Steady Growth and Strong Markets

1. Wage and Savings Growth. The U.S. labor market continues to demonstrate resilience, cooling but far from collapsing. Hiring has slowed modestly, suggesting that supply and demand for labor are beginning to rebalance. Despite this moderation, wage growth is up 5%, indicating that workers continue to see meaningful income gains even as job openings decline. This combination of slower hiring and steady wage momentum points to a soft landing scenario, one where economic growth tempers without triggering a sharp rise in unemployment.

At the same time, household savings are showing renewed strength, increasing 4%. Rising savings rates suggest that consumers are rebuilding financial cushions that were drawn down during the high-inflation period of recent years. The combination of higher wages and stronger savings enhances overall consumer stability and spending capacity, two critical supports for continued economic growth.

Inflation, once the economy’s most persistent headwind, has shown substantial progress. From a peak of 9% three years ago, the inflation rate has now eased to 3%, underscoring the effectiveness of tighter monetary policy and improved supply dynamics. This moderation provides the Federal Reserve with greater flexibility, helping to anchor expectations and support market confidence.

2. Strong Growth Offsets Elevated Rates. Interest rates have remained elevated, not because of economic weakness, but as a reflection of stronger-than-expected growth. Robust consumer spending, corporate earnings, and ongoing business investment continue to drive momentum across the economy. While higher rates would typically act as a headwind, this cycle is proving different as growth itself is offsetting much of the pressure.

Healthy demand and resilient labor trends are allowing businesses and consumers alike to absorb tighter financial conditions. In fact, the persistence of growth is helping anchor investor confidence, signaling that the economy can sustain expansion even in a higher-rate environment.

3. Large Cap vs Small Cap. Large-cap equities continue to stand out for their transparency, liquidity, and institutional visibility. These companies benefit from extensive analyst coverage and consistent research, giving investors clearer insight into earnings, operations, and long-term strategy. This high level of transparency allows for more efficient price discovery and greater confidence in valuations.

By contrast, small caps, while offering cyclical upside, often operate with less public information and lighter research coverage, resulting in less clarity around performance drivers. They also tend to be more thinly traded, which can amplify volatility during periods of shifting sentiment. Small caps, while offering meaningful cyclical participation, tend to trade alongside sectors such as industrials, financials, and materials, areas that typically benefit as interest rates move lower. For investors seeking to capture that cyclical upside, exposure through these sectors can provide an effective way to participate in small-cap momentum while maintaining the liquidity and balance sheet strength characteristic of large-cap investments.

4. AI and Financial Services Industry. Artificial intelligence continues to stand out as a durable, long-term growth theme rather than a fleeting market trend. Unlike the dot-com era, today’s AI leaders are established, profitable companies with real earnings, strong cash flow, and established business models. The rapid integration of AI across industries, stretching from cloud computing and semiconductors to healthcare and financial services, underscores its broad economic impact and scalability. As innovation deepens and infrastructure investment expands, AI remains a structural driver of growth, supporting both corporate profitability and long-term equity market leadership.

The financials sector has shown strong performance this year, yet still appears to have meaningful room to run. Despite recent gains, the group continues to trade below the broader market at 14 times earnings, offering attractive relative value. Capital markets activity has strengthened, and both equity and debt issuance remain robust, providing a solid foundation for revenue growth across major institutions.

M&A activity has been encouraging, with $2.7 trillion in announced deals year-to-date, of which only about 40% have been completed. As these transactions progress, fee generation for investment banks and advisory firms is set to accelerate. The sector’s mix of value, earnings leverage, and exposure to expanding capital markets positions it well for continued outperformance.

5. Fixed Income. Last week, the U.S. Treasury curve was muted until Friday, despite a multitude of Fedspeak, when trade war between the U.S. and China flared again. The whole curve fell 8/9 bps as a flight to quality trade took effect as investors digested which sectors and companies may be affected by the latest bout.

Corporate spreads had a similar experience to Treasuries, muted throughout the week and then widening on fears on Friday. IG spreads finished the week 7 bps wider, and HY spreads widened 42 bps. Both markets remain historically low, but any continued spread widening and the velocity should continue to be monitored.

Municipal bonds underperformed during the week, with yields on the front-end rising 3-5 bps due to richness, while longer-end yields fell 3-5 bps. October 15th represents a day with a low notional amount of redemptions compared to expected issuance, so there is potential for yields to rise throughout the rest of the month.

Stephanie Link’s TV Schedule:

Return for Selected Indices^[1]

Source:

^[1] Source: Bloomberg. As of October 13, 2025.

Disclosures

Investment Solutions is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, as a member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC. This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is neither indicative nor a guarantee of future results. The investment opportunities referenced herein may not be suitable for all investors. All data or other information referenced herein is from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other data or information contained in this presentation is provided as general market commentary and does not constitute investment advice. Investment Solutions and Hightower Advisors, LLC or any of its affiliates make no representations or warranties express or implied as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. Investment Solutions and Hightower Advisors, LLC assume no liability for any action made or taken in reliance on or relating in any way to this information. The information is provided as of the date referenced in the document. Such data and other information are subject to change without notice. This document was created for informational purposes only; the opinions expressed herein are solely those of the author(s) and do not represent those of Hightower Advisors, LLC, or any of its affiliates.