October Newsletter to Clients

Enjoy this month’s edition that features a review of the market, a focus on our international mutual fund, a reminder about market performance during federal government shutdowns and the 2026 federal tax brackets.

Last month I wrote about the “September swoon” where the market has, inexplicably, declined in September more often than any other month. Well, not this year! The major stock indexes continue to hit record highs. 

The most recent Investors Intelligence survey showed those investors identifying themselves as Bulls (those who think the market will continue to rise) at 57.7 and Bears (those who believe the market will decline) at just 15.4. Note: this is an index, not a percentage, so the numbers don’t add up to 100. Similarly, the American Association of Individual Investors survey saw 45.9% as bullish about the stock market over the next six months, while only 35.6% were bearish. 

This reminds me of the Warren Buffett quote: Be greedy when others are fearful and fearful when others are greedy. Is the market a bit too greedy?

As you know, we aren’t market timers. We don’t try and anticipate where the market is headed and sell or buy to get ahead of other investors. Why? It’s a fool’s errand – no one knows where the market is headed in the short term. 

More important, we don’t just rely on the direction of the market to help you achieve your goals. We choose in which parts of the markets you should invest your hard-earned money. For instance, most of us have a portion of our portfolio invested in the stocks of companies located outside the U.S. While the U.S. is by far the largest stock market in the world, there are many really good companies located in developed regions like Great Britain, Canada, Europe and Japan. In addition, the decline in the value of the dollar this year has helped boost the earnings of these international companies. 

Most of us own the mutual fund T. Rowe Price Overseas Fund (TROIX) to get exposure to these types of companies. The fund invests in companies such as Siemens, ASML, Unilever, Taiwan Semiconductor, Nestle, AstraZeneca and Sony. Through the end of September the fund has returned over 25% in 2025. (That’s a good return over three years, let alone one) Comparatively, the S&P 500 Index of large, U.S. companies has returned a robust 15% through the end of September – but still 10% lower than our international fund. 

As I write this, the 9th federal government shutdown since 1982 is still in place. Normally, the stock market as measured by the S&P 500 appears to interpret shutdowns as political theater as opposed to events that have severe negative impacts on the economy, according to the money management firm Lord Abbett. Of course, the longer a shutdown lasts, or if furloughs turn into permanent layoffs, the larger the negative impact on the economy. According to a report from S&P Global, each week of a U.S. shutdown would shave an estimated 0.15% from U.S. GDP. Though most of that activity would likely be recovered quickly when the shutdown ends. 

The IRS recently set new tax brackets for 2026 – they make inflation adjustments each year. 
For 2026, the top marginal tax rate remains 37% for individual taxpayers with incomes greater than $640,600 or $768,700 for married couples filing jointly. The other rates and inflation-adjusted incomes are:

•    35% for incomes over $256,225 for single taxpayers or $512,450 for married couples filing jointly
•    32% for incomes over $201,775 or $403,550 for married couples filing jointly
•    24% for incomes over $105,700 or $211,400 for married couples filing jointly
•    22% for incomes over $50,400 or $100,800 for married couples filing jointly
•    12% for incomes over $12,400 or $24,800 for married couples filing jointly
•    10% for incomes of $12,400 or less for single individuals and $24,800 for married couples filing jointly.

Thank you for your continuing confidence.