Stocks extend gains - Q3 2025 Investment Update (October)
📊 Q3 2025 Investment Update
During the third quarter, stocks extended their rapid recovery to reach new all-time highs. Technology led the charge, fueled by continued investment in Artificial Intelligence (AI) infrastructure and related spending. Emerging Markets also delivered strong performance, and the Federal Reserve (Fed) lowered interest rates as widely expected.
Looking ahead, we see potential tailwinds from AI expansion, rate cuts, reshoring initiatives, and recent tax law changes. At the same time, we’re closely monitoring key risks—including tariff policy, geopolitical tensions, and elevated stock valuations (are we approaching bubble territory?).
🔄 Portfolio Changes
- High Yield Bonds: We’re maintaining the “risk-on” posture initiated last quarter, continuing to favor high yield bonds for their attractive yields.
- International Equities: Our overweight position in international stocks remains a bright spot, with Emerging Markets outperforming following our recent allocation increases.
- Fixed Income Adjustments: In response to the Fed’s rate cut, we made a rare shift in bond strategy—reducing short-term holdings and increasing intermediate-term exposure. This move modestly increases portfolio duration toward our neutral target.
- Growth Stocks: We’re leaning into the growth trade to close out the year, with increased exposure to both large- and small-cap growth equities.
📈 What’s next?
The AI-driven rally has sparked debate about whether markets are entering bubble territory. While we acknowledge some froth in certain sectors, we do not believe this resembles the excesses of the dot-com bubble (2000) or the financial crisis (2007–09). That said, we expect volatility to rise as the market digests these gains.
As always, we’re keeping a close eye on macro developments and remain committed to prudent, diversified portfolio management.
If your financial situation has changed or you’d like to review your investments, please reach out to us for a review.
The views and opinions expressed herein are those of the author(s) noted and may or may not represent the views of Lincoln Investment. These views are as of October 22, 2025 and are subject to change based on subsequent developments. The material presented is provided for informational purposes only. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Nothing contained herein should be construed as a recommendation to buy or sell any securities. As with all investments, past performance is no guarantee of future results. No person or system can predict the market. All investments are subject to risk, including the risk of principal loss.