Economy
The broader economy is demonstrating remarkable resilience. Estimates for U.S. GDP growth range from roughly 3.3% up to 5%, while weekly job loss claims remain unusually low—a clear sign that higher interest rates have not slowed things down as much as expected. At the same time, long-term inflation expectations have stayed relatively calm, indicating that rising rates reflect a strong real economy rather than runaway prices. However, this momentum leaves the Federal Reserve with little reason to pause, raising the likelihood of additional rate hikes before the end of the year. Bank deposits are also growing again, injecting more liquidity into circulation at the exact moment growth is accelerating. For average consumers and businesses, this economic strength brings real pressure: mortgage rates pushing past 7% keep the housing market constrained, while elevated short-term borrowing costs through mid-2027 heavily burden debt-laden companies. Looking into the fourth quarter, investors must also navigate significant exogenous headwinds—including geopolitical conflict involving Iran, elevated oil prices that threaten to rekindle inflation, and political uncertainty surrounding the upcoming mid-term elections.
Investments
Fixed Income
The bond market has become the main focus for investors, driven by a sharp rise in real interest rates (returns after inflation), which jumped 0.40 percentage points in just three weeks. Yields on 10-year Inflation-Protected Treasuries (TIPS) are near 2.8%, while standard 10-year Treasury yields have surged above 5.2%. That surge came at a price in the third quarter: rising benchmark yields pushed bond prices lower, leaving Treasuries down 3.1%, investment-grade corporate bonds down 5.1%, and municipal bonds down 6.6%. High-risk junk bonds fared best, down 1.9%, and they continue to pay attractive yields, but elevated borrowing costs make debt refinancing a growing hurdle for lower-tier corporate issuers. The good news is that bonds now pay more income than at any time in nearly two decades. For that reason, we are positive on high-quality bonds for income, while staying cautious on lower-rated credit.
Equities
The same surge in real yields that hit bonds has changed the math for stocks. When a safe government bond pays more than 5%, investors are right to ask what they’re being paid to take equity risk, and the price they’ll pay for a dollar of earnings comes down. Even so, strong economic growth kept corporate revenue solid, and the highest-quality companies, with strong balance sheets, pricing power, and steady earnings growth, were best able to absorb higher rates. U.S. large caps rose 2.3% in the third quarter as a result. Smaller companies, with heavy short-term debt, felt it most: mid caps fell 6.4%, and small caps fell 7.9%. Overseas, Japan led the developed world on the strength of corporate reform and a weaker yen, while Europe lagged as high energy costs and a stronger dollar weighed on its industrial base. Emerging markets were split, with commodity exporters in Latin America and Southeast Asia benefiting from higher oil prices while big energy importers like China and India struggled, leaving developed markets outside the U.S. up just 0.3% and emerging markets up 1.0% for the quarter. Looking ahead, we remain overweight high-quality large caps and select emerging markets, underweight small caps, and generally positive on equities in the fourth quarter and into next year.
Wealth Planning
Cybersecurity AI and The Measures You Can Take at Home
As we start using AI platforms like ChatGPT, Claude, Perplexity, or Grok, we need to consider how to keep ourselves and our data safe and secure. AI is a cyber risk. In the future, we could all be subjected to a deepfake, or we could use a personal chatbot for a certain task.
Here are some simple steps we all could take right now to safeguard our privacy and data. As AI continues to advance, I am sure we will edit this list.
- When registering for an AI tool, use a separate email registration that you do not use for other valued services. Why: AI tools can scrape information from your inbox.
- Delete personal information from your profile (phone contact info). Do not use your real name.
- Use a VPN to disguise your IP address before logging in. A VPN is a virtual private network. It can scramble your data into unreadable code so that the internet service provider, hackers, or snoopers cannot read it while it travels. A VPN has a monthly cost.
- When you first log in to an AI tool, make sure to turn off model learning. This ensures what you type isn’t collected to improve the AI model.
We are happy to discuss this at any time. Here are a few other safety items:
- Avoid public USB charging stations, as they can install harmful software on your device.
- Share less about yourself online. Scammers using AI can piece together what you post online and use it to craft targeted scams. Review privacy settings on your devices, apps, and browsers. Make sure apps can only access what they need. Be mindful about posting your location, travel plans, or family details on social media. The more information available about you online, the easier it is for scammers to tailor attacks to you, and even small details like your pet’s name or the school you attended can be used to guess passwords or answer security questions.
- Be cautious about every email you receive. Look at the actual email address. For example, an email may say it is from Amazon, but when you hover over the email, it is clear that this is not Amazon.
- Scam messages using AI now look and sound real, and scammers can copy voices from audio clips. Be careful with any message that asks you to log in, make a payment, or share personal information.
- Always keep your software up to date.
If you have any best practices, please feel free to forward them to us. We will continue to update this list.