Each week brings new market shifts that could impact your portfolio. But you can remain aware and resilient by learning about recent economic events, which we cover in our Weekly Market Recap.
Here’s what we’ve noticed this past week:
How will these trends impact your portfolio? Continue reading to learn more.
U.S. stock markets have climbed to record highs this week as enthusiasm for artificial intelligence (AI) continues to grow. A major funding announcement valued OpenAI at $500 billion, reinforcing just how transformative this technology is becoming for businesses and the broader economy.
Other leading AI companies have also delivered strong gains: NVIDIA and Broadcom posted solid advances, while Tesla rose on better-than-expected vehicle sales. What's notable is how the market has maintained its upward momentum even with uncertainty from Washington's government shutdown. Investors seem increasingly confident that the Federal Reserve will continue supporting economic growth with interest rate cuts, helping sustain this AI-driven rally.
The excitement around AI continues to reward our strategic portfolio positioning in innovative technology leaders with strong balance sheets and proven track records. These aren't speculative bets on what might happen someday — they're investments in companies that are already generating substantial profits from AI applications today.
The bond market saw meaningful gains this week, even after private employment data revealed unexpected softness in the labour market. The ADP report showed that companies reduced payrolls by 32,000 in September, which is a sharp reversal from job growth expectations. This data marks the largest decline in more than two years.
This decline sent Treasury yields falling, with the 10-year note dropping to 4.10% and the two-year to 3.55%. With the usual government jobs report delayed by the shutdown, traders are relying more heavily on private indicators, like ADP reports, making these releases even more significant for market direction.
When employment softens this quickly, it can dramatically shift policy expectations and create opportunities for bond investors. High-quality bonds will continue to play a crucial role in balancing portfolios, providing both attractive income and the potential for price appreciation if the economy continues to moderate.
Beyond the ADP headline and employment data, the report revealed additional trends:
While a part of the weak result stems from adjustments to how the data is calculated, the underlying softness is evident. The Federal Reserve has already begun cutting interest rates and is watching the job market carefully for signs of further deterioration.
If this weakness continues, we could see the Fed accelerate its rate-cutting plans, which would support bonds and rate-sensitive investments. However, it could potentially incite caution in parts of the stock market tied heavily to consumer spending.
NVIDIA was our standout performer this week, gaining 6.3% and continuing its role as the flagship AI investment in our portfolios. The company benefits from ongoing momentum in AI infrastructure spending, where demand for its advanced graphics processing units shows no signs of slowing down.
What sets NVIDIA apart isn't just that it makes chips for AI applications; the company has built an entire ecosystem that makes it nearly irreplaceable for businesses that are building their AI capabilities. Recent industry updates have reinforced that major cloud providers are continuing to expand their AI data centres, with NVIDIA's technology at the core of these systems.
The company's scale and established platform position provide visibility into multi-year growth that few companies can match. Despite valuations that may give some investors pause, NVIDIA represents our conviction in owning the leaders of transformative technological shifts that are already reshaping how businesses operate.
The information technology sector led our performance again this week, with nearly every major holding contributing positive returns. Beyond NVIDIA's 6.3% surge, semiconductor equipment maker ASML gained an impressive 8.5% and Microsoft rose 1.7%. Other established leaders like Broadcom and Apple also posted solid gains.
Several powerful trends are driving the growth in the technology sector:
Our technology companies aren't just benefitting from temporary enthusiasm; they're positioned at critical junctures that are reshaping entire industries. These companies generate enormous cash flows, maintain technological advantages that protect their businesses, and have exposure to trends that will drive economic growth for years to come.
Our Size strategy delivered the strongest contribution this week, reflecting how investors gravitate toward the largest, most established companies during uncertain times. NVIDIA led the way with a 0.58% weighted contribution to portfolio performance, while Tesla added 0.16% and Eli Lilly contributed 0.14%.
This represents a clear flight to quality. When questions arise about the economic outlook or policy direction, investors naturally seek companies that have the resources to navigate challenges successfully.
Large-cap companies possess several advantages that smaller competitors simply cannot match:
The Federal Reserve Bank of New York released its monthly survey of consumer inflation expectations, asking everyday Americans about their inflation expectations in the next one, three, and five years.
Expectations data reveals what consumers think will happen in the future. This matters enormously because expectations can become self-fulfilling. For instance, if people expect higher inflation, they may demand larger wage increases and accept higher prices, which can drive inflation higher.
Recent surveys have shown one-year inflation expectations hovering around 3.2%, above the Federal Reserve's 2% target. The Fed watches these numbers closely because keeping expectations anchored near 2% is crucial for long-term price stability.
Federal Reserve Chair Jerome Powell is scheduled to deliver a speech that could provide insights into central banks’ thinking on interest rates and the economy.
Investors are closely watching Powell's public comments, as even subtle shifts in his language can signal changes in policy direction. At the Fed's September meeting, officials cut rates by a quarter point and indicated more reductions were likely, if warranted by economic conditions.
Since then, we've seen mixed signals, with employment data showing unexpected weakness and inflation remaining somewhat elevated. Powell will likely address how the Fed is balancing the competing concerns of supporting the job market through rate cuts, while making sure inflation continues declining toward the 2% target.
Markets will be carefully listening to the nuances of Powell’s speech. Any hints about the pace of future rate cuts, whether gradual or aggressive, could move both stock and bond prices significantly.
The weekly jobless claims report provides our most timely reading on employment conditions, though this week's data release may be delayed due to the ongoing government shutdown.
When it becomes available, this report will offer important insights, following the surprisingly weak ADP private payrolls data. Before the shutdown, new unemployment claims had been around 224,000, suggesting a relatively healthy job market.
However, the sharp reversal in September's private sector hiring data could reveal whether businesses are beginning to reduce staff more broadly. Employment trends matter enormously because consumer spending drives roughly 70% of economic activity.
Rising claims numbers could signal economic softening that might prompt faster Federal Reserve action, while stable claims figures would suggest that the ADP weakness might be temporary. This supports the view that the economy remains on solid footing.
The current market environment presents both opportunities and challenges. While AI-driven technology leadership continues delivering strong returns, emerging questions about labour market health require careful attention.
Our approach remains focused on owning high-quality companies with:
We believe this quality-focused strategy strongly positions portfolios for various economic scenarios, whether the economy maintains momentum or begins to moderate.
The week ahead will provide important insights into both consumer inflation expectations and Federal Reserve thinking. As always, we'll be monitoring these developments closely to make sure our portfolios remain positioned for your long-term financial goals.
Market conditions can change quickly, but our investment philosophy remains constant: disciplined strategy, thoughtful risk management, and focusing on your success.
If you have any questions about your portfolio, or how these market developments will affect your financial plan, don’t hesitate to reach out. We’re always here to help.
This analysis is based on publicly-available information and represents our current views, which may change based on market conditions and new information. Past performance does not guarantee future results. Please consult your Financial Advisor to determine how these insights might apply to your specific investment situation.