AI, Headlines, and Your Portfolio: Context That Helps

You’ve likely seen headlines comparing today’s AI-driven market to the late-1990s dot-com era. We take those comparisons seriously. This note outlines what’s different today, what still deserves caution, and, most importantly, how we’re positioning your strategy to hold up across a range of outcomes.¹

Where Valuations Stand
Stock prices have climbed, and by simple measures of “price versus earnings,” the market looks more expensive than its long-term average. That’s a reason for discipline. However, it’s also true that the broad market remains below the most extreme levels reached in the late 1990s. You can see this in the valuation charts that track the relationship between prices and earnings over time.²

What’s Different From Dot‑Com Era
Back then, Barron’s magazine cover story in March 2000, called “Burning Up,” reported that 74 percent of 207 publicly traded internet companies had “negative cash flows” and at least 51 of those companies were projected to run out of money in the next 12 months. In contrast, today the largest parts of the market are producing real earnings, and overall profit margins across the major U.S. index remain above their five-year average. That doesn’t remove risk, but it does mean prices are supported by business results that we didn’t see from some companies in the dot-com cycle. FactSet’s latest quarterly review provides a good snapshot.³

AI Isn’t Just a Story—There’s Heavy Investment Behind It
A big reason certain companies have led is the build-out of the “plumbing” for AI: data centers, chips, software, and power. You can see this in government data, which shows manufacturing construction near record highs, much of it related to chip facilities, and in rising business spending on information-processing equipment and software. Those are dollars going into real plants, servers, and tools that support future productivity.^4,5

What the Federal Reserve Is Doing—And Why It Matters
The Fed lowered interest rates for the second time on October 29 and said it will stop shrinking its bond holdings on December 1. That combination appeared to ease some pressure in financial markets without being a promise to keep cutting short-term rates from here. The message was that conditions warranted a modest step, and from here, the Fed would respond to the data.^6,7

About the Government Shutdown
Government shutdowns create uncertainty and lots of media coverage. Historically, markets have often overlooked them; returns during past shutdowns have been mixed, and many episodes have been flat to slightly positive. That’s not a forecast, just context that short-term political moves haven’t reliably driven long-term market outcomes.⁸

How We’re Managing Your Strategy
Our job is to make sure you and your overall approach remain on track. We continuously track a core set of signals, including earnings trends, profit margins, credit conditions, employment levels, and inflation—and we adjust our approach when the facts change. If you’d like to meet and discuss how your portfolio is positioned for both stronger and more challenging environments, please give us a call to schedule a meeting.^9,10

Bottom line, we are on top of this, and we’re here if you'd like to discuss further.

<sup>1. Insights.com, October 08, 2025.
2. Yardeni.com, 2025.
3. FactSet.com, October 31, 2025.
4. Fred.StLouisFed.org, September 25, 2025.
5. Fred.StLouisFed.org, September 25, 2025.
6. FederalReserve.gov, October 29, 2025.
7. Reuters.com, October 29, 2025.
8. Bloomberg.com, September 30, 2025.
9. Corporate.Vanguard.com, 2025.
10. Morningstar.com, April 1, 2025.</sup>