October Commentary

Over the past 100 years, September has been the worst month of the year for stock performance on average.  According to data from Dow Jones, over that period both the Dow Jones Industrial Average and the S&P 500 Index have averaged a decline of more than 1% in September.  However, 2025 marks a change from that historical trend, as this September produced relatively calm and steady upward progress for stocks, similar to July and August. The Federal Reserve’s interest rate cut of 25 basis points, and the market’s anticipation of further monetary easing, helped the Dow, S&P 500, NASDAQ and Russell 2000 all set new record highs. Additionally, the renewed optimism around the next wave of AI infrastructure investment has also boosted stocks. However, despite the strong month, stocks were outperformed by gold, which rose over $400 an ounce in the month. The volatility of April and Liberation Day are a distant memory.

With so many asset classes performing well, some corners of the markets have started to show signs of speculative excess. One notable call out is the proliferation of so-called Crypto Treasury Companies. These companies are strictly in the business of issuing shares and debt to fund the purchase of cryptocurrencies. Their stocks often trade at a premium to the value of their crypto-holdings. Why does this premium exist? It’s certainly not for fundamental economic reasons.

The AI trade has gained renewed momentum, with several blockbuster deals recently announced. In September, OpenAI, the developer of ChatGPT, unveiled a 5-year $300 billion agreement with Oracle for computing power, followed by an expanded $400 billion project with SoftBank and Oracle. These massive commitments have the market asking: how will a company generating less than $20 billion in revenue this year fund such ambitious spending? We’re not sure, but the warning signs are clearly there that perhaps the AI narrative is getting a bit ahead of itself.

The low volatility environment of the last three months has been great for investors, but can it continue? At SAM we position our portfolios for the long term. While hot stocks will come and go, our principles of owning world class businesses with durable franchises endure.

Interested in how our strategies may fit with your goals? Reach out to our team to start the conversation.