Executive Summary
Last week, stocks declined while bonds appreciated (price up / yield down). The MSCI Emerging Markets and MSCI EAFE indices outperformed the S&P 500. Across U.S. Russell style & market cap indices, mid-cap growth did the best, but the low volatility factor led more broadly.
As for fixed income, the 10-year. treasury yield fell 6 bps on the week to 4.06%, and the 2/10 treasury yield spread was steady at +53 bps. High yield bond spreads were up on the week to 304 bps, still well off recent highs of 453 bps. U.S. Treasuries generated positive returns as yields decreased sharply in response to reescalating U.S.-China trade tensions late in the week. (Bond prices and yields move in opposite directions.) Government shutdown risks also appeared to contribute to safe-haven demand for Treasuries during the week. Municipal bonds showed steady performance with limited price movement due to tariff uncertainty.
What We Are Monitoring
Last week, European macro data was soft, and trade war risk returned to markets on Friday. The expectations for European growth this year were relatively low, but the thought that fiscal stimulus in Germany (which will mostly hit in 2026 and beyond) was a game changer. European stocks are still up nearly 28% year-to-date (in USD), and the EUR/USD has been a meaningful driver, up nearly 12% (that is roughly what the S&P 500 is up alone).
The major drivers of the decline were in Germany, where manufacturing turnover and industrial production declined well below expectations. Germany’s real GDP growth in Q2 was -0.3% and the estimate for Q3 is 0.1%. The German stock market is still one of the best performers year-to-date across the world up nearly 34% in USD. However, they still could provide global equity diversification benefits if trade war risks get priced into U.S. and Asian markets more, where Asian/European trade ties may be tighter.
What to Consider
Positioning portfolios based on tariffs or government shutdowns has been shown to be nearly impossible to time over history. In April, the markets likely overreacted to tariff risks. Markets have been riding a one-sided risk-on trade for much of this year. Trading tariff headlines will likely not end up being additive to portfolios in our view and would instead focus on the fundamentals. This week, the US Banks begin reporting Q3 2025 earnings and guidance. With the U.S. government shutdown causing a lack of major economic data releases, earnings could have an outsized impact on markets and investor sentiment. Wall Street Analysts polled by FactSet expect the broad-based S&P 500 Index to generate a ninth consecutive quarter of year-over-year earnings growth.
High valuations and meaningful market concentration have prompted many investors to draw comparisons with the dot.com bubble. However, unlike the late 1990s, today we believe many large growth stocks are delivering robust earnings growth, strong profit margins, good cash flow, and quality balance sheets with net cash. While elevated valuations and crowded investor positioning may signal risk, a material market correction is more likely to be triggered by macroeconomic weakness than by valuation alone.
While the appreciation for stocks is becoming increasingly challenging, the assumption of a material downside beyond normal market volatility is rarely realized when fundamental earnings are improving and the Fed is easing. However, we recognize that potential weak guidance from any of the mega-tech companies could trigger a derailment from the current direction.
Weekly Commentary
Investment Commentary – October 13, 2025
Stuart Katz
Executive Summary
Last week, stocks declined while bonds appreciated (price up / yield down). The MSCI Emerging Markets and MSCI EAFE indices outperformed the S&P 500. Across U.S. Russell style & market cap indices, mid-cap growth did the best, but the low volatility factor led more broadly.
As for fixed income, the 10-year. treasury yield fell 6 bps on the week to 4.06%, and the 2/10 treasury yield spread was steady at +53 bps. High yield bond spreads were up on the week to 304 bps, still well off recent highs of 453 bps. U.S. Treasuries generated positive returns as yields decreased sharply in response to reescalating U.S.-China trade tensions late in the week. (Bond prices and yields move in opposite directions.) Government shutdown risks also appeared to contribute to safe-haven demand for Treasuries during the week. Municipal bonds showed steady performance with limited price movement due to tariff uncertainty.
What We Are Monitoring
Last week, European macro data was soft, and trade war risk returned to markets on Friday. The expectations for European growth this year were relatively low, but the thought that fiscal stimulus in Germany (which will mostly hit in 2026 and beyond) was a game changer. European stocks are still up nearly 28% year-to-date (in USD), and the EUR/USD has been a meaningful driver, up nearly 12% (that is roughly what the S&P 500 is up alone).
The major drivers of the decline were in Germany, where manufacturing turnover and industrial production declined well below expectations. Germany’s real GDP growth in Q2 was -0.3% and the estimate for Q3 is 0.1%. The German stock market is still one of the best performers year-to-date across the world up nearly 34% in USD. However, they still could provide global equity diversification benefits if trade war risks get priced into U.S. and Asian markets more, where Asian/European trade ties may be tighter.
What to Consider
Positioning portfolios based on tariffs or government shutdowns has been shown to be nearly impossible to time over history. In April, the markets likely overreacted to tariff risks. Markets have been riding a one-sided risk-on trade for much of this year. Trading tariff headlines will likely not end up being additive to portfolios in our view and would instead focus on the fundamentals. This week, the US Banks begin reporting Q3 2025 earnings and guidance. With the U.S. government shutdown causing a lack of major economic data releases, earnings could have an outsized impact on markets and investor sentiment. Wall Street Analysts polled by FactSet expect the broad-based S&P 500 Index to generate a ninth consecutive quarter of year-over-year earnings growth.
High valuations and meaningful market concentration have prompted many investors to draw comparisons with the dot.com bubble. However, unlike the late 1990s, today we believe many large growth stocks are delivering robust earnings growth, strong profit margins, good cash flow, and quality balance sheets with net cash. While elevated valuations and crowded investor positioning may signal risk, a material market correction is more likely to be triggered by macroeconomic weakness than by valuation alone.
While the appreciation for stocks is becoming increasingly challenging, the assumption of a material downside beyond normal market volatility is rarely realized when fundamental earnings are improving and the Fed is easing. However, we recognize that potential weak guidance from any of the mega-tech companies could trigger a derailment from the current direction.
Disclosure and Source
Investment Commentary Sources: Bloomberg. Investment advisory services offered through Robertson Stephens Wealth Management, LLC (“Robertson Stephens”), an SEC-registered investment advisor. Registration does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. This material is for general informational purposes only and should not be construed as investment, tax or legal advice. It does not constitute a recommendation or offer to buy or sell any security, has not been tailored to the needs of any specific investor, and should not provide the basis for any investment decision. Please consult with your Advisor prior to making any Investment decisions. The information contained herein was carefully compiled from sources believed to be reliable, but Robertson Stephens cannot guarantee its accuracy or completeness. Information, views and opinions are current as of the date of this presentation, are based on the information available at the time, and are subject to change based on market and other conditions. Robertson Stephens assumes no duty to update this information. Unless otherwise noted, any individual opinions presented are those of the author and not necessarily those of Robertson Stephens. Indices are unmanaged and reflect the reinvestment of all income or dividends but do not reflect the deduction of any fees or expenses which would reduce returns. Past performance does not guarantee future results. Forward-looking performance targets or estimates are not guaranteed and may not be achieved. Investing entails risks, including possible loss of principal. Alternative investments are only available to qualified investors and are not suitable for all investors. Alternative investments include risks such as illiquidity, long time horizons, reduced transparency, and significant loss of principal. This material is an investment advisory publication intended for investment advisory clients and prospective clients only. Robertson Stephens only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Robertson Stephens’ current written disclosure brochure filed with the SEC which discusses, among other things, Robertson Stephens’ business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov. © 2025 Robertson Stephens Wealth Management, LLC. All rights reserved. Robertson Stephens is a registered trademark of Robertson Stephens Wealth Management, LLC in the United States and elsewhere. A2660
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