Delta Wealth Solutions Strategy Lab
Welcome to the Strategy Lab. The Delta Wealth Solutions Strategy Lab focuses on providing the necessary insights to help clients achieve optimal investment and planning outcomes. Please check back regularly for our quarterly market newsletter along with commentary on the stories that move markets.
October 2025
Embracing the Investment Environment
Delta Strategy Lab - Market Update
As we write, the top American and European golfers are competing for the prestigious Ryder Cup. The Ryder Cup is a team golf competition between the USA and Europe and is only contested every other year. It’s a fantastic competition and truly historic event stirring pride for ones homeland. What’s fascinating about the Ryder Cup is how loud and rowdy the crowd can become. Patrons are expected to be well behaved and especially quiet during players swings at a typical PGA Tour event or one of the four golf majors. The Ryder Cup couldn’t be more different! The crowd swells and indulges in a party atmosphere ripe with drinking, chanting, bright patriotic clothing, even strong heckling of the visiting teams players. Although out of the norm, this event still comes down to who plays the best golf. Whichever team embraces the rowdy environment and hits the most fairways, greens in regulation, and shots gained will go on to win.
As with the Ryder Cup, markets are going through a cycle where things could seem out of the norm. Valuations on the S&P 500 are historically high at ~22.5 times forward earnings as of this writing. The Fed cut rates while inflation, although down, remains above target. The labor market is certainly cooling while corporate earnings continue to climb to consistent all time highs. We’ll cap our list here, but the theme could easily continue. Even though data does seem divergent from the norm, just as the Ryder Cup still comes down to a game of golf, investing still comes down to time tested strategies such as asset allocation, rebalancing, and executing a plan. These variables remain within an investors control, just as swinging the golf club remains in control of the golfers competing at the Ryder Cup.
Where do I stand with my financial plan?
Let’s look at two items that have rewarded investors consistently over the years. First, let’s review corporate earnings. Simply put, it’s hard for equity markets to increase in value without positive corporate earnings growth. While summarizing the second quarter earnings season, the Morning Brew newsletter remarked, “So far, over 40% of companies in the S&P 500 jacked up their earnings projections, compared to 17% during the Q1 reporting season earlier this year…”1 Increasing corporate earnings projections has been cheered by markets. Second, let’s look at staying the course. Market commentator Phil Rosen recently computed the differences in investor performance around the April 2025 tariff announcements, “investors who sold their stocks through Liberation Day have been left with flat returns in 2025...holding the S&P 500 through the sell-off has returned nearly 11%, while selling and missing the day after the April 8 bottom has led to returns of just 1.2%.”2 In both these examples, regardless of the investing environment, sticking to a long term strategy and executing an asset allocation has proven successful for investors.
"You make most of your money in a bear market, you just don't realize it at the time." Shelby Cullom Davis
The Music Keeps on Playing
The 19% correction and near bear market of liberation day seems like generations ago. After the third quarter, the S&P 500 sits roughly at all-highs around 6700 (keep in mind on April 9th the benchmark was at 5200) up double digits for the third year in a row. Corporate profits have reached new all-time highs and are expected to grow 10% in 2025 with analyst estimates looking for another 14% growth in 20263. Are there pockets of irrational exuberance? We would argue absolutely. However, with that said the markets phenomenal appreciation over the last 5 years is largely justified. Since 2020, the stock market, as measured by the S&P 500, has appreciated 125%. 76% (95% in total) of the market’s returns have come from dividend payments and earnings growth4. Market returns from dividends and earnings growth are largely sustainable healthy returns. Roughly 24% of the market’s returns since 2020 have come from what we call “multiple expansion”. These types of returns are largely unsustainable and not repeatable. While stocks aren’t as cheap as they were 5 years ago, as long as corporate earnings continue to grow and the largest most profitable companies continue to pay dividends there is good reason to expect further market returns, even if it is likely at a lower pace than we have seen over the last 5 years. to coach you along the way.
Valuations Matter Very Little in the Short-term
While we have provided much discussion over recent newsletters on the above-average valuations of US large-cap stocks, and it continues to be a medium to long-term concern for investors, asset allocators valuations typically have very little correlation with stock market returns. This is true whether stocks are historically cheap or historically expensive. Often clients will ask questions along the lines of “if stocks are so expensive, why don’t we sell them?”. While this line of thinking is perfectly rational, US large cap stocks, and specifically large cap growth stocks were historically overvalued at the start of 2025. If investors had sold those holdings from their portfolios they would have missed out on 14.83% and 19.53% returns respectively over the last 9 months. Furthermore, former federal reserve chairman Alan Greenspan spoke of irrational exuberance during the tech-bubble in December of 1996. The stock market would go on to rise over another 100% before beginning to fall in 2000. Investors would have had 3-4 opportunities to profit and rebalance before stocks fell back to rational levels. No one knows how long the current bull market will continue, but predicting a premature end could cause investors to miss out on sizable long-term gains.
Fixed Income Still Pays
There has been much discussion of the federal reserve cutting interest rates and in turn, many investors think that means yields on fixed income are declining across the yield curve. While that may be true over the last 60 days, it’s not necessarily true if you compare interest rates to October of last year. The federal reserve directly controls the short-end of the yield curve. Perhaps it’s important to define what the “yield curve” is for those that don’t live in the finance world every day. The yield curve is used to describe investors differing required rates of return depending on how long one is locking up their money in a bond. Generally, the longer the term an investor is investing their money, investors require a higher rate of return and therefore receive a higher interest rate. The short-end of the yield curve, think investors putting their money away for one year or less, can be directly manipulated by the federal reserve. When the fed changes interest rates they are effectively shifting how much banks can get paid for overnight deposits. Directly this effects one interest rate, but there are no doubt spillover effects to the rest of the interest rate markets. Medium to longer term interest rates, think 5-30 years, are impacted by many more factors. Some of the more intuitive factors are perceived inflation risk, credit risk (risk of default), and time preference, among others. Now back to the point that fixed income is still attractive. Over the last twelve months the Barclays Aggregate Bond Index (think the Dow Jones for Bonds) is actually negative, meaning interest rates in the medium to longer term part of the yield curve have actually risen over the last 12 months. In conclusion, simply because the federal reserve is cutting, does not mean fixed income is no longer an attractive investment.
Referencing the chart on the below, the grey bars detail the highest yields and lowest yields offered on various fixed income securities over the last 15 years. The purple rectangle shows the median yield offered on fixed income over the same time period. The blue square details approximate current yields offered on the same fixed income securities. As one can see, the current yield sits comfortably above the median yield in every market segment. Additionally, market segments such as municipal bonds and asset backed securities sit at discounted valuations relative to the last 15 years. Fixed income still provides opportunities for investors, they just have to be comfortable stepping out from money market to see the returns they have come accustomed to over the last three years.
Source: Bloomberg, FactSet, J.P. Morgan Credit Research, J.P. Morgan Asset Management. Indices used are Bloomberg except for ABS: J.P. Morgan ABS Index; CMBS: Bloomberg Investment Grade CMBS Index; EMD (USD): J.P. Morgan EMIGLOBAL Diversified Index; J.P. Morgan CEMBI Broad Diversified; Leveraged Loans: Yield to worst is the lowest possible yield that can be received on a bond apart from the company defaulting and considers factors like call provisions, prepayments and other features that may affect the bonds’ cash flows. ABS data begins in 2012. *All sectors shown are yield to worst except for Municipals, which is based on the tax-equivalent yield to worst assuming a top income tax bracket rate of 37% plus a Medicare tax rate of 3.8%.
Guide to the Markets – U.S. Data are as of September 30, 2025.
AI Buzz Continues
The hype around AI continues with more companies mentioning it on their earnings calls, more executives stressing employees make it a daily focus, and some of the biggest businesses continue to make major capital expenditures into the technology whether it’s hardware or through other methods. This boom has significantly benefited the Large-Cap Growth segment of the market, seeing the index’s returns increase by 100.98%5 since Microsoft initially made public its investment in chat GPT in January 2023. In our view, AI is going to be a revolutionary technology, and many companies are going to become more productive and increase profits because of it. However, as with every revolutionary technology throughout history investors will get ahead of themselves at some point. We don’t know if that inflection will occur this year, next, or 5 years from now, but in our view, investors need to continue with a diversified portfolio that can achieve their financial goals even if growth stocks aren’t providing double digit returns every year. Morgan Stanley recently published a research report stating AI may generate $920 billion in annual benefits and add up to $16 trillion in market cap to the S&P 500. One should keep in mind US GDP is only $30trillion. Using Warren Buffett’s preferred metric of stock market value to US GDP, the US stock market sits at 217% of US GDP, which is 2.2 standard deviations above average (98th percentile overvalued)6. Investors should be enthusiastic about the technology and cautious about the euphoria.
The Government has Shut Down... Again.
As of this writing the government is in its sixth day of shut down. The media will scream like a carnival barker talking about how the shut down will have dramatic long-standing effects on markets and the economy. The truth of the matter is though government shutdowns do have short-term impacts on both the market and the economy, but in the long-term these episodes matter very little. Generally furloughed employees receive back pay and most parties are made whole. Using an old chart from LPL financial, historically the S&P 500 loses 0.4% during the average government shutdown, then sees an average 13% return the 12 months following the reopening. We would encourage investors, regardless of ones party preference, not to make emotional decisions due to the government’s current situation.
Embrace the Uncertainty
There is the saying in the investment industry that goes something like “we are investing in unprecedented times.” Whether it’s the financial crisis, covid, or 9% inflation, there will always be another “unprecedented” event that is impacting global markets. Quite frankly, we don’t know what that next event will be or when it will occur, no one does. Investors that do the little things right, are better prepared to have financial success over the long-term. Asset allocation and rebalancing have stood the test of time crisis after crisis, and we don’t expect this next era to be any different. Moving forward given above average valuations clients can expect tighter rebalancing bands and continued diversification.
Disclosure: Indexes shown: S&P 500 Value, S&P 500 Growth, S&P Mid Cap 400, S&P SmallCap 600 Growth, S&P SmallCap 600 Value, ICE BofA High Yield Bond Index ETF, Bar-clay's Aggregate Bond Index, MSCI World Index ex. US, S&P 500 Real Estate, and Morgan Stanley Capital Index Emerging Markets. This is not an official representation of your asset allocation. The percentages shown were calculated manually and could be subject to transcription error. Your official record of your asset allocation is shown on your official statement from Charles Schwab. Past Performance isn’t indicative of future results. *Performance Date as of 09/30/2025
1. Van Leuven, Et Al. . “Rough Riding.” Morning Brew, 18 Aug. 2025, www.morningbrew.com/issues/latest?utm_medium=website&utm_source=global_footer&utm_campaign=mb.
2. Rosen, Phil. “Stock Market Outlook: S&P 500 Sees One of Best 100-Day Rallies in History.” Opening Bell Daily, 3 Sept. 2025, www.openingbelldailynews.com/p/stock-market-outlook-fed-rate-cuts-september-seasonality-investors-wall-street-economy.
3. Kelly, Dr. David “JP Morgan Guide to the Markets” JP Morgan Asset Management Page 7 30 September 2025
4. Detrick, Ryan, “Irrational Exuberance? Not Really—profit growth mostly drove returns since 2019.” Carson Investment Research 23 September 2025
5. Large Cap Growth in this instance is measured by the performance of the SPYG (S&P 500 Growth ETF) from January 23, 2023 to September 30, 2025.
6. “Buffett Indicator Shows Stock Market Is Strongly Overvalued.” Buffett Indicator Valuation Model, www.currentmarketvaluation.com/models/buffett-indicator.php. Accessed 6 Oct. 2025.
This commentary on this newsletter reflects the personal opinions, viewpoints and analyses of the Delta Wealth Solutions, LLC employees providing such comments, and should not be regarded as a description of advisory services provided by Delta Wealth Solutions, LLC or performance returns of any Delta Wealth Solutions, LLC Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website/newsletter constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Delta Wealth Solutions, LLC manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results. Delta Wealth Solutions, LLC a Registered Investment Adviser. This newsletter is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Delta Wealth Solutions, LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Delta Wealth Solutions, LLC unless a client service agreement is in place.
The hypothetical information provided is back-tested performance, was compiled after the end of the period described and does not represent decisions made by Delta Wealth Solutions, LLC.
Specific note concerning graphs, images, charts, formulas, or any other visuals: Delta Wealth Solutions, LLC provides such exhibits for informational purposes only and the data provided alone should not be considered investment advice and should not in and of itself be used to determine which securities to buy or sell, or when to buy or sell them. Any graph, image, chart, formula, or visual should be only be considered in its specific context within this newsletter and from the original source where it is derived. Any use of a graph, image, chart, formula, or other visual is not a solicitation to buy or sell securities in any manner. Any investments should be considered thoroughly and discussed with the readers Financial Advisor.
This publication has been prepared by Delta Wealth Solutions LLC and may not be reproduced or distributed without the consent of Delta Wealth Solutions LLC. This document is for informational purposes only and is not an offer, or solicitation, to buy , sell or hold any financial product or investment. The analysis contained within this publication should not be considered a recommendation and does not take into account the specific goals, objectives, or needs of any recipient. Past performance is no indication of future results and different assumptions could create results that materially alter from the information conveyed in this publication. The opinions and information conveyed within this publication were procured by sources deemed to be reliable. This report is up to date as of the date and time reported on page 1 of this publication.
More information about Delta Wealth Solutions LLC can be found on our website at www.deltawealthsolutions.com, calling us at 816-810-4467, or e-mailing info@deltawealthsolutions.com. Delta Wealth Solutions is a Registered Investment Advisor in the State of Missouri.
