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Major stock indices continued the 2025 rally and surged to new all-time highs in the third quarter as economic growth remained stable, tariff increases were no worse than feared and the Federal Reserve cut interest rates, beginning the long-awaited rate-cutting cycle. Markets started the third quarter with a continuation of the year-to-date rally thanks, initially, to the passage of the One Big Beautiful Bill Act in early July. This legislation contained several pieces of economic stimulus including making the 2017 tax cuts permanent, reintroducing accelerated depreciation and committing billions to the development of domestic industries, providing the markets and the economy with a fresh dose of fiscal stimulus. But while that was the first positive market event in July, it was not the last. Second-quarter corporate earnings results (released in mid-July) were stronger than expected and importantly showed no significant signs that tariffs or policy uncertainty were weighing on results. Finally, in mid-to-late July, the Trump administration announced trade agreements with some of the largest U.S. trading partners including the EU, Japan and South Korea, while the U.S. and China agreed to extend their trade “truce” as the two sides negotiated toward a larger trade agreement. These trade “deals” reduced investor anxiety stemming from the re-imposition of reciprocal tariffs in early August and lowered trade-related concerns among investors. These factors, along with stable economic and inflation readings, helped to push the S&P 500 steadily higher and the index rose 2.24% in July. The beginning of August brought an economic surprise, however, that temporarily paused the rally in stocks. The July jobs report, released on August 1st, was much weaker than expected, not just because job growth in July disappointed but also because there were substantial negative revisions to the May and June reports. The underwhelming employment data introduced the idea that the labor market was weaker than expected and that did slightly increase economic slowdown risks. However, the soft employment data also boosted expectations for a Fed rate cut, and at the Jackson Hole Economic Symposium Fed Chair Powell strongly hinted that a rate cut was coming at the September Fed meeting. Rising rate cut hopes helped to offset the underwhelming employment data and stocks ultimately continued their advance, as the S&P 500 rose 2.03% in August.   The rally accelerated in September despite growing signs that the labor market is indeed seeing some deterioration. The August jobs report was another underwhelming print showing just 22,000 jobs added that month, well below the consensus estimate. But like in August, the expectation for Fed rate cuts helped offset that negative employment report and the Fed did cut interest rates at the September meeting. Equally as importantly, Fed members signaled they expected two more rate cuts this year via the “dot plot.” The start of a Fed rate-cutting cycle, which should support the economy, combined with strong AI-related tech stock earnings from Oracle and Broadcom to send stocks higher and major U.S. stock indices all hit new all-time highs following that Fed rate cut, capping a moderate increase in September.   In sum, the third quarter was resoundingly positive for the U.S. economy and markets as economic data showed solid growth, inflation readings stayed mostly stable, the Fed cut interest rates, the U.S. reached trade agreements with major trading partners and AI-linked tech companies continued to produce better-than-expected earnings. Given these positives, major U.S. stock indices rallied solidly in the third quarter, just as they should have given this news.  Third Quarter Performance ReviewRising expectations for a rate cut; strong AI-related corporate results, and stable economic growth helped propel the major stock averages solidly higher in the third quarter.Starting with market capitalization, small caps outperformed large caps for the first time in 2025 as investors rotated out of large-cap stocks and into more economically sensitive small caps, as they historically have received the most benefit from lower borrowing costs that come with falling interest rates.From an investment style standpoint, both growth and value ETFs were solidly higher in Q3 but growth outperformed value thanks to continued strength in AI-linked tech stocks, continuing a trend from the second quarter.  On a sector level, 10 of the 11 S&P 500 sectors finished the third quarter with a positive return. Tech and tech-aligned sectors (consumer discretionary and communications services) comfortably outperformed other market sectors and posted strong quarterly returns. Positive earnings results from AI-linked tech stocks such as Microsoft, Alphabet, Amazon, Nvidia, Oracle, Broadcom and others kept investor enthusiasm for AI-related investments high and that powered tech and communications services higher. The consumer discretionary sector, meanwhile, benefited from solid economic growth and expected lower interest rates, which should support consumer spending. Looking at sector laggards, consumer staples was the only sector that finished the third quarter with a negative return. Investor preference for more economically sensitive sectors (given falling interest rates) and tariff related concerns pressured that sector, which finished the third quarter with a modest loss.Internationally, foreign markets saw mixed performance vs. the S&P 500 as emerging markets outpaced U.S. stocks in the third quarter while foreign developed markets posted a positive return but relatively underperformed the S&P 500. Emerging markets handily outperformed the S&P 500 in Q3 thanks primarily to a weaker dollar, falling interest rates and a rebound in Chinese economic growth. Foreign developed markets also rallied in the third quarter but lagged the S&P 500, due in part to concerns about fiscal stress and slow growth in the United Kingdom.    Commodities were solidly higher in aggregate in the third quarter but that result somewhat masked mixed internal performance. Gold surged to fresh all-time highs in the third quarter thanks to elevated inflation and the weaker U.S. dollar. Oil, however, declined as increased production from OPEC+ and concerns about global economic growth weighed on oil prices, especially late in the third quarter.     Switching to fixed income markets, the leading benchmark for bonds (Bloomberg Barclays US Aggregate Bond Index) saw a strong quarterly return despite elevated inflation readings, as expectations for rate cuts and labor market deterioration boosted demand for both short- and longer-term debt.   Looking deeper into the bond markets, longer-duration bonds comfortably outperformed those with shorter durations as investors reached for longer-term yield amidst underwhelming labor market data. Shorter-duration bonds also saw a positive return, however, as investors anticipated the start of a rate-cutting cycle by the Fed.      Turning to the corporate bond market, both investment grade bonds and lower-quality, high-yield bonds saw strong gains in the third quarter. Investment grade bonds slightly outperformed high yield bonds as the weakening labor market and slight uptick in economic concerns boosted the attractiveness of higher credit quality corporate bonds.Fourth Quarter Market OutlookMarkets begin the final quarter of 2025 in a decidedly positive macroeconomic environment as the Fed is cutting interest rates, tariffs have not disrupted the U.S. economy (so far), broader economic growth remains stable and investment enthusiasm for AI-linked tech stocks remains high. Those factors propelled stocks steadily higher throughout the third quarter, added to already-solid year-to-date gains for major U.S. stock indices and boosted investor enthusiasm.However, while the current macroeconomic setup is positive, it should not be confused with a riskless environment and continued gains in stocks are not inevitable. And as always, there are risks to the markets and economy we must monitor. First, the labor market is deteriorating and that is an economic risk that needs to be monitored closely. Numerous employment indicators, in addition to the monthly jobs report, are signaling a loss of momentum. For now, they are not at levels that would increase concerns about overall U.S. economic growth, but if we see the unemployment rate continue to rise, investors will become more concerned about the state of the U.S. economy and that could be an unexpected negative influence on the markets, as an economic slowdown is not currently anticipated by investors or analysts. Additionally, inflation remains stubbornly high. Headline CPI remains just under 3.0%, solidly above the Fed’s 2.0% target. Meanwhile, tariffs are now starting to impact broader parts of the U.S. economy and while analysts generally believe tariffs will produce only a one-time price increase and not create broader inflation, that outcome remains uncertain. Bottom line, there is a chance that tariffs further boost inflation in the fourth quarter and that could result in the Fed having to reconsider future rate cuts, which would produce a negative surprise. Staying on tariffs, there remains substantial policy uncertainty with regard to trade and tariff policy. The Supreme Court will hear arguments on most reciprocal tariffs in November and if the Supreme Court upholds the lower court ruling invalidating tariffs, it could cause market volatility. While the removal of tariffs may initially boost stocks, it will also extend broader policy uncertainty, as the administration will likely try to reimpose tariffs using different legislation. Bottom line, markets embrace clarity and the longer trade policy uncertainty exists, the greater the chance that it becomes a headwind on growth. Finally, AI and tech enthusiasm has driven the valuation of the S&P 500 to a historically high level. While elevated valuation, by itself, isn’t a negative influence on stocks, the high valuation does underscore this reality: A lot of profit growth is priced into the largest tech stocks and if AI-related capital expenditures from major tech firms begin to decline or AI adoption disappoints investor expectations, it could be a substantial surprise negative for markets.  In sum, the macroeconomic environment is currently positive as the economy and markets are benefiting from rate cuts, fiscal stimulus (via the One Big Beautiful Bill Act) and continued investor enthusiasm for AI-linked tech stocks. But we also recognize that risks remain on the periphery of both the markets and the economy.    At Towson Partners Wealth Management, we understand the risks facing both the markets and the economy, and we are committed to helping you effectively navigate this challenging investment environment. Successful investing is a marathon, not a sprint, and even intense volatility is unlikely to alter a diversified approach set up to meet your long-term investment goals.Therefore, it’s critical for you to remain patient, and stick to the plan, as we’ve worked with you to establish a unique, personal allocation target based on your financial position, risk tolerance, and investment timeline.Rest assured that our entire team will remain dedicated to helping you successfully navigate this market environment.Please do not hesitate to contact us with any questions, or comments, or to schedule a portfolio review.Sincerely,Towson Partners

Market volatility spiked in the second quarter as the S&P 500 dropped sharply in early April following the announcement of sweeping reciprocal tariffs, although those initial losses were slowly and steadily recouped over the remainder of the quarter as initial tariff rates were reduced while economic growth proved resilient and inflation stayed low, allowing the S&P 500 to hit a new all-time high and finish the quarter with a strong gain.The second quarter started with a proverbial thud as, on April 2nd, President Trump announced sweeping and substantial tariffs on virtually all U.S. trading partners. The tariff amounts were significantly larger than markets expected and their announcement sparked fears of a trade-war-driven economic slowdown, which hit stocks hard as the S&P 500 dropped more than 10% in the days following the tariff announcement. However, that low in the index on April 8th turned out to be the low for the quarter as the rest of April saw the administration take numerous steps to reduce the practical impact of those announced tariffs. A week after reciprocal tariffs were announced, the administration declared a 90-day delay where tariff rates on most trading partners would be just 10%, far below most reciprocal tariff rates. That delay was then followed by more steps to reduce the tariff burden, including important exemptions for key imports such as smartphones, semiconductors, pharmaceuticals and computers. The delay in reciprocal tariff rates and key category exemptions gave investors some confidence that the trade war would not automatically cause a recession, and that optimism combined with a solid first quarter earnings season to help the S&P 500 rally throughout the remainder of April and close with just a slight loss, down 0.68%.   The market rebound accelerated in May as Treasury Secretary Scott Bessent announced he would be meeting with Chinese trade officials in Geneva early in the month. That boosted investor expectations for more tariff relief and those hopes were fulfilled as the meeting resulted in a dramatic reduction in tariffs on Chinese imports from 145% to approximately 30%. That tariff reduction combined with still-solid economic growth further eroded investor concerns that tariffs would cause a recession and the S&P 500 extended its rebound. Earnings also contributed to the rally thanks to strong results from tech bellwether Nvidia (NVDA), which reminded investors of the growth potential of artificial intelligence (AI). Finally, in late May, the Court of International Trade ruled the administration’s tariffs were illegal under the law used to justify the duties. The case was appealed immediately and a decision should come in the third quarter, but the initial ruling raised the prospect that tariffs could be eliminated almost entirely by the courts in the coming months. That decision further strengthened the belief that tariffs would not derail the strong economy and the S&P 500 turned positive year to date and finished May with very strong gains, up 6.29%. The rally continued in June although trade headlines, which had driven market moves for the first two months of the quarter, took a back seat to geopolitical concerns after Israel launched a massive attack on Iranian nuclear and military facilities. The hostilities between the two rivals caused oil prices to temporarily spike and that halted the rally in mid-to-late June, as investors again had to consider the prospect of rising oil prices hurting economic growth and boosting inflation. However, that volatility was limited, as following U.S. strikes on Iranian nuclear facilities, a ceasefire was agreed to between Iran and Israel and oil prices dropped sharply, turning negative for the quarter. That decline, combined with rising expectations for rate cuts in the second half of the year, pushed the S&P 500 to new all-time highs in the final days of June. In sum, the stock market completed an impressive rebound from the steep declines of early April, as steps by the administration to ease the tariff burden helped to boost investor confidence while corporate earnings remained strong and economic growth proved resilient, yet again, even in the face of geopolitical uncertainty and elevated policy volatility. Second Quarter Performance ReviewThe gains in the S&P 500 in the second quarter were particularly impressive considering the intense selling witnessed in early April, as the market rebound was broad and the majority of indices, sectors and factors logged a positive return for the quarter. By market capitalization, large caps outperformed small caps in Q2, as they did in the first quarter. A lack of Fed rate cuts, generally elevated bond yields and some soft economic data late in the second quarter weighed on small caps, although they still finished the quarter with a positive gain.  From an investment style standpoint, growth massively outperformed value in the second quarter, as tech-heavy growth funds attracted value-seeking investors following the April declines. Tariff reductions and exemptions also boosted the outlook for major tech firms while solid earnings from AI bellwethers Nvidia (NVDA) and Oracle (ORCL) helped renew AI enthusiasm amongst investors. Value funds, meanwhile, were weighed down by weakness in energy shares but still managed a slightly positive return for the quarter.On a sector level, seven of the 11 S&P 500 sectors finished the second quarter with positive returns. The best-performing sectors in the second quarter were the AI-linked technology and communications services sectors as well as the industrials sector. All three sectors benefited from tariff reductions and exemptions as many companies in these sectors have strong international businesses.Turning to the sector laggards, energy and healthcare posted solidly negative returns for the quarter, as both were pressured by negative industry-specific news. For energy, volatility in oil prices (and a lack of a sustainable rally despite the Israel-Iran conflict) weighed on energy producers, as did general fears of an economic slowdown. For healthcare, uncertainty over pharmaceutical tariffs as well as a legislative focus on reducing prescription drug costs weighed on healthcare stocks.    Internationally, foreign markets outperformed the S&P 500 for most of the quarter, although the late June surge in the S&P 500 saw that index pass both emerging and foreign developed indices from a performance standpoint. Emerging markets outperformed foreign developed markets due to substantial de-escalation in the U.S./China trade war as well as some encouraging Chinese economic data. Foreign-developed markets also posted strong returns for the quarter thanks to falling interest rates and generally resilient economic growth.Commodities saw slight declines in the second quarter due to weakness in oil prices, although a continued rally in gold kept losses for most commodity indices modest. Gold added to the already-impressive YTD returns, aided by the falling dollar (which hit a three-year low in the second quarter) and elevated geopolitical tensions. Oil prices, meanwhile, were volatile but ended the quarter with a modest loss as geopolitical tensions eased following the Israel/Iran ceasefire and in response to some lackluster U.S. economic readings in June.  Switching to fixed income markets, the leading benchmark for bonds (Bloomberg U.S. Aggregate Bond Index) realized a modest positive return for the second quarter, as stable inflation readings and some cooling of U.S. economic growth late in the quarter boosted demand for bonds.   Looking deeper into the fixed income markets, longer-duration bonds outperformed shorter-duration bonds because of the aforementioned stable inflation data and slightly underwhelming economic readings. Shorter-term bonds lagged as the Fed remained in a “wait-and-see” approach to rate cuts given the central bank wants to wait to see the impacts from tariffs on both growth and inflation. Turning to the corporate bond market, both investment grade and lower quality “high yield” bonds posted solidly positive quarterly returns. High-yield bonds outperformed investment grade debt, however, as generally resilient economic growth and the promise of looming tax cuts gave investors confidence to reach for higher yield and assume more credit risk. Third Quarter Market OutlookThe markets begin the third quarter following an impressive first half performance, as the S&P 500 hit a new all-time high despite much-larger-than-expected tariffs on U.S. imports, a dramatic increase in policy volatility and more hostilities in the Middle East.  While investors expected tariffs and a tougher stance on trade from the new administration, the moves taken in the first half of 2025 exceeded the vast majority of expectations as tariffs were both higher and more far reaching than most analysts expected. But moves by the Trump administration to ease the tariff burden combined with the court decision invalidating reciprocal tariffs boosted market confidence that neither the administration nor the courts would allow tariffs to derail economic growth. That belief helped stocks look past what is still a dramatic increase in tariffs.Importantly, tariffs matter to the markets primarily because, if not properly executed, they could cause an economic slowdown, or worse, stagflation, where growth slows but inflation rises. Fears of a tariff-induced slowdown or return of stagflation were contributing factors behind the April decline in stocks. Positively, economic data remained mostly resilient throughout the second quarter and there are no major economic indicators pointing to a material slowing of growth or a sudden rise in inflation. That resilient data in the face of tariffs and geopolitical turmoil contributed to the market rebound in the second quarter.   Finally, geopolitical risks undoubtedly rose with direct conflict between Israel and Iran (including U.S. involvement in the war) and no progress on a ceasefire on the now three-year-long war between Russia and Ukraine. However, the market views these conflicts as largely isolated and not at risk of spreading into a larger regional war that could disrupt oil production or the global economy. Because of that, markets largely ignored the increase in geopolitical tensions during the quarter. However, while the market was impressively resilient over the past three months, it would be a mistake for investors to become complacent in this environment, because there remain a lot of risks facing the economy and markets.First, while the market has assumed that tariffs won’t rise substantially from current rates, there’s no guarantee of that. To that point, the deadline for the reciprocal tariff delay is July 9th and if that deadline is not extended, we could see tariff rates on major trading partners surge once again. Regardless, the reality is that global tariff rates are at multi-decade highs and it’s still uncertain how that will impact the economy in the months ahead (so risks of a tariff-induced slowdown or rise of stagflation can’t be dismissed).Turning to geopolitics, while the various conflicts have not negatively impacted global markets, risks remain elevated. If Iran takes steps to disrupt global oil production or transit, that will boost oil prices and create a new headwind on markets. Similarly, if these isolated conflicts begin to spread into larger regional conflicts that will also lift oil prices and weigh on stocks and bonds. Finally, investors still expect two interest rate cuts from the Federal Reserve between now and year-end; however, the unknown impact from tariffs on economic growth and inflation make rate cuts in 2025 far from certain. If the Federal Reserve does not cut rates in the coming months, that will increase concerns about an eventual economic slowdown and that could weigh on markets. Bottom line, markets have been impressively resilient so far this year, but as we start the second half of 2025 there remain numerous, potentially significant risks to the markets and the economy and we will not let the market’s resilience create a sense of complacency. At Towson Partners Wealth Management, we understand the risks facing both the markets and the economy, and we are committed to helping you effectively navigate this challenging investment environment. Successful investing is a marathon, not a sprint, and even intense volatility is unlikely to alter a diversified approach set up to meet your long-term investment goals.Therefore, it’s critical for you to remain patient, and stick to the plan, as we’ve worked with you to establish a unique, personal allocation target based on your financial position, risk tolerance, and investment timeline.Rest assured that our entire team will remain dedicated to helping you successfully navigate this market environment.Please do not hesitate to contact us with any questions, or comments, or to schedule a portfolio review.Sincerely,Towson Partners

by Jack CintorinoVice President & Senior Financial PlannerMay 15, 2025The way your assets are distributed into accounts, and, specifically, the way those accounts are titled, can directly affect your estate plan.Transferring Assets to Your Next GenerationAn essential piece of the financial planning process is ensuring that your assets will pass to the next generation according to your wishes. There are three ways your accounts can be passed to your heirs:WillContractLawWills and trusts pass most accounts titled in your individual name to the beneficiaries named in the will or trust document. Keep in mind, a will does not avoid probate. Before it becomes effective, every will must be “admitted” by the probate court in the county where a person resided at his or her death. However, assets such as life insurance, annuities, or individual retirement accounts pass directly to third parties through a beneficiary designation. This is true even if your will or trust says otherwise.Understanding Account TitlesHere are the most common account titles, besides individual accounts, and the importance of their impact.Joint Tenants with Right of Survivorship (JTWROS)This is one of the most common ways married couples title accounts. This type of account will pass directly to the surviving account holder when the first account holder dies, regardless of what the first account holder’s will says. In fact, it is often desirable to hold an account in JTWROS form between spouses, because the surviving spouse will have access to the funds in the account immediately at the death of the first spouse, rather than having to wait several months for a will to be probated.Transfer on Death (TOD)Almost every state has adopted the Uniform Transfer-on-Death Securities Registration Act, a law that lets you name someone to inherit your accounts without probate. It works very much like a payable on death bank account. This is a designation added to an individually-titled account. In appointing a specific beneficiary, the account will automatically be transferred to the designated beneficiaries on the account holder’s death without going through probate. This is done simply by providing proof of death and some identification to the financial institution. This titling will supersede any instructions in your will.Unlike a JTWROS account, the beneficiaries will not have access to the account during your lifetime. This designation allows you to specify both multiple beneficiaries and the percentage of assets each will receive. If the payable on death (POD) beneficiary dies before the account holder, their share is eliminated and is divided among the surviving POD beneficiaries. A transfer on death (TOD) designation can be used only to transfer certain assets. Some states will allow you only to transfer securities, while other states allow TOD designations to transfer land, cars, and other assets. The TOD designation is not available for all assets in all states. What may be registered varies widely.Transfer-on-Death Deeds for Real EstateIn many states, you can prepare a deed now, but have it take effect only at your death. These transfer-on-death deeds must be prepared, signed, notarized, and recorded (filed in the county land records office) just like a regular deed. But unlike a regular deed, you can revoke a transfer on-death deed. The deed must expressly state that it does not take effect until death.Beneficiary DesignationsWhen you open a retirement plan account such as an IRA or 401(k), or purchase an insurance solution such as life insurance or an annuity, the forms you fill out will ask you to name a beneficiary for the account. After your death, the beneficiary you named can claim the money directly from the account custodian.Surviving spouses may have more options when it comes to withdrawing the money than other beneficiaries. For retirement accounts, if you're single, you're free to choose whomever you want as the beneficiary. If you're married, your spouse may have rights to some or all of the money.A Note About Life Insurance Ownership and BeneficiariesLife insurance proceeds may be reduced by estate taxes. The general rule is that life insurance proceeds are subject to the contract owner’s federal estate tax and, depending on your state's laws, state estate tax as well. An Irrevocable Life Insurance Trust (ILIT) is a trust primarily set up to hold one or more life insurance policies. The main purpose of an ILIT is to avoid federal estate tax.If the trust is drafted and funded properly, your loved ones should receive all of your life insurance proceeds, undiminished by estate tax. If you name the ILIT as the beneficiary of your life insurance policy, your family will ultimately receive the proceeds because they will be the named beneficiaries of the ILIT. This way, there is no danger that the proceeds will end up in your estate.Living TrustA living trust is a popular estate planning tool that lets you retain control over the trust property while you are alive, and pass trust property outside of probate when you die. Assets in the living trust do not pass through your will when you die. Instead, they are distributed by the trustee according to the terms you establish in the trust.Also, the assets in the trust are not part of your probate estate. This may get them into the hands of your beneficiaries faster or, if you desire, provide that the assets be held until the beneficiaries meet certain criteria or attain a certain age. Since the trust is not subject to probate, the terms of the trust are private. A revocable living trust does not minimize income, gift, or estate taxes, nor does it shelter trust assets from creditors in most cases.Are your estate plan and beneficiary designations up-to-date?Any time there is a change in your life circumstances, the titling of your accounts and your estate plan should be reviewed and, if necessary, updated. Account titling and beneficiary designations can have income and estate tax implications as well, which should be discussed with your personal legal and tax counsel. We can help ensure that your titling and beneficiary designations are reviewed periodically.Click here for print friendly version...............................................................................................................................................................................Working With JanneyDepending on your financial needs and personal preferences, you may opt to engage in a brokerage relationship, an advisory relationship or a combination of both. Each time you open an account, we will make recommendations on which type of relationship is in your best interest based on the information you provide when you complete or update your client profile.If you engage in a brokerage relationship, you will buy and sell securities on a transaction basis and pay a commission for these services. Our recommendations for the purchase and sale of securities will be based on what is in your best interest and reflect reasonably available alternatives at that time.If you engage in an advisory relationship, you will pay an asset-based fee, which encompasses, among other things, a defined investment strategy, ongoing monitoring, and performance reporting. Your Financial Advisor will serve in a fiduciary capacity for your advisory relationships.For more information about Janney, please see Janney’s Relationship Summary (Form CRS) on www.janney.com/crs which details all material facts about the scope and terms of our relationship with you and any potential conflicts of interest.By establishing a relationship with us, we can build a tailored financial plan and make recommendations about solutions that are aligned with your best interest and unique needs, goals, and preferences.Contact us today to discuss how we can put a plan in place designed to help you reach your financial goals................................................................................................................................................................................Janney Montgomery Scott LLC, its affiliates, and its employees are not in the business of providing tax, regulatory, accounting, or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.Ref #: 1852285