partly by the Fed’s decision to lower interest rates and signal more cuts might be on the horizon. Additionally, continued AI-driven spending fueled growth, with Oracle skyrocketing nearly 40% in a day after reporting a massive backlog of orders.
Investors welcomed the good news – the S&P 500, Nasdaq, DJIA, and Russell 2000 all hit records on September 18th. That’s only happened on 25 other days this century, according to data compiled by Bloomberg.
Short-term bond yields have fallen, reflecting the lower interest-rate environment. However, the government shutdown is helping to keep those yields stable.
Is Volatility Poised to Return in October?
These charts show that October indeed tends to be volatile so investors can reasonably expect and be prepared some swings. If history is any indication, that “October effect” sometimes shows up as sharp pullbacks, other times as surprise rallies. In other words, the real pattern is bigger swings, not necessarily bad ones. So instead of bracing for the worst, a better solution is to expect a bumpier ride. Investors need to remain focused on the long-term to endure any October volatility!
How does an Investment Adviser Approach AI?
In late 2022, OpenAI’s ChatGPT came onto the scene. Overnight, “artificial intelligence” went from a futuristic concept to a present-day reality. Many compared this moment to the dawn of the internet in the 1990s – a breakthrough that would reshape how we live, work, and invest.
The market reaction was immediate. Investors piled into the big tech names at the center of the AI story. But here’s the real question: are those the only ways to participate in the AI revolution?
Stepping back from the headlines, here are some categories to help us think about AI going forward:
The Core Players
The companies that form the foundation of today’s AI boom:
- Semiconductor manufacturers – companies that design and produce the chips powering AI models.
- Hyperscalers and cloud providers – the massive data centers that train and run these systems.
The Supporting Cast
These “second-order” sectors often fly under the radar, but they are indispensable to the AI ecosystem. Without the right infrastructure, the promise of AI would remain just that – a promise.
- Utilities and renewable energy – a single data center can consume as much electricity as a small city. Power demand is expected to grow exponentially.
- Battery technology and data storage – energy efficiency and reliable supply will be critical.
- Data transmission and networking – AI requires moving enormous amounts of data.
- Cybersecurity – data protection is critical.
Building an Investment Strategy
Once the landscape is mapped out, the next step is deciding how to gain exposure. That means identifying dominant or emerging players across industries, while making sure the approach remains cost-effective and diversified.
This approach seeks to capture the opportunities of AI without betting everything on a handful of stocks. The goal is to look at both the main cast and the supporting cast, and to build portfolios that are resilient, diversified, and positioned for long-term growth.
"Falling" Into Year-End Planning
Autumn is a great time to review your financial picture before the year wraps up. Consider the following items:
1) Tax Situation
Review income tax liabilities (federal, state and local), capital gains, retirement account contributions, charitable giving, etc.
2) Mandatory Distributions
Owners of qualified plans who are 73 or older must withdraw a minimum amount, known as required minimum distribution (RMD). Qualified charitable distributions (QCDs) can be a helpful way to offset RMD up to a limit ($108,000). Of course, like most rules, there are strict requirements that must be followed to take advantage of QCDs.
3) Health Insurance
Open enrollment for both private and Medicare plans is coming soon. If you’re considering a coverage change, now is the time to compare options.
4) Family Gifts
The holidays are a great time to give with intention. If you’re considering gifts to family members, talk to us about the “how.” Thoughtful gifts can make a lasting impact – both personally and financially!
