As we consider the threat of another US government shutdown, it begs the question, why does this keep happening? DEBT. After the global financial crisis, a new era of easy money emerged spurred on by “quantitative easing” (money printing). Governments around the world have abandoned fiscal restraint and it is unlikely that any “debt limit” will ever serve its purpose of keeping spending in check. The question isn’t “will a government shutdown cause a market downturn,” but rather, “what will be the implications of profligate spending year after year?”
While we question sustainability of deficits, the US central bank is facing unprecedented pressure by the President to lower rates. A 25-basis point cut and hopes for more provided short-term comfort to investors in Q3. After a drop of over 10% to start the year, the S&P 500 Index has rebounded with technology shares reversing their roughly 20% decline and pushing valuations back into thin air. Market concentration is again at historic levels with 10 of 500 companies in the S&P 500 Index accounting for over 40% of the market value.
Canadian markets continue to perform well despite adversarial US trade policies. Historically volatile gold stocks increased on inflation fears and potential for a weak dollar policy from the US. Financials have also performed well as increasing buybacks and dividends are coupled with strong earnings. Overall, valuations remain within historical ranges for most sectors and our defensive positioning buttresses against the potential for larger swings in the S&P/TSX Composite Index.
International markets took a bit of a breather after a strong 1st half. China was the exception as it climbed on hopes that a détente will be realized in its trade war with the US. Valuations remain relatively more attractive in international markets vs the US, however, we are increasingly cautious and taking profits where appropriate.
While momentum has returned to markets and can continue in the near term, there are enough red flags to keep us wary of their long-term sustainability. Market concentration, high valuations, increasing debt, and prospects of trade wars escalating, to name a few. But perhaps to best illustrate the current mood of markets and enthusiasm for AI spend, we will share a quote from Mark Zuckerberg:
“If we end up misspending a couple hundred billion dollars, I think that that is going to be very unfortunate, obviously, but what I'd say is I actually think the risk is higher on the other side.”
Unfortunate indeed. This does not scream capital discipline and is an echo of so many technological booms that, while ultimately transformative, did not survive without major market busts. Railways to nowhere in the 1800’s. Empty fiber in the late 1990s. The risk always seems to be under-spending, but in the short run, it is this reckless mentality that puts hard earned savings for investors most at risk. If the promise of AI is to be realized, generally our portfolio companies should benefit, but if the payoff from these investments is delayed, our discipline aims to cushion the blow of a disappointed market.
Information as of September 30, 2025.
Doherty & Associates Ltd. (“Doherty & Associates”) is registered across Canada as a Portfolio Manager and Exempt Market Dealer.
The commentaries contained herein are provided as a general source of information based on information available as of September 30, 2025. It is not intended to address the needs, circumstances, and objectives of any specific investor. The content of this commentary is not to be used or construed as investment advice, as an offer to buy or sell any securities and is not intended to suggest taking or refraining from any course of action. Every effort has been made to ensure accuracy in these commentaries at the time of publication however, accuracy cannot be guaranteed. Market conditions may change and Doherty & Associates Ltd. accept no responsibility for individual investment decisions arising from the use or reliance on the information contained herein. We strongly recommend consulting with your Portfolio Manager prior to making investment decisions.
This document may contain forward-looking information that reflects our current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein.
This document may not be reproduced (in whole or part), transmitted or otherwise made available to any other party without the prior written consent of Doherty & Associates.
Published dated: October 16, 2025
While we question sustainability of deficits, the US central bank is facing unprecedented pressure by the President to lower rates. A 25-basis point cut and hopes for more provided short-term comfort to investors in Q3. After a drop of over 10% to start the year, the S&P 500 Index has rebounded with technology shares reversing their roughly 20% decline and pushing valuations back into thin air. Market concentration is again at historic levels with 10 of 500 companies in the S&P 500 Index accounting for over 40% of the market value.
Canadian markets continue to perform well despite adversarial US trade policies. Historically volatile gold stocks increased on inflation fears and potential for a weak dollar policy from the US. Financials have also performed well as increasing buybacks and dividends are coupled with strong earnings. Overall, valuations remain within historical ranges for most sectors and our defensive positioning buttresses against the potential for larger swings in the S&P/TSX Composite Index.
International markets took a bit of a breather after a strong 1st half. China was the exception as it climbed on hopes that a détente will be realized in its trade war with the US. Valuations remain relatively more attractive in international markets vs the US, however, we are increasingly cautious and taking profits where appropriate.
While momentum has returned to markets and can continue in the near term, there are enough red flags to keep us wary of their long-term sustainability. Market concentration, high valuations, increasing debt, and prospects of trade wars escalating, to name a few. But perhaps to best illustrate the current mood of markets and enthusiasm for AI spend, we will share a quote from Mark Zuckerberg:
“If we end up misspending a couple hundred billion dollars, I think that that is going to be very unfortunate, obviously, but what I'd say is I actually think the risk is higher on the other side.”
Unfortunate indeed. This does not scream capital discipline and is an echo of so many technological booms that, while ultimately transformative, did not survive without major market busts. Railways to nowhere in the 1800’s. Empty fiber in the late 1990s. The risk always seems to be under-spending, but in the short run, it is this reckless mentality that puts hard earned savings for investors most at risk. If the promise of AI is to be realized, generally our portfolio companies should benefit, but if the payoff from these investments is delayed, our discipline aims to cushion the blow of a disappointed market.
Information as of September 30, 2025.
Doherty & Associates Ltd. (“Doherty & Associates”) is registered across Canada as a Portfolio Manager and Exempt Market Dealer.
The commentaries contained herein are provided as a general source of information based on information available as of September 30, 2025. It is not intended to address the needs, circumstances, and objectives of any specific investor. The content of this commentary is not to be used or construed as investment advice, as an offer to buy or sell any securities and is not intended to suggest taking or refraining from any course of action. Every effort has been made to ensure accuracy in these commentaries at the time of publication however, accuracy cannot be guaranteed. Market conditions may change and Doherty & Associates Ltd. accept no responsibility for individual investment decisions arising from the use or reliance on the information contained herein. We strongly recommend consulting with your Portfolio Manager prior to making investment decisions.
This document may contain forward-looking information that reflects our current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein.
This document may not be reproduced (in whole or part), transmitted or otherwise made available to any other party without the prior written consent of Doherty & Associates.
Published dated: October 16, 2025