October 2025
QUESTION FOR CONSIDERATION
With Washington in gridlock and the government shut down, yet the stock market hitting all-time highs—are your investment decisions based on headlines, or on a disciplined, diversified plan?
THE BOTTOM LINE
Asset Allocation, Market Timing, and the Hidden Costs of Behavioral Bias
Investors are constantly inundated with headlines and hype. The excitement around technology and artificial intelligence has fueled strong market returns in recent years, leading many to believe that tech is the permanent leader in any well-performing portfolio. But history tells a different story—one where market leadership rotates, trends reverse, and yesterday’s winners can quickly become today’s laggards. That’s why smart investing starts with asset allocation—not market timing.
The idea that you can outguess the market is seductive, but deeply flawed. According to long-term data from MFS Investment Management, asset class performance is notoriously inconsistent. In one year, U.S. large-cap growth stocks may lead. In the next, commodities or international equities might take the top spot. Even technology stocks, which have surged recently, found themselves among the worst performers in 2022. The point is not to avoid tech or innovation—on the contrary, they should be a part of a modern portfolio—but rather to avoid overconcentration. The key to enduring success is diversification, ensuring that no matter which asset class leads or lags in any given year, your portfolio remains balanced and resilient.
The allure of trying to time the market often stems from a mix of confidence and emotion. Acronyms like FOMO (Fear of Missing Out), YOLO (You Only Live Once), and TINA (There Is No Alternative) have entered the investing lexicon, and while catchy, they often encourage reactionary decisions. Emotional investing almost always leads to poor results. Market volatility and headline noise can push even experienced investors into making impulsive moves, often at precisely the wrong time.
But perhaps even more dangerous than reacting to headlines are the personal biases that quietly influence decisions. Overconfidence bias leads many investors to believe they can predict winners or time the market better than others. However, a landmark study by Barber and Odean found that the most active traders—those most confident in their market acumen—actually underperformed those who traded less frequently. Other biases are equally damaging. Confirmation bias causes investors to seek out only the information that reinforces their existing views, while familiarity bias keeps them overly concentrated in companies or industries they know, such as their employer’s stock or large domestic firms. Anchoring bias leads investors to fixate on purchase prices, often refusing to sell a losing stock in hopes it will rebound. And hindsight bias gives the false impression that market movements were predictable all along, leading to dangerous overconfidence in future forecasts.
These behavioral tendencies aren’t rare—they’re human. But they can be mitigated with a sound investment strategy built around asset allocation. By thoughtfully dividing your portfolio across different asset classes like stocks, bonds, and alternatives, you insulate yourself from the performance whiplash of any single area. You also give your investments the structure they need to weather both euphoria and downturns.
A diversified portfolio won’t always win the headlines, but over time, it has been shown to outperform many single-asset portfolios on a risk-adjusted basis. Studies consistently demonstrate that asset allocation—not individual stock selection or market timing—is the single largest contributor to long-term investment returns. That’s why we believe that building a solid portfolio starts not with chasing the next big idea, but with a personal plan rooted in your unique goals, timeline, and risk tolerance.
Investing isn’t about being right in the moment—it’s about being prepared for the future. If you’re unsure whether your portfolio is truly diversified or concerned that your strategy may be overly reliant on recent winners, this is the perfect time to review your allocation. A strong foundation is not built on headlines or hunches. It’s built on discipline, structure, and understanding what role each investment plays in your broader goals—and That’s the Long and Short of it!
The following facts and statistics describe the financial situation in the United States from January 1st to September 30th, 2025:
· The S&P 500 is up 13.72% year to date.
· The S&P 500’s P/E ratio currently stands at 31.1 (the average P/E of the S&P 500 is 16.18)
· The NASDAQ is up 17.34% year to date.
· The Dow Jones Industrial Average is 9.06% year to date.
RECENT STATISTICS AND ECONOMIC DATA THAT AFFECT INVESTMENT DECISIONS
The following statistics and data are important factors to consider when making investment decisions:
The S&P 500 is currently projected to post 8.0% year-over-year earnings growth for Q3 2025, marking the ninth consecutive quarter of earnings expansion. This is a modest increase from the 7.3% estimate at the start of the quarter, driven by upward revisions across six sectors.
Among the 112 companies that have issued guidance, the split is even: 56 have issued positive EPS guidance, while 56 have issued negative guidance—a sign of diverging expectations amid sector-specific volatility.
Valuation remains elevated, with the forward 12-month P/E ratio at 22.8, above both the 5-year average of 19.9 and the 10-year average of 18.6. As of this writing, 74% of companies reporting thus far have posted positive surprises on both earnings and revenue, reflecting resilience in corporate fundamentals even as broader economic data signal a more mixed picture.
The most recent Personal Consumption Expenditures (PCE) price index reading was for August 2025, released on September 26, 2025, with the overall PCE price index increasing 0.3% month-over-month and 2.7% year-over-year. The core PCE price index (excluding food and energy) rose 0.2% for the month and 2.9% year-over-year, both in line with expectations.
GDP: After contracting slightly in the first quarter, the U.S. economy bounced back in the second quarter of 2025. According to the third estimate from the U.S. Bureau of Economic Analysis, real gross domestic product (GDP) grew at an annualized rate of 3.8% from April through June. This marks a sharp turnaround from the revised -0.6% contraction reported in Q1.
The rebound was driven primarily by a decline in imports—which are subtracted in GDP calculations—and a modest increase in consumer spending, reflecting continued household resilience. These gains were partially offset by declines in investment and exports, which remain sensitive to both interest rates and global demand conditions.
Private employers shed 32,000 jobs in September, according to ADP. Following their annual rebenchmarking using the full-year 2024 Quarterly Census of Employment and Wages, job counts were revised downward by 43,000. While the recalibration adjusted the numbers, the broader trend remains unchanged—job creation continues to lose momentum across most sectors.
Job openings remained unchanged in August at 7.2 million (4.3% rate), with notable declines in construction (-115,000) and the federal government (-61,000). Hires also held steady at 5.1 million (3.2% rate), showing little change across all industries.
U.S. unemployment ticked up slightly to 4.3% in August 2025, rising from 4.2% in July, according to the Bureau of Labor Statistics. While this rate reflects those actively seeking work, it does not account for discouraged workers who have stopped looking.
Consumer prices rose 0.4% in August, following a 0.2% increase in July, according to the U.S. Bureau of Labor Statistics. Year-over-year, the CPI rose 2.9%. Shelter costs were the largest contributor, increasing 0.4% for the month. Food prices rose 0.5%, with groceries up 0.6% and dining out up 0.3%. Gasoline prices climbed 1.9%, pushing energy prices up 0.7%.
Core CPI (excluding food and energy) rose 0.3% in August, matching July’s increase. Shelter costs, the largest component, climbed 0.4%, with owners’ equivalent rent and rent indexes up 0.4% and 0.3% respectively. Airline fares spiked 5.9% for the month, while used cars and trucks rose 1.0% and apparel increased 0.5%. Medical care declined 0.2%, led by a 0.7% drop in dental services. Over the past year, core CPI rose 3.1%, with shelter up 3.6%, used cars and trucks up 6.0%, and motor vehicle insurance up 4.7%.
The latest U.S. Retail Sales Report for September 2025 shows a 5.0% year-over-year increase and a 0.6% monthly increase, with sales at clothing, sporting goods, and digital retailers showing strong gains. This indicates resilient consumer spending, with the National Retail Federation noting a cooldown after back-to-school purchases but continued year-over-year momentum for the holiday season.
Nonfarm business sector labor productivity rose 3.3% in Q2 2025, driven by a 4.4% increase in output and a 1.1% rise in hours worked. Compared to the same quarter last year, productivity rose 1.5%. Unit labor costs increased 1.0% for the quarter, reflecting a 4.3% gain in hourly compensation. Over the past year, unit labor costs are up 2.5%.