What’s Inside the Q3 2025 Newsletter:
- The Everything Rally; Stocks, Bonds, And Your Portfolio – Risk Markets Look to Finish 2025 Strong
- Navigating Medicare Open Enrollment
- Tips to Help Preserve Your Inheritance
For the PDF version of the newsletter, click here.
The Everything Rally; Stocks, Bonds, And Your Portfolio – Risk Markets Look to Finish 2025 Strong
The S&P 500 Index gained 8.11% in the third quarter of 2025, a continuation of the strong second quarter performance. The index notched 23 new all-time highs in the quarter. Continued strength in technology, Artificial Intelligence (AI), and mega-cap growth stocks remained the primary drivers of the index’s quarterly gains, but market breadth improved during the quarter. Growth stocks continued to outpace value, supported by strong gains in technology, communication services, and consumer discretionary sectors. AI-related companies continued to pace equities, as elevated capital spending on data centers, semiconductors, and cloud infrastructure drove earnings growth and investor enthusiasm throughout the quarter. The healthcare sector remained under pressure as growing policy uncertainty out of Washington weighed on investor sentiment.
The quarter opened with lingering uncertainty around trade policy as the expiration of the 90-day tariff pause approached. However, the deadline passed without disruption, and the administration subsequently announced a flurry of trade deals and preliminary agreements aimed at reducing tariffs and easing tensions with key partners. The progress on trade policy helped restore confidence among investors and businesses alike, reinforcing the broader sense of economic stability that underpinned the market’s advance. The U.S. Dollar Spot Index posted a slight gain for the quarter, providing some relief from the slide in the first half of the year. Small capitalization stocks outperformed their larger counterparts, driven by an end of the quarter rally after the Federal Reserve Open Market Committee (FOMC) reduced the federal funds target rate range to 4.00%-4.25% at their September meeting. The central bank’s resumption of its easing cycle came on the back of a series of weaker labor market data readings.
International equities have continued their strong year. The MSCI EAFE Index gained 4.89% in the third quarter and has returned 25.83% year-to-date. Emerging growth stocks outperformed both domestic and international developed markets, and the MSCI Emerging Markets Index returned 10.92% in the quarter and has gained 28.17% year-to-date. World equity markets rallied as easing trade tensions and clearer policy direction marked a notable improvement from the uncertainty that characterized the first half of the year.
In fixed income markets, interest rates declined across the yield curve. The 2-year treasury fell from 3.72% at the quarter’s start to 3.61% by its end, while the 10-year yield started the period at 4.23% and ended the third quarter at 4.15%. Credit spreads continued to tighten in the quarter, signaling healthy corporate balance sheets and strong economic growth. Amid these falling rates, bonds had positive price movement across the board. Municipal and taxable bonds both posted similarly positive performance, and investment-grade bonds had a strong third-quarter showing in both areas.
Condor Capital’s Outlook
Looking ahead, investors will be closely watching policy developments in Washington, D.C., along with upcoming economic data releases and the next round of corporate earnings reports. The government shutdown looms large as the quarter begins, with the ongoing impasse in Congress over the start of the new fiscal year on October 1 adding another layer of uncertainty to the near-term outlook. Markets have become rather desensitized to these shutdowns, however, and are more effective than ever at separating political theater from long-term economic fundamentals.
Market participants will also be attuned to signals from the Federal Reserve regarding the trajectory of rate cuts and the durability of the economic expansion as policy and growth dynamics continue to evolve. While inflation has moderated significantly from its 2024 levels, a more mixed picture is emerging within the labor market. The most recent jobs numbers showed some early signs of weakness, but consumers still appear to be spending at a healthy pace. As a result, the Fed may have a narrow path forward as they balance their dual mandate of stable prices and full employment. We believe that this goldilocks scenario, in which the labor market and inflation are cool enough for the Fed to cut but the economy remains hot enough for GDP and corporate earnings growth, can continue under current economic conditions.
Speaking of corporate earnings, results have remained strong, with the U.S. on track for its ninth consecutive quarter of year-over-year earnings growth and analysts revising third-quarter estimates even higher. Going into 2026, earnings growth estimates increase to double digits, with the current consensus calling for 12.7% earnings growth and 6.6% revenue growth next year. AI spending remains extremely robust, and while the mega-caps like Nvidia have been primary beneficiaries to date there have also been major tailwinds for REIT, utility, and industrial firms helping to facilitate the buildout. Semiconductor manufacturers and hyperscale AI data centers are obviously benefitting from this growth, as are the utility firms supplying the massive power needs associated with the buildout. But we are seeing broader beneficiaries as well, from the HVAC firms that provide the cooling technology for these data centers to the heavy equipment manufacturers facilitating further construction. Looking forward, we expect the benefits of AI to begin spreading from the firms involved in its creation to the end users, who should begin to see efficiency and profitability gains as their adoption of AI takes hold. For example, JP Morgan’s Jamie Dimon recently announced that their $2 billion AI investment is starting to see positive return on investment as they begin to realize cost savings exceeding the $2 billion they’ve spent. This should result in even further broadening of the market moving forward.
Overall, core parts of the U.S. economy, from corporate earnings growth to consumer spending to AI investment and adoption, continue to operate well. While we remain alert to the risks and developing economic and political developments, we remain cautiously optimistic.
Navigating Medicare Open Enrollment
If you have Medicare coverage, the Medicare Open Enrollment period is a good time to review your options, compare costs, and make sure that your current Medicare coverage meets your needs.
When is Medicare Open Enrollment? Open Enrollment runs from October 15 through December 7 of each year. During this window, anyone with Medicare can make changes to their Medicare coverage that will be effective for the following calendar year.
What can you do during Open Enrollment? During Open Enrollment, you can:
- Switch from Original Medicare (Parts A and B) to a Medicare Advantage Plan (Part C), or vice versa
- Change from one Medicare Advantage Plan to another Medicare Advantage Plan
- Enroll in, drop, or switch from one stand-alone Medicare prescription drug plan to another
If you’re happy with Original Medicare or your current plan, should you still review your coverage? Each year, Medicare plans make changes to their costs, coverage, and network of providers. Prescription drug coverage can also change. Even if you are satisfied with your current coverage, Open Enrollment is your chance to see if you can make changes that could help save you money or enhance your benefits.
You can review your plan’s Annual Notice of Change that lists changes to your plan’s coverage, costs, or service area to find out if your current doctors and prescriptions are still covered and affordable. Any changes to your plan will take effect on January 1, 2026.
Are there other times you can make changes? In addition to the Open Enrollment period, there are Special Enrollment periods for certain life events, such as moving to a new address or losing another form of coverage.
There is also a Medicare Advantage Open Enrollment period which allows you to switch to another Medicare Advantage Plan (with or without drug coverage) or drop your Medicare Advantage Plan and go back to Original Medicare. If you’re already enrolled in a Medicare Advantage Plan, this period runs from January 1 through March 31. If you are new to Medicare and enroll in a Medicare Advantage Plan, this period runs from the first month you’re eligible for both Parts A and B, until the last day of the third month you’re first eligible.
If you have questions about Medicare, call the Condor Capital team at 732-356-7323 or the official Medicare line at 1-800-MEDICARE. You can visit the Medicare website at medicare.gov for additional resources. Your State Health Insurance Assistance Program can also help you sort through your options.
Tips to Help Preserve Your Inheritance
According to the Federal Reserve’s Survey of Consumer Finances, taken every three years, slightly more than one in five U.S. households had received an inheritance as of 2022.1 If you expect to receive an inheritance one day, these tips may help you better manage your financial windfall.
Wait a while before you act. Emotions run high after the death of a loved one. You might regret quitting your job, buying a sports car, or making other costly decisions before you have thought them through. Consider how the funds might be used to strengthen your financial position now and over the long term. You may also want to be discreet. Telling people that you have inherited a substantial amount of money may lead to unwanted advice, business or investment solicitations, and requests for financial support.
Boost (don’t blow up) your lifestyle. If you have a large balance on a high-interest credit card or vehicle loan, consider paying it off and using the increased cash flow to save more toward your retirement or other long-term goals. Whether it would be wise to pay off your mortgage depends on your individual circumstances and goals. Investing represents an opportunity to grow an inheritance and potentially make it last longer. You could use any income generated by your portfolio to supplement your paycheck, which might allow you to live better now while preserving the bulk of the money for future needs, such as a child’s education or your retirement.
Take advantage of tax deferral. If you inherit tax-deferred assets, such as those in a traditional 401(k) or IRA, keep in mind that withdrawals are taxed as ordinary income. You could choose to cash out and pay the taxes all at once, or you might consider transferring the inherited funds to a properly titled beneficiary IRA. Inherited retirement funds can be withdrawn over a period of up to 10 years, although some beneficiaries may have to take yearly required minimum distributions (if the original owner had started taking them). Spouses and other eligible designated beneficiaries receive preferential treatment. The rules and deadlines for handling inherited retirement account assets and taking distributions are complex. Because each choice could have far-reaching implications, be sure to seek professional guidance.
Consider meeting with a financial professional. Discussing your situation with someone outside of your family may help you gain perspective, clarify your goals, and make sound decisions. You can reach your service advisor at Condor Capital for guidance by calling 732-356-7323.
All investing involves risk, including the possible loss of principal, and there is no guarantee that any investment strategy will be successful.
1) The Washington Post, November 10, 2023
