Trademark Update - October 31, 2025

End of October Market Update

·        This was a huge month for biotechnology.  Biotech is a very long duration asset (many companies are far from their first profits), so they benefit greatly from lower interest rates.

·        This was also a very good month for solar/clean energy.  Strangely, this industry tends to move counter-intuitively (meaning not at all like political control would make you think).

·        October was also a huge month for semi-conductors, as demand continues to be essentially infinite.

·        Infrastructure funds had a good month, as industrial, utility, and materials stocks tied to the AI build-out over-performed.

·        The performance advantage of large caps over small caps was big once again, but mid-caps were actually the worst performers.

·        Gold set an all-time high mid-month, but dollar strength and profit taking has fueled a 9% plus sell-off since then.  For gold mining stocks, the decline is 16%.  The gold rally was largely predicated on irresponsible central bank behavior.  If Fed Chairman Powell stands up to Trump and doesn’t cut rates in December, alternative currencies (gold and bitcoin) are probably not going to do well.

·        The market sectors to have avoided in October: Retail/Discretionary, Energy, Real Estate, and Financials.  Worst of the worst: Pipelines, homebuilders, Small Banks, and Insurance.

·        Emerging Markets performed very well, led by Argentina (35%, on U.S. financial support) and South Korea (21%, on the agreement to provide Nvidia chips to their technology companies).  India finally had a good month. 

·        Dividend-focused strategies are lagging the market on both a monthly and a yearly basis.

·        AI is really hurting business models that depend on selling information.  Consulting and business services (Moody’s, Fair Isaac, etc.) have commanded premium multiples for years if not decades, but those multiples are shrinking fast.

·        Bonds rallied hard from May 21 (“maybe these tariffs aren’t going to be as inflationary as we thought”) to October 28 (we aren’t seeing much of an economic slowdown despite the shutdown.  What if Powell hints that he might not cut in December?”).  Bonds have lost about 1% since then, but I’m still inclined to be bullish.

Conclusions: 

·        I believe gold is a weak holding until the market begins to focus on Powell’s successor, which might not be until March or so (his term ends in May).

·        Seasonally the stock market is moving into a stronger period (November-January).  Investors tend to buy strength to pad their returns.  I see large cap growth continuing to lead, partially because the arguments for defensive industries and smaller companies are just not economically supported.

·        Japan, under it’s new Prime Minister, is returning to it’s super easy monetary policy stance.  Because of this, the yen is falling and Japanese stocks are rising.  More importantly for global investors, the “carry trade” is working again (borrow in Yen, buy global risk assets).  As ridiculous as one might find the valuation of a stock like Palantir (300 times next year’s earnings, 142 times sales), this is why you can’t short it now.

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