The S&P 500 advanced for the sixth month in a row, gaining 2.3%. The DJIA gained 2.5%, but mid and small caps declined by .5% and .9%, respectively. World equities gained 2%, the S&P 500 equal weight declined around .3% while the QQQ’s jumped over 5%, signifying the narrow participation of the market constituents. Value (VTV) was flat and bonds were up .6% as yields fell.

For the month, growth outperformed value, large outperformed small, and U.S. outperformed foreign.

Given our portfolio’s significant exposure to large cap tech, we handily outperformed both the S&P 500 as well as the portfolio’s respective benchmarks.

TWG growth, moderate and conservative portfolios gained 4.1%, 3.7%, and 3%, respectively.

WHAT MOVED MARKETS

The Federal Reserve – the Fed cut its benchmark interest rate by .25%, the second cut of the year. This move was anticipated by the market and generally viewed as an effort to counter a weakening labor market. The Fed also announced it would restart limited purchases of Treasury securities, adding an additional stance of accommodation.

Technology and the AI rally – Nvidia reached a historic $5 trillion market valuation, a primary driver for the NASDAQ composite outperforming the S&P 500. However, there is a noticeable deterioration in market breadth, as the Mag 7 complex and other large cap growth stocks were responsible for most of the gains.

U.S. Government shutdown – the Federal government shutdown that began in October was a significant headwind for the economy and the markets. The shutdown delayed the release of crucial economic data, such as employment and inflation reports, which limits the information available to both the Fed and investors when making decisions.

Corporate earnings – Stronger than expected results from Caterpillar and Amazon helped support the broad stock market, but large tech stocks showed mixed results. Meta shares dropped after their quarterly report, while Alphabet and Microsoft saw mixed to modest movements.

PORTFOLIO ADJUSTMENTS

Over the course of October, we made some adjustments to the modeling process, notably adding a semi-conductor (SMH) and a momentum (MTUM) fund while eliminating the S&P 500 index fund from the growth models. This is designed to better manage future “V” shaped recoveries that we have observed over the past couple of years.

The portfolio’s composition at the beginning of the month reflected a strong emphasis on growth-oriented equity ETF’s, with QQQ commanding the largest allocation, followed by SMH which was layered in throughout the month. Other notable holdings included SPLG, CWB (convertible bonds) and smaller positions in MTUM, IWF, EEM, VTV and IWO. The allocation suggests a growth-driven strategy with a focus on technology and large-cap equities while maintaining some exposure to value and emerging markets. From a risk-return standpoint, SMH and QQQ delivered strong total returns, indicating the portfolio capturing growth opportunities in the technology sector. The strategy balances concentrated growth exposure while subtly integrating value and international components for diversification. By including a mix of momentum (MTUM), growth (IWF), and value (VTV), a foundation was set for diversification that can weather varying market cycles, while targeting a competitive return profile.

At the end of the month, the portfolio exhibited both shifts in holdings and rebalancing moves. Notably, DBMF has been introduced in the bond sleeve aimed at providing alternative or fixed income exposure to reduce overall portfolio volatility. EEM’s weight increased significantly from the beginning of the month, while CWB decreased slightly. The portfolio capitalized on SMH’s strong performance and steady QQQ returns. Emerging markets’ exposure contributed positively, reinforcing the strategic merit of increased allocation. These tactical adjustments demonstrate commitment to improving diversification and risk management. The introduction of DBMF is a prudent step toward stabilizing portfolio volatility through alternative or bond-like exposure. Increasing EEM shows a keen move to capture growth in emerging markets, which can complement the domestic growth-heavy stance. Slight trimming of QQQ and CWB reallocates capital to strengthen these themes without significantly altering the portfolio’s risk profile. Overall, these actions reflect a dynamic reallocation strategy designed to enhance return potential while carefully managing risk – demonstrating expertise in navigating evolving market conditions for a better outcome.

LOOKING AHEAD

With earnings season almost over, and a void of economic data due to the ongoing government shutdown, market participants will need other sources of information to evaluate the market’s future. This will likely create additional volatility, as the environment is akin to driving in the fog. During periods of such low visibility, we are anticipating plenty of break pumping and swerving as we navigate the balance of the year.

Further Fed rate cuts are not a forgone conclusion, and recently, a handful of AI stocks needing to borrow money to funds its AI spend has raised some flags. Over the past two years, the Mag 7 complex had plenty of cash on their balance sheets to fund their massive spending on AI. That some are now going to the debt market even as they announce increases of their capital expenditures for 2026 leaves one to question when, or if, this massive expenditure will show up in profits.

However, as we enter the final months of the year, we are looking towards the typical “santa” rally to close the year at levels higher than today. Many fund managers are underperforming their benchmark, which may force their hand to attempt a hail mary in the weeks ahead. This uncertainty challenges the justification for elevated valuations.

While we recognize an economic slowdown seems to be transpiring, and only a minority of companies are responsible for the S&P 500’s gains for the year, until the music stops, or slows down, we will maintain a fully invested allocation, and will continue to seek out areas of relative strength.

We hope you have an enjoyable Thanksgiving holiday with friends and family and we are grateful for the opportunity to be a prudent steward for your investment assets.