September was a month of contrasts. The Federal Reserve raised interest rates by a quarter point—its first hike since 2023—and signaled more could be on the way. Stocks shrugged off the news, with the Nasdaq hitting a fresh record and the S&P 500 hovering near its highs. But bonds told a different story, and the cracks beneath the surface of the equity rally are getting harder to ignore.
For our monthly Finimize Portfolio update, we look at how our research picks have fared, what's changed, and what investors should watch next. Here's the October edition.
The Fed's hawkish turn
The unanimous rate hike was a clear signal that the central bank is worried about inflation. Higher energy prices, lingering price pressures, and heavy government borrowing have kept the heat on. The Fed's hint at further hikes suggests this isn't a one-and-done move—markets now expect a longer tightening cycle than they did a few months ago.
For everyday investors, higher rates mean borrowing costs go up for companies and consumers, which can squeeze corporate profits and slow economic growth. It also makes bonds more attractive relative to stocks, since yields are climbing.
Bonds get battered
While stocks celebrated, bonds suffered. A global selloff pushed the 30-year Treasury yield toward 5.5%—a level not seen since 2004. The drivers: higher energy prices, inflation fears, worries about government debt, and heavy borrowing by AI companies to fund their data-center buildouts.
Rising long-term yields are a double-edged sword. On one hand, they offer savers better returns on fixed-income investments. On the other, they raise the cost of borrowing for governments and corporations, and they can weigh on stock valuations by making future earnings less valuable today.
If you hold bond funds, you've likely felt the pain—bond prices fall when yields rise. But for those with cash on the sidelines, higher yields are a welcome development.
The AI rally is real—but narrow
Artificial intelligence has been the engine of the stock market's gains. The S&P 500 is trading about 2% below its all-time high, thanks largely to a handful of mega-cap tech names. But look under the hood, and the picture is less rosy.
According to Goldman Sachs, the median stock in the S&P 500 is trading 16% below its 52-week high. That means most stocks are actually in a drawdown, even as the index flirts with records. Market breadth—the number of stocks participating in the rally—has fallen to its lowest level since the dotcom bubble.
This is a classic sign of a narrow market. When only a few giants drive the index, it can be fragile. If those leaders stumble, there's little to cushion the fall. For investors, it's a reminder to check whether your portfolio is as diversified as you think.
Our portfolio: the numbers
Since our ideas launched in October 2024, they've delivered an average return of 24%, beaten their benchmarks by eight percentage points, and posted a 68% hit rate—meaning most of our calls made money. That's a solid track record, but it's not uniform. Some ideas have soared, others have lagged, and a few we've decided to cut.
This month, we're throwing a few Finimize Portfolio ideas on the chopping block. That's part of the process: we review every open idea, check the thesis, and decide whether it still holds. You can follow every trade in the tracker, which has links to each investment case and up-to-date performance stats.
What it means for investors
The takeaway from this month's review is that concentration risk is real. The AI trade has been fantastic for those who rode it, but it's left the broader market vulnerable. If you're heavily weighted in tech, consider whether you're comfortable with that level of risk.
Bonds, meanwhile, are offering yields we haven't seen in two decades. That's a meaningful shift for income-seeking investors. But be aware that if yields keep climbing, bond prices will keep falling—so duration matters.
We're also watching the quarter-end rebalancing flows that could push money from stocks to bonds, and the pressure on Asian currencies as the dollar stays strong. Both could affect markets in the weeks ahead.
As always, we're not telling you what to buy or sell. Our job is to explain what's happening and why it matters for your money. The full breakdown of our analyst-by-analyst review is in the tracker—check it out to see what we've changed and why.
