From the desks of Stanley Katz & Lauren Madera
HAPPY NATIONAL SAVINGS DAY! FOUNDED IN 2017, THIS NATIONAL DAY COMMEMORATES ONE OF OUR CORE BELIEFS: THE IMPORTANCE OF SAVING FOR A MORE SECURE FUTURE.
The three major U.S. stock market indices posted sharp declines for the week (i.e., DJIA: -2.73%, S&P 500: -2.43%, Nasdaq: -2.53%). What makes this week’s selloff noteworthy is the timing—coming after markets spent previous weeks shrugging off shutdown risks as “political theater.” Unfortunately, the federal government has entered what may be shaping up to be a more extensive shutdown than earlier funding lapses. The impasse between lawmakers centers on enhanced premium tax credits under the Affordable Care Act.
Columbia Threadneedle outlines two possible scenarios:
1) A lengthy shutdown with escalating moves to cut workers and funding; or
2) A short-term resolution with a handshake agreement to negotiate later.
No matter the outcome, Columbia Threadneedle warns about the complication of delayed government economic data. Government shutdown meant no October 3rd release of the jobs report, important data that policymakers use for monetary decisions. This could inject uncertainty into markets just as the Fed prepares for its late-October meeting.
JP Morgan’s analysis reveals a market grappling with the uncomfortable realization that expensive might actually mean overvalued. With the U.S. stock market up 15% year-to-date, valuations have reached levels that require justification beyond momentum and hope. The S&P 500’s price-to-earnings ratio sits at 22.8x, slightly exceeding the post-COVID peak. The market’s resilience earlier in the year was driven by weaker recession fears and robust corporate profits, with tech companies posting double-digit profit growth while the broader market delivered more modest gains. But here’s where it gets interesting: that profit strength may have already been priced in, leaving stocks vulnerable to disappointment. The shift from viewing stocks as reasonably valued to potentially overvalued doesn’t require a dramatic narrative—just the recognition that when earnings growth moderates and external shocks (like Friday’s China tariff news) arrive simultaneously, expensive stocks may become cheaper ones rather quickly.
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.
Columbia Threadneedle:
J.P. Morgan Asset Management:
Van Eck:
BlackRock:
Capital Group:
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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