3rd Quarter Recap

After the initial dip in global markets following the U.K.’s June referendum to leave the European Union (commonly referred to as “Brexit”), stocks rebounded slightly in the third quarter. Stabilizing global economic indicators—including lower bond yields, expectations of continued monetary support, and relatively steady economic data—helped ease investor concerns.

In the U.S., the Federal Reserve kept its target rate range steady at 0.25% to 0.50% during both its July and September meetings. Despite this, the Fed maintained a generally optimistic tone regarding the economy.

U.S. stocks posted a 3.8% gain during the quarter, but this was tempered by a 2% decline in S&P 500 earnings forecasts. This marked the sixth consecutive quarter of year-over-year earnings declines—the longest such streak since FactSet began tracking the data in 2008. Economic indicators were mixed, with weaker results in August followed by a sharp rebound in September.

Despite these headwinds, the S&P 500 performed well in July, though gains moderated in the following months. The Dow Jones Industrial Average rose 3% in the quarter, while the Nasdaq Composite surged 10%, fueled in part by tech sector strength.

Current Outlook

As we move into the fourth quarter, we’re keeping a close eye on whether the recent inconsistent economic data will create additional uncertainty in the markets—particularly as the Federal Reserve continues its search for the right conditions to implement another rate hike.

From our perspective, a meaningful rebound in corporate earnings is essential for driving returns this year and into 2026. Unfortunately, we see little evidence of earnings momentum building, and remain concerned that earnings may continue to decline.

Technically, the markets are stuck in a trading range, with neither bulls nor bears able to generate sustained momentum. This has created a choppy environment—where one day the outlook appears bleak, and the next it’s optimistic. Eventually, a more definitive trend will emerge. Our objective is to identify that trend early, as we’ve done in the past, allowing us to position portfolios advantageously ahead of the next major move.

Given the current environment, we maintain a neutral stance. Our priority is protecting against significant drawdowns (such as losses exceeding 10%), while selectively capitalizing on sector-specific opportunities. For long-term planning clients, we recommend maintaining a larger-than-usual cash position and being prepared for more frequent portfolio adjustments until we enter a more favorable risk/reward environment.

Our Investment Philosophy

Many clients have asked about our investment approach, particularly in volatile times. Simply put, our strategy is designed to align closely with your long-term financial goals while being responsive to short-term market dynamics.

We actively seek opportunities created by temporary market inefficiencies and focus on minimizing large drawdowns. Our team continuously evaluates the risk/reward landscape across various asset classes over shorter periods—where we believe we can achieve the highest clarity and confidence in outcomes.

Unlike traditional “buy and hold” strategies that rely on broad diversification regardless of market conditions, we believe in being more strategic. History has shown us—especially during major downturns like 2002 and 2008—that this passive approach can leave investors unnecessarily exposed.

While our strategy may seem unconventional compared to typical retail investing, it is common practice in the institutional space. Our goal is to bridge the performance gap between institutional and retail investors by offering the same level of sophisticated asset management and financial planning.

In fact, our ability to bring institutional thinking to individual investors is one of the reasons I joined Gainplan three years ago. Together, we’re committed to helping our clients leverage the unique advantages of smaller, more flexible portfolios—giving them the opportunity to outperform even the largest Wall Street firms.

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