Market OverviewStock markets across the globe posted a truly remarkable third quarter with US stocks pushing near double digit returns and emerging markets gaining over 10% in the last three months. One and three year trailing returns are now well above average for all developed market indexes. As interest rates have stabilized, bond returns have followed suit with reasonable returns for the quarter and trailing twelve months. When we see these incredible strong trailing returns we should first pause and recognize just how good things have been for stock investors for the past few years, despite scares and bumps along the way. Then we should immediately remember that it is not always this good, and that eventually market returns will normalize, and it might hurt a little bit in the process. I’m not here trying to call a top or to assume I know what happens next in the markets. But we’ve been around long enough and all studied enough history to know that while market returns have always been good to us in the very long run, in the short run anything is possible and mean reversion is real. It’s not (ever) the time to panic or be euphoric, but instead to stick to a well reasoned plan and remember that this is exactly how it works: sometimes it is awe inspiring, sometimes it is terrifying, and in the end there is balance.3Q 2025 1 Year 3 Year 5 YearLarge Cap US Stocks 8.12%17.60%24.94%16.47%Small Cap US Stocks9.11%3.64%12.82%12.94%International Equity4.23%12.09%18.53%8.32%EM Equity10.64%17.32%18.21%7.02%Aggregate Bonds2.00%3.19%5.07%-0.05%Index performance is provided as a benchmark. It is not illustrative of any particular investment. An investment cannot be made in an index. Past performance is not an indication of future of results. S&P 500, S&P 600, MSCI EAFE Index, MSCI EM Index, S&P US Agg Bond Index. Returns as of 9/30/25.Economic UpdateThe most recent revision to second quarter GDP showed a large gain of 3.8%. This followed a weak first quarter (revised down to -0.6%) and was largely influenced by a decline in imports (which subtract from GDP calculations) and an increase in consumer spending. Investment and export calculations also weighed down growth slightly. It’s worth noting that without the large drop in imports, second quarter GDP would have been negative again (as seen in the second chart).In September the Federal Reserve Board’s Open Market Committee voted to lower short term rates by 0.25% to a target window of 4-4.25%. Federal Reserve chair Jerome Powell cited a complicated labor market driven by lower labor supply and demand as the primary reason for reducing rates. Powell also expressed concern that the inflationary impacts of tariff policy has not yet been fully reflected in current data. The Fed is in a tight spot as core inflation calculations continue to run above the long term target of 2%, creating a balancing act between encouraging further job growth without stoking inflation any higher than it already is.Inflation has come down from the post-COVID highs and has bounced off the bottom of lows seen earlier this year. In August the figure read 2.94% year over year.Employment data continues the cooling trend of the last few years as the labor market trends downward with openings, quits and hires all slowing.Unemployment has been very slowly creeping up for the past few years and currently sits at 4.3%.Despite 30-year mortgage rates falling slightly since the beginning of the year, we are seeing a cooling trend in residential real estate. Active inventory is growing as homes sit on the market longer, and the national home price index is approaching a flat line growth from the previous twelve months.Legislative UpdateTime seems to be moving strangely this year, but it was just earlier in the third quarter that Congress passed a new tax cut and spending bill to replace and extend portions of the Tax Cuts and Jobs Act from 2017. A quick breakdown of the most pertinent aspects of the bill for retirees, investors and the like are below.Many aspects of the original legislation were made permanent, including increased standard deductions (given a slight bump in 2025), Qualified Business Income deductions and the increased Child Tax Credit.The $10,000 cap on State and Local taxes (SALT) was increased to $40,000, a boon for high income earners in high tax states.A new increased above-the-line (non-itemized) deduction of $6,000 (per person) for taxpayers over age 65 was created.Up to $10,000 in auto loan interest is now deductible above-the-line.TJCA tax brackets from 2017 are extended permanently.Introduction of non-itemized deductions for charitable giving up to $2,000 for joint filers.Clean energy credits, including the $7,500 electric vehicle credit, the $1,200 home energy efficiency credit and the 30% residential clean energy credit have been eliminated after 2025.