Don’t Sell for the Wrong Reasons
We’re living in a fraught moment.
Throughout the year, our letters have touched on themes of economic policy uncertainty, geopolitical instability, and market volatility. As we’ve been sending you letters over these months, the ‘political temperature’ in the country seems to keep going up, and problems seem to keep getting worse.
In addition to reaching over 20 records this year, the S&P 500’s price-to-sales ratio recently hit a record of its own (~3.25x), and index concentration remains very high. The “Magnificent Seven” mega-cap Technology stocks comprise roughly a third of the S&P 500’s market value.
For many, the disconnect between social, political, and economic uncertainty—contrasted by a market at all-time highs—is a cause for concern. This is especially true as signs of economic weakness have started to show up in the data. Inflation, jobs, and GDP growth have been less than inspiring of late, and it’s fair to wonder if there’s some level of ‘irrational exuberance’ driving prices higher.
But it is also important to take a balanced view and consider what may be working in the market’s favor.
The Federal Reserve lowered rates for the first time in 2025 in September, and the central bank has opened the door for easier financial conditions over the coming months. On the trade front, three courts have ruled that the Trump administration exceeded its authority in implementing tariffs, and the Supreme Court is set to hear arguments in November. A ruling that pares tariffs back or deems them illegal would remove a cost overhang for businesses and could factor as a positive for earnings. Households and small businesses may also get a boost next year, with scheduled tax changes poised to modestly support after-tax cash flows.
And then there are corporate earnings. In Q2, S&P 500 earnings rose roughly 12% year-over-year on about 6% revenue growth, with the share of companies beating EPS and revenue estimates running notably above recent norms. In my view, the message is less about eye-popping headline numbers and more about the ‘steady state’ of corporate profits. Looking ahead, Q3 estimates have drifted higher in recent weeks, signaling that corporations remain at least modestly optimistic.
Even still, investors who are weighing the negativity of the moment against a fully valued stock market may feel tempted to take profits. For clients without near-term liquidity needs, we generally view that as a mistake. The bigger long-term risk is not living through volatility—it’s trying to sidestep it through market timing. Exit-and-re-entry decisions are two-step bets that rarely pay off. By the time conditions “feel” better and the news cycle is calmer, markets have usually long moved on.
That said, for clients who do rely on their portfolios for distributions, retirement income, or other planned expenses, we are proactively reviewing allocations to ensure at least 2–3 years of liquidity is set aside. In these cases, trimming equities and rebalancing into more stable assets is not market timing—it’s good planning.
So, what should investors do now?
Instead of trying to time the market, we recommend keeping your decisions anchored to your goals, your time horizon, and your cash-flow needs. Responding to the sentiment of the moment opens the door for making mistakes.
If your plans for retirement income, liquidity needs, estate or tax considerations have changed, we should revisit your asset allocation to determine if it is still aligned with your objectives. Alternately, if a little reassurance would go a long way in this moment, talk to us about stress-testing your plan against higher inflation, lower returns and sequence-of-returns risk, so you can see a range of possible outcomes regarding your wealth trajectory.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. All indices are unmanaged and may not be invested into directly. Past performance is no guarantee of future results.
