Market Commentary
“To know thyself is the beginning of wisdom.”
October delivered more gains across most of the market, with the S&P 500 rising 3.5% for the month and extending its year-to-date gain to 16.3%. Yet beneath the surface of these headline numbers, the increasingly troubling reality is that most stocks aren't doing so well, and neither are most investors, particularly conservative and even moderate investors who have stuck with their conservative and moderate portfolios.
Does that mean these conservative and moderate investors should modify their answers to the risk assessment questions? That is the question I want to address in this commentary, but first, let's knock out the monthly performance summary.
As has been the case throughout 2025, performance continues to be driven by a narrow slice of the market. While the S&P 500 was up 3.5% last month, notching yet another all-time high, the S&P 500 Equal Weight Index was down 0.9%, bringing its year-to-date return to just 7.2%. This gap between the year-to-date returns of these two benchmarks is largely explained by the outperformance of the largest and most expensive stocks in the market, as well as the S&P 500's heavy concentration in the top ten of them.
The Top 10 index rose 5.3% in October, besting the so-called Magnificent 7, yet again. As of October 31, the Top 10 is up 24.2% year-to-date, slightly ahead of the Magnificent 7 at 23.6%. One reason I continue to prefer the Top 10 to the Mag 7 is that the Top 10 is less volatile. As you can see in the year-to-date performance chart above, the Top 10 as a group were down less than the Mag 7 during the "tariff tantrum" drawdown.
With those gains, the concentration of the top 10 companies in the S&P 500 has grown to yet another all-time high of 41.6%! That is astounding. And it should give us pause. It is not healthy for so much of the supposedly diversified index to be so heavily concentrated. While I can appreciate that the largest and most expensive stocks have performed the best recently and continue to post strong gains, I also know that this trend will not last forever. Things that can't go on forever don't. There will come a time when at least some of these ten stocks become the largest sources of capital, rather than the largest recipients of capital. I am just not sure when.
As you can see in the chart above, the ten largest companies in the market change frequently in the context of decades. Four companies in the top 10 at the beginning of this year (JP Morgan, Berkshire Hathaway, Apple, and Microsoft) were on the list 10 years ago. And only one (Microsoft) was in the top 10 in 2005.
However, notice that over the decades, the ten largest stocks tend to only account for 20% or less of the index. If anything is different this time, it is that these ten now account for over 40% of the market.
Does that mean they will all be included on the list in 2035? Or that they have even further to fall compared to decades past?
Looking back to 1985, you will see Kodak on the list. Kodak filed for bankruptcy in 2012 despite having invented digital photography in 1975 and being a leader in the space.
By the way, when my monthly commentary is sent each month, the list of email addresses still includes a few @aol.com addresses. America Online (AOL) was the consumer's on-ramp to the internet. It was wildly popular. Almost everyone who had an email address had one there. Today, very few people still have an @aol.com email address, and just as AOL was in the early days of the internet, I think LLMs, such as Chat GPT, are the consumer's on-ramp to AI. I am not making a prediction, but what if OpenAI, which was recently valued at $500 billion despite losing billions of dollars every quarter, turns out just like AOL--essentially non-existent? I won't be the least bit surprised. I digress...
Getting back to the top 10 over the decades, a few of the members from 2005 would have failed without being bailed out by the government during the Great Financial Crisis of 2008-09. AIG lost nearly 100 billion dollars (!) in 2008 and eventually got about $180 billion in emergency loans from Uncle Sam. Bank of America got about $65 billion, and Citigroup got about $50 billion.
For what it is worth, over the past 19 years, Bank of America's stock has clawed its way back from the dead to be nearly flat over nearly two decades. Meanwhile, Citigroup and AIG are still down 80% and 93%, respectively.
I should also mention that our Top 10 Index still includes Eli Lilly (LLY) instead of JP Morgan (JPM). LLY finished October as the 11th largest company, outside the top 10 for the third consecutive month, but only by a very small margin. The two companies are only separated by $40 billion, which may sound like a lot, but in context, it is only 4%. So, if JPM fell by 2% and LLY rose by 2%, which could happen any day of the week, LLY would be back in the official top 10. I don't think the juice is worth the squeeze to make a change. It would unnecessarily cause some to realize short-term gains and complicate our performance tracking. Plus, I think from here, LLY is a much better bet than JPM.
I can't move on without mentioning Gold, which finished the month up more than the S&P 500 again, despite experiencing a correction of 11.30%. We actually took some profits in our gold position for the first time in recent memory. And, before the month was over, we had already started buying again for clients (mostly new ones) who were underweight our target allocation.
I was asked by a reader and long-time client, in response to my last commentary, whether Gold was in a bubble. My answer was "no." In the timeless book, Manias, Panics, And Crashes: A History Of Financial Crises, the author defines a bubble as "an upward movement in prices… that feeds upon itself; rising prices attract ever-increasing numbers of buyers seeking to profit from the price rise, until the process becomes unsustainable." I can provide numerous fundamental reasons for a significantly higher gold price. So far, we still aren't seeing shares outstanding in the largest gold ETF approaching levels seen at prior peaks. On that basis, the two criteria provided by Klindberger have not yet been met.
Now, that doesn't mean Gold won't experience a pullback here and there, and it also doesn't mean that I am certain it hasn't peaked. I just don't think it meets the definition of a bubble. I also don't think it has necessarily peaked. I once again am not making a prediction, but I won't be surprised if we wake up in a year and an ounce of Gold costs $5,000, nor will I be surprised if that same ounce costs $3,000. I do think the odds are tilted in favor of the higher number, though.
Bonds, as measured by the Bloomberg U.S. Aggregate Bond Total Return Index, gained 1.1% in October as yields declined modestly. The 10-year Treasury yield fell from 4.15% to around 4.07% by the end of the month despite spiking higher as the Fed cut its policy rate on October 29. A lower 10-year interest rate is a welcome development for bond investors, though I remain concerned about the impacts of rising inflation. For now, however, bonds are performing as one would expect in an environment where the Fed is cutting rates.
So there we have it. The top 10 (and Mag 7) stocks are crushing everything else. The equal-weight index is being left behind. Gold is still rising despite being up substantially for the year and suffering a healthy correction in October. Bonds are rallying on falling yields. With that in mind, let's move on to some thoughts on behavioral finance.
BEHAVIORAL FINANCE AND THE ILLUSION OF CONTROL
What I really want to talk about today is something far more important than any single month's performance or the current state of market valuations. I want to talk about a deeply ingrained human tendency that, in my view, is one of the single biggest destroyers of long-term wealth. Investors tend to fundamentally alter their investment approach based on recent market performance, and in particular, their inclination to move to more aggressive positions after good returns and more conservative positions after poor returns.
Let me be very clear: assuming that one should change their risk management approach solely based on recent market performance, which I don't think is true, adopting a more aggressive approach after good returns and a more conservative approach after poor returns is exactly backward for long-term investors.
Before I proceed, let me acknowledge a few things.
First, I am not satisfied with the recent performance of our conservative and, to a slightly lesser extent, our moderate portfolios. I am extremely pleased with how they each performed during the volatility around "Liberation Day" in the spring, but since then, I know we could have done better, particularly over the past three months. I have identified what I believe are the root causes of the underperformance, and we have begun implementing adjustments to these portfolios to improve upside capture during the remainder of this bull market. The portfolios are still conservative or moderate, respectively, but within those categories, there are a million different ways to build portfolios.
I don't mean to imply that the performance has been "bad" across the board. I simply am not pleased with it and know we can do better. I am not allowed to report on the performance of our composites, strategies, or models in this commentary for regulatory reasons. However, if you are interested in knowing how we have performed in the aggregate, I'd be happy to share that with you individually. Just let me know.
Second, I am also aware that you are not necessarily in control of when you complete a risk assessment for us. Regulators like to see that we have updated your risk assessment annually. If the date of your last risk assessment was in April of 2024, and we asked you to update it in April 2025, just as the market was crashing, it is highly likely that your answers would have been more conservative. We have discussed as a team ways to prevent this from happening in the future.
We have always taken pride in the idea that we don't aim to keep you on the market rollercoaster at all times, unlike many firms. And I think, as a result, we have probably been a little too willing to accept changes in risk category from our clients any time they feel uncomfortable. I think this has been the wrong call. Going forward, we will do a better job of making sure that a) your risk assessment was not heavily influenced by recent market performance, and if we are confident in that, then b) keep you focused on your long-term investment objectives and sticking with your portfolio allocations through corrections and rallies unless something has materially changed in your financial circumstances.
We can't make you stick with the plan. It is your money after all. We will still absolutely honor your requests. But you hired us to tell you what we'd want to know if our roles were reversed, and what I'd want to know if I were you is that these types of changes almost always lead to very poor long-term results.
Third, not all of the following applies to all of you reading this. For those to whom it applies, you know who you are. I promise that I am not writing this because of any one person. If it feels that way, rest assured, you are not alone. And for the rest of you, it is probably valuable to understand anyway. So, please, read on.
Most investors don't do this consciously. They don't wake up one morning and think, "The market is up 20% this year, so I'm going to move from a moderate portfolio to an aggressive portfolio just so I can lose everything." Instead, it happens gradually and often without much conscious thought. A year of strong returns makes the market feel safe. FOMO kicks in, as people who have been conservative feel like they're missing out on the gains others are enjoying. "If I just moved to a more aggressive posture, I could have made that extra 5%," they think. Before they realize it, they've drifted into a risk category that doesn't align with their actual willingness or ability to take risks.
Conversely, after a significant market decline, that aggressive portfolio suddenly feels far too risky. "I can't afford to lose any more money," they tell themselves. So they move to a more conservative position, often right at the bottom of the market, locking in losses and ensuring they won't participate in the recovery that inevitably follows.
In April of this year, we observed some clients transition from moderate portfolios to very conservative portfolios, and even some to cash via US Treasuries. By the time the market had bounced from its lows and these investors got around to telling us they wanted to move back to their moderate portfolio, many of the stocks we had bought for the moderate portfolios near the lows were trading well above what we considered a fair value.
For example, I thought NVDA was a buy up to around $90/share and ANET was a buy up to around $65/share. We received alerts and bought both right around those prices on April 7. The stocks never looked back and never dipped back below our buy-up-to prices. Both are now up over 100%*, but investors who moved back to moderate portfolios in May would have had to pay $88+ for ANET and $110+ for NVDA - prices I don't think would lead to good long-term returns.
With hindsight, sure, I could have bought both stocks at $88 and $110, and we'd be up nicely today. But that would have been a speculative trade in a moderate portfolio, not a "high quality business trading at a fair price," and would have represented a major deviation from our standard process. And what about folks who shift back to moderate today? Should I just buy NVDA and ANET for them regardless of the price and analysis we have done? I don't think so, even though they may both very well continue to climb from here.
Here's what I've learned over the years: some people do this more than others. And the bigger the magnitude of these moves, the worse the long-term results tend to be. This is not a matter of opinion; rather, it is a measurable and observable fact. Investors who regularly shift their risk categories based on recent market performance substantially underperform those who maintain a consistent approach aligned with their actual capacity for risk.
Why? Because every time an investor makes one of these moves, they are essentially trying to time the market. And timing the market is extraordinarily difficult. In fact, I would argue that it's impossible for most people (but not all) to do it consistently.
The harsh truth: even if the advisor is a great portfolio manager, which unfortunately many are not, it is virtually impossible to overcome the headwinds created by an investor who constantly moves in and out of risk categories based on recent performance. It's like trying to win a foot race while running backward every other lap. The advisor's skill becomes irrelevant because the fundamental problem is not the investment strategy. The fundamental problem is the investor's behavior.
γνῶθι σεαυτόν
Know Thyself
Socrates didn't say it first. The earliest known use of the oft-quoted phrase was as an inscription on the Temple of Apollo in the Delphi area of ancient Greece.
As an investor, you must know thyself. I mean, quite literally, that you must understand your own willingness and propensity to take risk, and then stick with it. Let a professional (I know a good one) help you with the ability part.
Conservative investors should invest conservatively. Regardless of how the S&P 500 has performed this year. Regardless of what their neighbor is telling them about making 20% in AI or Quantum stocks, regardless of FOMO. If you are a conservative investor, you should maintain a conservative portfolio. Period.
Likewise, moderate investors should invest moderately, and aggressive investors should pursue aggressive strategies. All of this, regardless of what the market has done recently and regardless of your emotional reaction to recent performance.
If you answered our risk questionnaire honestly, without regard for recent market performance, and that questionnaire indicated that you are a conservative investor, then you are a conservative investor today, tomorrow, and for as long as your personal circumstances don't change in some fundamental way.
Perhaps you didn't answer the questions honestly, or you let recent market performance influence your answers. In that case, it is probably time for an unbiased, performance-agnostic update.
Now, I want to be very clear about something because I can already hear the pushback. I am not advocating for a strict buy-and-hold approach, where you ignore market signals and sit in an equity-heavy portfolio through a long and protracted bear market with your eyes closed, praying that it will all work out in the end. That's not what we do at Elevate, and frankly, that's not what you hired us to do.
Here's the distinction: there is a huge difference between actively managing a portfolio through various market environments and changing your risk category based on recent performance.
An example might illustrate this. Let's say we have an aggressive investor who, during an extended bull market, is positioned with 100% of their portfolio in stocks. As time passes and the market becomes increasingly overvalued, and as we begin to see signs of deterioration in the economy, risk factors build in the system, and some positions break down technically, we might gradually shift the portfolio to a 50% stock, 50% cash position. We might even move it to 70% cash if conditions warrant it. That is our job. That is what you hire us to do. We decide when to be more aggressive and when to be more defensive. We decide when to increase equity exposure and when to reduce it. We decide what to sell and what to replace it with, and sometimes that replacement is cash.
However, what's critical here is that we're not moving the investor from their aggressive category to a conservative one. We're not changing the risk profile of the portfolio from "aggressive" to "conservative." We're managing the risk within the aggressive allocation. The investor remains aggressive. The portfolio remains structured for an aggressive investor. The specific positioning and allocation are based on our analysis of market conditions and risk factors, rather than recent performance. Sometimes, the most aggressive allocation is cash!
Investors who switch from one risk category to another based on recent market performance are behaving aggressively, even if their move is from a conservative to a moderate or from a moderate to a conservative category. This shift is not a neutral, harmless action. It is aggressive behavior on par with day trading. It is a departure from their normal risk profile. It is behavior that I believe actually drives market volatility and contributes to tops and bottoms in the overall market.
When enough people behave this way, it creates a feedback loop. Good performance attracts new money to aggressive positions, driving prices higher. Prices rise further, which attracts even more people to become more aggressive. At some point, the music stops. It always does. And when it does, all those people who had moved into more aggressive positions suddenly become terrified. They rush for the exits. This rush for the exits accelerates the decline. It turns what might have been a 10% or 15% correction into a 30% bear market.
Finally, and inevitably, these same investors realize their mistake and return to their normal risk category, locking in losses for individuals who had no business being in such aggressive positions in the first place.
By then, the damage is done. And they did it to themselves, not because their advisor was incompetent, but because they didn't stick with their own long-term risk management plan.
WHO WE ARE AND WHAT WE DO
We manage portfolios in strict alignment with your willingness, ability, and propensity to take risk. This process begins with a brief questionnaire that we ask you to complete. We ask questions about your financial situation, time horizon, previous investment experience, comfort level with volatility, and personal circumstances. We do this for a reason. We want to understand who you are as an investor.
Ideally, we also create a comprehensive financial plan for you in which we discover your "family index," which is the rate of return required for you to live happily ever after, meeting all your income needs for the rest of your life without any major lifestyle adjustments.
If you answer those questions honestly and without influence from recent stock market performance, the result is a risk profile that we believe accurately describes your appropriate risk category. Conservative. Moderate. Growth. Aggressive. Whatever the case may be, that risk profile is the result of careful thought, not a guess.
Once we've determined your risk profile, we build a portfolio that matches that profile. We then manage that portfolio according to our investment process, which includes rebalancing, disciplined buying and selling based on technical analysis, valuation, and proactive risk management as market conditions change.
What we ask from you in return is simple: maintain that risk profile. Stick with the plan. Allow us to do our job, which includes managing the portfolio through both drawdowns and rallies. Every investment manager is going to have bad months, a couple of bad quarters, or even a bad year. It happens. We are not immune. But try not to watch the news and panic, or compare your portfolio to your neighbor's portfolio or to some index or benchmark. We don't build your portfolio to match any random index or even the S&P 500, which, as we know, is heavily concentrated. We build your portfolio to match your unique financial situation and your unique risk profile.
A few quick things before I sign off.
The debt spiral is picking up speed. Just two months after crossing the $37 trillion threshold, US national debt blew through $38 trillion at a breakneck pace—and Washington is clocking new borrowing at a $5 trillion annual run rate. The Congressional Budget Office is projecting total federal debt of $140 trillion by 2054. If that comes to pass, our debt will tower over the productive capacity of the entire economy and even eclipse the global money supply, which stands today at just about $100 trillion.
Consumer bankruptcies surge to highest level since COVID…
The latest data from the New York Fed shows consumer bankruptcies have climbed to 141,640 in Q3 2025—the highest since Q1 2020 during the pandemic. Why does this matter? Rising bankruptcies often signal stress beneath the surface of the economy. Despite market highs, household balance sheets are cracking. Foreclosures remain low, but the bankruptcy trend is hard to ignore. And it’s not just the data—pretty much every major consumer product and restaurant company has been sounding the alarm in their earnings calls on weakening demand, especially among lower-income households and younger customers.
Roundhill Investments, which focuses on offering "innovative" ETFs, launched a "Meme ETF" on October 8. As of Friday, November 7, it was down 31%. If you are thinking to yourself, "I thought that already existed..." you'd be right. It did exist. They actually launched the same ETF on December 8, 2021 — right before the bear market of 2022 got rolling. The ETF lost 75% of its value before closing in 2023. So, this was a sign of the top last time. The market started falling less than a month after issue. This time around, to make matters worse, they actually have a 2x leveraged version.
Speaking of leverage. Chairman of the Federal Reserve (for now) Jerome Powell said during his press conference on October 29, "You don't see too much leverage in the financial system." Evidently, he wasn't looking at this chart:
Meanwhile, the Nasdaq 100 was up for the 7th consecutive month in October--pretty much unheard of.
And the "Hindenburg Omen" has flashed for the first time in a while. What's the Hindenburg Omen? Imagine if, on the same day, you saw a lot of stocks hitting all-time highs and a lot of others hitting all-time lows—at the same time—instead of most stocks moving in the same direction. This combination is unusual and hints that the market is confused or conflicted. When this happens, the Hindenburg Omen flashes. Every time the Hindenburg flashes doesn't lead to a drop in the market, but pretty much every significant drop has been preceded by the omen flashing.
One last thing, a reason to be bullish! CNN's Fear and Greed index is a contrary indicator. You would normally want to do the opposite. However, I must say that I don't understand how they can arrive at this result based on their claimed calculation method - the only fear I see from my seat is the fear of missing out (FOMO).
I hope you found this commentary both useful and enjoyable. Please tell me what you think - good, bad, or otherwise.
Would you recommend it to people you know? Why or why not? What about our portfolio management and financial planning services?
Click here and let me know!
Until next time, I thank God for each of you, and I thank each of you for reading this commentary.
Clients, I encourage you to click here to access your personalized performance portal and see how your portfolio performed compared to the market's last month.
Shane Fleury, CFA
Chief Investment Officer
Elevate Capital Advisors
Legal Information and Disclosures
This commentary expresses the views of the author as of the date indicated and such views are subject to change without notice. Elevate Capital Advisors, LLC (“Elevate”) has no duty or obligation to update the information contained herein. This information is being made available for educational purposes only. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources. Elevate believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. This memorandum, including the information contained herein, may not be copied, reproduced, republished, or posted in whole or in part, in any form without the prior written consent of Elevate. Further, wherever there exists the potential for profit there is also the risk of loss.
