From the desks of Stanley Katz & Lauren Madera
HAPPY WORLD PASTA DAY!
“LIFE IS A COMBINATION OF MAGIC AND PASTA.” ~ FEDERICO FELLINI
Once again, the three major U.S. stock market indices finished the week mixed (DJIA: +0.41%, S&P 500: -0.47%, Nasdaq: -0.71%) after another volatile week for AI-related stocks. Technology shares bounced early on, then gave back their gains Thursday as investors again questioned how the enormous AI build-out gets funded and whether earnings will justify it. Meanwhile, smaller companies and value stocks, which trade at lower prices relative to their earnings, held up better. The tech sell-off, along with Middle East tensions, also sent investors toward the safety of government bonds. Treasury yields fell sharply, and the 10-year yield slipped below 5% for the first time in about a month. Housing remains under pressure, with builders citing rising mortgage rates among their biggest challenges. A closely watched gauge of homebuilder confidence fell to its lowest level since 2012, and pending home sales dropped to the lowest reading since record-keeping began in 2001.
Housing is just one piece of a broader affordability squeeze, which Capital Group’s political economist deems the issue that will decide the midterms, now less than two weeks away. Annual inflation has cooled well below its peak of a few years ago, but voters aren’t measuring by the annual rate. They are feeling the cumulative climb, with prices on everyday staples like food, utilities, and gasoline up 30% or more since 2021. Their economist also expects a closer contest than many headlines suggest, since fewer seats are truly up for grabs than in past elections. As for markets, Capital Group notes that legislative gridlock from a divided government has historically not hurt stocks. Shoppers seem to have longer memories than inflation reports.
Argus Research also sees inflation looming large over the elections, and their third-quarter review describes a market that couldn’t quite make up its mind. Stocks treaded water in a typically strong July, rallied in a usually lukewarm August, and slipped in a typically weak September. Each turn tracked inflation, interest rates, and oil. Through it all, corporate earnings remained the bull market’s main support. The part worth reading closely is Argus’s take on leadership. Since the second half of 2025, the market has been shifting away from fast-growing companies toward steadier and more defensive corners. That shift showed up again this week as value outpaced growth for the third week in a row. Argus argues that a wider mix of leaders is good for the bull market’s health and longevity. They still expect a bruised but double-digit gain through September to carry into a solid year-end finish. Bruised, after all, is not the same as broken.
Below are links to a number of third-party research reports that we have read and analyzed over the past week. We hope you will find the information interesting, useful, and worthwhile.
Capital Group:
Argus:
J.P. Morgan Asset Management:
First Trust:
Schwab:
Stanley Katz & Lauren Madera, Financial Advisors
ClientFirst Financial Strategies, Inc.
937-293-5500
Source for weekly stock market returns: Barron’s.
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