Let me start this by saying that if you think that the nightly news is crazy, I have you beat…it snowed here in Florence last week. Strange things are afoot.
I’ve had some client questions about the recent pullback in stocks, so I wanted to use this update to address some of these. By my math, the S&P 500 is down roughly 3% from its all-time high set just three weeks ago. Headlines are screaming about “the AI bubble bursting,” “the top is in,” and “tech is cracking.” We understand — red on the screen is never fun. But let’s zoom out together and look at what’s really happening.
A 2–3% pullback is normal, and actually healthy. The average year sees three separate 5%+ dips — even in the best bull markets. Major bear markets almost always begin when everyone is euphoric and fully invested. Right now the mood is the opposite: widespread “bubble worry.” That caution is one reason this bull market still has room to run. If investors are worried about a bubble, it’s probably not a bubble.
Corporate earnings just delivered another blowout quarter. It’s the fourth straight quarter of double-digit profit growth (~15% year-over-year). Revenue growth hit 8% — the best since 2022. Profit margins hit a new record high, and companies are raising their earnings guidance at twice the normal rate. Small companies grew earnings 18%, actually faster than the mega-cap tech giants for the first time in years. While stock price appreciation has been very concentrated in a few names, this is evidence that earnings growth, which often translates into stock price growth, is spreading beyond just the big names. It sure looks like corporate America is healthy, profitable, and optimistic.
Uncertainty over interest rates has added some volatility to the market, too. The odds of a December rate cut have fallen from “certain” to about 50/50. That caused some wobbles, but remember, the Fed is still on your side. The Fed is NOT raising rates, they are still in easing mode overall, with more cuts are expected in 2026. Real bull-market killers come from aggressive interest rate tightening, not a brief pause.
With the above fears over interest rate cuts and price bubbles, the big AI leaders have pulled back, and for sure, some of the excitement got ahead of itself. But the core story is intact and stronger than ever. Many big tech names raised their 2025 and 2026 capital-spending plans again last month. CEOs keep saying the same thing: “The biggest risk is under-investing and falling behind.” Hundreds of billions in AI spending are flowing straight into the profits of chipmakers, utilities, construction firms, and thousands of other businesses. And while there are some similarities between today and the 1999 dot-com bubble, there is a major difference: back then most internet companies had no earnings. Today’s AI leaders are some of the most profitable companies in history.
Markets love to climb a “wall of worry,” and we have plenty of worries right now. A softening (but not collapsing) labor market , higher tariffs coming in 2026, Government shutdown noise and delayed economic data, and concentrated and expensive technology stocks are a few of them. Yet despite all of that, the S&P 500 sits near all-time highs, earnings keep surprising to the upside, and AI spending continues to accelerate. That tells us the positives are still outweighing the negatives.
So, what does history tell us about moments like this? Government shutdowns? The market usually dips a little going in, then rallies hard coming out. It’s often a non-event. October–December volatility? Common — but the fourth quarter is still the best-performing quarter of the year on average. Investor sentiment this cautious near all-time highs? That’s usually a bullish signal, not a bearish one.
For all these reasons, we remain constructive on U.S. stocks for 2025 and 2026. The combination of continued strong earnings growth, still-supportive Fed policy, massive ongoing AI investment, and reasonable (not crazy) overall valuations outside of a handful of names creates a favorable backdrop.
That doesn’t mean we won’t see more 5–10% dips along the way — we almost certainly will. But dips have been buying opportunities in this bull market, and nothing we see today has changed our minds about that pattern.
We continue to invest in high-quality companies with strong balance sheets and growing dividends (when income is a focus). We maintain broad diversification across industries and geographies, and while we have exposure to the high-growth tech stocks, we allocate what we believe is a prudent weighting to them. For many portfolios, we keep some dry powder in bonds in case volatility creates even better entry points for stocks.
As always, your portfolio is built to handle all kinds of moments. We want to participate in the long-term growth of the market while maintaining an allocation that aligns with your risk tolerance.
If the recent headlines have you second-guessing anything, please call or reply. A five-minute conversation can save five months of worry. And if you have friends or family who are feeling anxious about the market right now, feel free to forward this note. Sometimes, a calm perspective is the most valuable thing we can share.
Thank you, as always, for your trust. We’re grateful to be on this journey with you, even through November snowfalls.
Very importantly, if you have not completed your IRA distributions for 2025, PLEASE call our office now to do that. You’re running out of time, and penalties can be steep. Beneficiary IRAs are also required to make a distribution this year.
As you can imagine, our offices will be closed on November 27th for Thanksgiving, and the market closes at 1:00 pm on November 28. I hope you all have a wonderful Thanksgiving. There is a lot to be grateful for.
