Markets continued their climb this quarter, defying predictions and rewarding those who stayed invested through the turbulence earlier this year. But as headlines now shift from “soft landing” to “are stocks too expensive?”, it’s natural to feel a mix of confidence and caution. Both emotions are valid—and both are part of being a thoughtful investor.
At Curio, we believe the most important question isn’t where markets go next, but how you choose stay grounded while they do.
The Quarter in Review: A Rally Built on Renewed Optimism
After a volatile first half of the year, the third quarter delivered strong global gains.
- U.S. stocks rose 8.2%, led by technology and small-cap companies.
- International developed markets gained 5.6%, while emerging markets climbed 9.9%, outpacing most developed regions.
- The Federal Reserve made its first rate cut of the year in September, signaling a gradual shift toward easing policy after more than two years of restraint.
The market’s tone reflected relief. Investors who had been waiting for the Fed’s next move finally got some clarity—and stocks rallied on the expectation that borrowing costs may continue to fall before year-end. Excitement around artificial intelligence (AI) remained a major driver, propelling names like NVIDIA and Microsoft to new highs, but the rally broadened too: small-cap and international stocks regained momentum, contributing to more balanced global performance.
The Federal Reserve Usually Finds a Way to Grab a Few Headlines
When the Fed cut rates, markets cheered. Then Chair Jerome Powell added some now well repeated words of caution:
“By many measures, equity prices are fairly highly valued.”
His comment reminded investors that while lower rates support markets, valuations can stretch expectations. It’s a familiar tension—optimism meets realism.
Does that mean stocks are “too expensive”? Not necessarily. The overall price-to-earnings ratio of the S&P 500 sits about 20% above its 10-year average, but much of that is concentrated in a few technology giants. Many sectors—energy, healthcare, financials—remain priced at far more modest levels.
So, rather than trying to predict when enthusiasm peaks, a better question is: How do I stay aligned when markets feel high?
The answer is the same one that has guided investors for decades: through diversification and disciplined rebalancing. When certain assets run ahead, rebalancing brings your portfolio back to its intended mix—selling a bit of what’s grown fastest and reinvesting in what’s lagged. It’s a quiet, powerful way to stay on course without trying to outguess the next move.
Investment Spotlight: The Many Faces of AI
One of the most common questions we hear lately is: “Should I invest more in AI?”
The truth is—you likely already are.
AI isn’t confined to a few headline names. The largest AI-focused funds collectively hold more than 40% of U.S. stock market capitalization and nearly a third of global markets. Companies as varied as Caterpillar, Honeywell, and Thomson Reuters are using AI to improve efficiency, logistics, and customer experience.
That’s why we believe the best way to benefit from innovation isn’t to chase trends—it’s to hold a broadly diversified portfolio designed to capture growth wherever it occurs. You don’t have to predict the winners to participate in the progress.
Policy Perspective: New Tax Law Brings Certainty—and Complexity
Amid the market headlines, in July Congress passed a sweeping tax and spending bill with long-term implications for families and business owners. The most meaningful change may simply be clarity.
Several provisions that were set to expire are now permanent, including:
- The lifetime estate and gift tax exemption, now set to rise to $15 million per person (or $30 million for couples) next year.
- The larger standard deduction and the $750,000 mortgage interest limit.
- The 20% deduction for qualified business income (Section 199A) for eligible business owners.
Other measures are winding down, such as electric vehicle and clean-energy tax credits, which begin expiring later this year.
And while the law simplifies some areas, it complicates others—most notably the new state-and-local-tax (SALT) deduction phaseout, which decreases sharply once income exceeds $500,000. The details matter, and we’ll be working with clients individually to identify planning opportunities and avoid surprises.
Staying the Course—Even When It’s Tempting Not To
Periods of strong returns can paradoxically create discomfort. When markets rise quickly, the question often shifts from “Am I invested enough?” to “Should I take something off the table?” It’s a fair question—and a human one.
The good news is, your plan already accounts for moments like this. It’s built to absorb short-term uncertainty and align with your long-term goals. The same discipline that helped you stay invested through last year’s volatility is what helps you participate in today’s gains.
When in doubt, return to what you can control:
- Your plan. Is it still aligned with what matters most?
- Your behavior. Are decisions grounded in purpose, not fear or euphoria?
- Your perspective. Are you filtering short-term noise through a long-term lens?
At Curio, we’re here to help you do all three. If you’re wondering what these shifts mean for your own path, we’d be glad to talk through it. Because the goal isn’t to predict what happens next—it’s to stay ready for whatever comes.
