Momentum or Mirage? Navigating Narrow Leadership
Invested In Us | Issue 8 | September 15, 2025
Markets Strong, Leadership Narrow
As of September 12, the S&P 500 has risen nearly 13% year-to-date, driven by strength in a handful of sectors and sustained corporate earnings despite weakening macro data. Telecommunications has been the clear leader, advancing almost 25% YTD. Healthcare, by contrast, has barely broken even (+1.3% YTD) and remains down more than 9% over the trailing twelve months, entering what many would define as bear market territory.¹
The divergence is striking. Telecommunications has benefitted from a confluence of fiscal and structural tailwinds. The One Big Beautiful Bill Act has provided extraordinary tax incentives, including 100% bonus depreciation and favorable treatment of domestic R&D, effectively lowering the cost of capital for a sector that is both infrastructure-heavy and innovation-dependent.² At the same time, secular demand for digital connectivity continues to accelerate: 5G adoption, fiber buildouts, and cloud-driven bandwidth consumption are forcing sustained capital investment. Investors, confronted with uncertainty elsewhere, have rewarded telecom’s relatively predictable revenue streams—media rights, long-dated naming contracts, luxury suites, and season tickets—all of which carry inflation-linked step-ups and multi-year visibility.
Healthcare tells the opposite story. Pressured by reimbursement risk, drug pricing debates, and weak sentiment, the sector has underperformed. Yet beneath the near-term malaise lies structural growth. An aging demographic base, advances in biotech, and the integration of artificial intelligence into diagnostics and drug discovery point toward significant long-term upside. For investors with patient capital and tolerance for volatility, today’s discounted valuations may represent a rare entry point.³
Beyond the US: Global Equity Breadth
While the S&P’s performance has been strong, it has not been exceptional relative to global peers. European equities, Japanese markets, and Asia-Pacific ex-Japan have all outperformed year-to-date.⁴ Emerging markets, often overlooked, have quietly delivered superior risk-adjusted returns on the back of capital inflows, cheaper valuations, and differentiated growth profiles.⁵ This breadth matters. It signals that 2025 is not solely a “U.S. exceptionalism” story; rather, global capital is diversifying across regions where policy clarity and valuation discounts create fertile ground.
Corporate Earnings and the Path to 7,000
Despite decelerating job growth, corporate earnings remain robust. Many companies continue to surprise to the upside, aided by deregulation across industries and a more predictable tax structure. While consensus expects S&P earnings to decelerate from double-digit growth, it is plausible that equity indices could push past 7,000 over the next twelve months, particularly if productivity enhancements from AI continue to flow through the economy.⁶
Tariffs remain the wild card. If policy turns unpredictable, margins could compress. Larger companies have more flexibility to pass costs downstream or restructure supply chains, but the smaller and mid-cap universe could be disproportionately impacted. For now, markets appear to have priced in current tariff regimes.
Policy, Growth, and Rates
The Federal Reserve looms large. Markets currently price in a >90% probability of a rate cut; our assessment is closer to 70/30. Inflation is sticky, particularly in services, and tariff impacts have not been fully realized. The economy expanded at 2.8% in 2024 but is tracking closer to 1.7% in 2025, with current forecasts for 2026 clustered around 1–2%. Growth is slowing, and the jobs data confirm the deceleration.⁷
The 10-year Treasury remains anchored in the low 4% range. However, fiscal uncertainty is acute: Congress must resolve budget negotiations by month-end or pass a continuing resolution. A shutdown or extended impasse would have direct consequences for fixed income markets and potentially alter the Fed’s tone.
Real Assets and Inflation Hedges
Technology continues to lead headline performance, but under the surface, real assets are gaining momentum. Precious metals, particularly gold, remain near all-time highs, and silver has delivered strong YTD gains. Energy infrastructure and broader real assets offer investors protection against inflation, attractive yield, and contractual cash flows often tied to CPI step-ups. With estimates showing a shortage of 3–6 million residential units in the United States, real estate remains a long-term structural opportunity.⁸
Investor Perspective
Headline vs. Reality: Equity returns and earnings look strong, but underlying macro signals—slower job growth, sticky inflation, tariff risks, and fiscal uncertainty—point to fragility.
Telecommunications: A clear secular winner, buoyed by fiscal incentives and sustained infrastructure demand.
Healthcare: Near-term laggard, but offers asymmetric long-term upside for investors with patience.
Real Assets: Provide stability, yield, and inflation protection—an essential ballast in uncertain markets.
Global Diversification: Outperformance abroad underscores that investors can’t rely solely on U.S. exceptionalism.
Core Strategy: Position portfolios for durable cash flows, policy alignment, and undervalued sectors with mean reversion potential.
This Week’s Takeaway
“Don’t chase momentum—build resilience with policy tailwinds, real assets, and global breadth.”
Community Spotlight: Hispanic Heritage Month
From September 15 to October 15, we celebrate Hispanic Heritage Month — honoring the contributions, culture, and economic power of Latinos across our nation. The impact is undeniable:
$4 trillion economy in 2023: the 5th largest in the world if measured independently, bigger than the U.K. or France.
Latino GDP nearly doubled in just 8 years, from $2.1T (2015) → $4T (2023).
$4.1 trillion in purchasing power, growing 2.4x faster than the national average.
$2.5 trillion in consumer spending in 2023 alone (more than double the growth rate of non-Latinos)
The backbone of the workforce — adding 820,000 working-age individuals in 2023 while the non-Latino population declined.
With a median age of 31, Latinos are the youngest, fastest-growing part of America’s workforce and future.
Bottom line: Latinos are not just part of America’s story — we are driving its growth, resilience, and prosperity.