On Air with Altair | 3Q2025
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BULL MARKET GOING STRONG AT 3
The bull market passed the three-year mark on October 12th amid inevitable questions about how much longer it can last. We share the concerns of many about the stretched valuations of some stocks as well as unusually heavy market concentration in a handful of high-flying stocks. However, we see offsetting factors that we believe provide the rally with staying power. For example, Strong corporate earnings and heavy capital spending by companies tied to the artificial intelligence boom should provide a continuing tailwind. In addition, further interest-rate cuts and government stimulus from the One Big Beautiful Bill Act should also breathe more wind into the market’s sails.
INTERNATIONAL STOCKS RETAIN MOMENTUM
International stocks are the top asset class so far in 2025, and improved fundamentals suggest their momentum can be extended. The U.S. dollar’s plunge helped fuel big gains for non-U.S. stocks in the first half of the year. More surprisingly, though, is that international stocks continued to rise during the third quarter and overcame a strengthening dollar. How the global economy fares in the face of tariff pressures will have a lot to do with their performance. But we see room for further upside. Markets across Asia and Europe are benefiting from economic growth and shareholder-friendly actions by their governments. Numerous Asian countries are providing more monetary and fiscal stimulus And valuations of non-U.S. stocks remain near historical norms despite this year’s big rally. The rally in global markets is broad-based and we believe it can continue.
RESILIENT ECONOMY BOOSTED BY AI
The U.S. economy has performed much better than expected this year, with a big assist from both artificial intelligence and consumers. AI-related expenditures by tech companies are estimated to add an extra half-percentage-point to GDP growth. And consumers, buoyed by rising household wealth, have kept spending despite surveys showing flagging sentiment. Inflation is a near-term concern as more companies raise their prices to offset the cost of tariffs. However, we expect price growth to start decelerating again in 2026.
OUR OUTLOOK
We are cautiously optimistic about the market outlook for the rest of this year and into 2026. The U.S. and global economies both remain on firm growth paths despite continuing uncertainty due to tariffs. The Federal Reserve is likely to lower interest rates further at the end of October but may pause again if the job market holds firm and inflation keeps rising.
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