Third Quarter Newsletter

Responsible Guidance:  Third Quarter 2025 Newsletter, October 2025

Be cautious when others are comfortable and look for opportunities when others are anxious or nervous…

Market data in the third quarter was encouraging, but we should not become complacent. You will read that all of the indexes we cover were positive for the quarter and are positive through the first nine months. However, in the Your Personal Economy^SM (the aspects of your financial life that are unique to you) section below, we will suggest you should be mindful about how to process that information.

Looking forward, there are plenty of planning opportunities as we move into the last quarter of the year. October is officially Financial Planning Month, so along with investments, we are reminded that it is always a good time to review other financial aspects of your life such as estate planning, taxes, and insurance. Speaking of insurance, it is also that time of the year for those 65 and older to review their Medicare plans for 2026. The annual open enrollment period begins Oct. 15, 2025, and runs through December 7, 2025. During this period, you can make changes to your coverage that will take effect as of January 1, 2026. Baron Financial Group offers clients assistance with a review of their current plans or with new Medicare enrollment. If you are age 64 and older, you should have received an email or letter from us offering help with our Medicare consultants. If you have any questions please do not hesitate to ask.

Remember, your financial plan is not just about data, it is about creating a framework to operate within Your Personal Economy^SM. Our goal is to help you remain focused on your personal goals, regardless of economic, market or political noise. In the pages that follow, we will review what happened in the third quarter, as we help you plan for what comes next. With Your Personal Economy^SM at the center of the process, we aim to help you answer the most important financial question: “Am I going to be okay?”

A Global Perspective

A core objective for our customized Baron Financial Group investment strategies is global diversification, meaning strategies can include investments based both in the U.S., as well as internationally in developed and developing countries. There are popular benchmark indexes that provide perspectives about the performance of global investments.

For equities, we monitor the MSCI ACWI All Cap Index. This index represents stock investments across 23 developed and 24 emerging markets. Global diversification paid off in the third quarter, as the index continued its positive performance, and was up 7.71%, improving year-to-date (YTD) performance to 18.32%. Outperformance for developed countries outside the US, including those in emerging Asia countries, contributed to the strong performance that was broadly supported across regions. This was the second quarter in a row of positive performance.

For fixed income, or bonds, we track the FTSE World Government Bond Index. The index tracks sovereign debt from 20 countries, denominated in their respective currencies. The index was basically flat, up 0.17% for the third quarter and up 4.74% YTD. Rates have been coming down in many countries across the globe, as central banks try to stimulate more growth, and have been positive overall for this index in 2025.

U.S. Economy

The Atlanta Federal Reserve was on target, estimating growth would return in the second quarter, and the economy avoided any immediate recession concerns. Jobs continue to be added, but in decreasing numbers, and the unemployment rate increased and remains above 4% during the quarter. This may have been influential, as the Federal Reserve lowered interest rates for the first time this year in their September meeting.

The U.S. economy grew by 3.8% in the second quarter, according to Bureau of Economic Analysis (BEA). This was a rebound in growth, after the economy contracted by 0.5% in the first quarter. The primary driver in growth was a decrease in imports (subtracted from GDP) and an increase in consumer spending (the full press release can be found at  https://www.bea.gov).

Due to the normal delay in receiving growth data from the BEA, the Federal Reserve Bank of Atlanta publishes a “nowcast” by estimating GDP growth for the most recent quarter (in this case the third quarter of 2025) using an approach like the BEA. On October 1, 2025, the estimate for second quarter GDP from the Federal Reserve Bank of Atlanta suggests growth may continue at 3.8%. Please note that this estimate updates regularly and is subject to change. The “nowcast,” along with the methodology, and additional information can be found at: https://www.atlantafed.org/cqer/research/gdpnow.

Job growth continues, but the unemployment rate remains above 4.0%. According to the Bureau of Labor Statistics (BLS), the U.S. gained 22,000 jobs for the month of August, and the unemployment rate was 4.3%, slightly higher than 4.2% in June. BLS indicated job growth was notable in health care (full press release can be found at: https://www.bls.gov). Note that, due to the government shutdown, the September jobs data was not available at the time of this writing.

U.S. Stocks

The S&P 500, an index consisting of roughly 500 of the largest U.S. domestic stocks, remained strong. The index was up 8.12% for the quarter and 14.83% YTD. The technology sector continued to drive positive performance. The consumer staples sector struggled in the third quarter and distracted from the other positive performing sectors.

For technical analysts and trend followers, the index remained above the 50-day moving average and 200-day moving averages for the entire quarter.

Dividing index components into growth and value, growth-focused stocks continued to lead in the third quarter. Growth stocks have mostly dominated over the last decade. Value last outperformed on a calendar-year basis in 2022, when most equity indexes were struggling.

International Stocks

International-developed-country stocks (such as those in the European Union and Japan), measured by the MSCI EAFE index, continued their positive momentum, up 4.77% in the third quarter, bringing YTD performance to up 25.14%. Non-developed, or emerging-country stocks (such as those located in Brazil, India, and China), measured by the MSCI EM index, were also strong, gaining 10.64% in the third quarter and 27.51% YTD. This was the best performing index that we cover for the third quarter and also YTD.

After struggling in 2024, relative to U.S. stocks, international stocks continued to outperform in 2025 helped by attractive valuations, on a relative basis, and a weaker dollar during that time, along with other factors. The last time international stocks outperformed U.S stocks on a calendar-year basis was 2022, and then 2017 prior to that.

Bonds

U.S. Domestic Fixed Income (bonds), as measured by the Barclays U.S. Aggregate Bond Index (gauges performance of investment-grade intermediate bonds), was up 2.03% in the third quarter and up 6.13% YTD. The Federal Reserve restarted its rate-cutting cycle in September after pausing in January. Bonds have rallied in price as investors adjust to lower interest rate expectations. As demand for bonds increases, typically, prices rise and interest rates fall, possibly resulting in gains for existing bond holders. However, the opposite can occur when there are more bond sellers than buyers.

The 10-year U.S. Treasury bond yield finished the third quarter at 4.16%, below the 2024 year-end rate of 4.58%.  

A yield curve plots interest rates against the time-to-maturity to earn those rates. We continue to monitor the changing shape of the yield curve for U.S. debt issues, and what that may signal. Using the U.S. Government 2-year bond rate as a proxy for short-term rates and the 10-year U.S. Government bond rate as a proxy for long-term rates, we calculate the difference between the rates, which provides a possible indicator for the future direction of the economy. A steep spread (long-term rates higher than short-term rates) indicates potential future economic expansion, and fixed-income investors are compensated for taking longer-term risks. A flat spread (long-term rates match short-term rates) is a possible indicator of economic uncertainty, and longer-term investors are not being compensated for investing in longer-dated securities. An inverted spread (short-term rates are higher than long-term rates) possibly indicates future economic contraction.

At the end of the second quarter, the 2-year rate was 3.60% (and 10-year 4.16% per above), keeping the shape of the yield curve positive, at 56 basis points (a basis point represents 1/100 of 1%). The yield curve was positive by 33 basis points to start the year. So, though rates are lower overall, the shape of the curve became steeper compared to the start of the year.

The yield curve was inverted (short-term rates higher than long-term rates) from the third quarter of 2022 to the third quarter of 2024. As a reminder, the Fed started raising rates in March 2022 to fight inflation and then began cutting rates in September 2024, with inflation reducing.

If the economy continues to grow and if inflation slows, the curve could be indicating continued growth opportunities for the economy with long-term rates possibly remaining higher than short-term rates.

Housing and Real Estate

Commercial real estate, as measured by the FTSE NAREIT All Equity REIT (Real Estate Investment Trust) Index, rebounded slightly in the third quarter, up 2.67%. The index is up 4.51% YTD.

According to Freddie Mac (FM), the average 30-year residential home mortgage rate decreased to 6.34% (as of 10/2/2025). During the past 52 weeks, the rate has been between 6.08% and 7.22%.

Natural Resources

The Bloomberg Commodity Index regained momentum in the third quarter and was up 3.65%. The index finished the third quarter up 9.38% YTD. Within the Natural Resources category, precious metals, especially gold, and livestock did well. Natural gas, copper, and some agricultural products struggled in the third quarter.  

Baron Client Strategies

Planning for multiple outcomes with Your Personal Economy^SM is critical to helping our clients answer the simple question "Am I going to be OK?".

As clients know, we are Registered Investment Advisors (fiduciaries) and we operate as fee-only advisors, so we do not receive a commission for making investment transactions. A big reason your Baron team makes trades is to align clients' portfolios with their customized, risk-appropriate globally-diversified strategy. We also believe these actions potentially strengthen clients' portfolios or financial positions. We use this same approach with our own personal money.

No matter the economic environment, our basic principles remain:

Create a globally-diversified and risk-appropriate strategy. Validate the investment choices versus peer investments. Rebalance when needed. Test the strategy in a comprehensive financial plan and obtain regular feedback to update information and advance your financial position.

Your Service Plan

One of our primary roles is to educate our clients to make informed decisions about reaching their goals. Critical to that process are plan reviews, a process that focuses our attention on your goals, takes account of any changes in your situation, and allows us to alter the course, as necessary. If you have experienced any changes to your financial position or are considering changing financial goals and objectives, please let us know.

Your Personal Economy^SM

Concluding Comments

There is a lot to be happy about through the first nine months of the year and there is a lot to plan for and be mindful of during the last quarter. Try to avoid psychological traps like recency bias and stay focused on the process of the plan. As always, we are here to help you stay aligned with your personal goals and navigate Your Personal Economy^SM.

Baron Updates  

For our clients and friends, we hope you enjoyed our recent Client Appreciation Event in New Jersey. It is always a pleasure to see you! We are happy to introduce you to some of the dedicated people who help run the charities we are honored to support. Thank you to Alan and Mary-Edna Krutchkoff from Adopt-a-Soldier Platoon for explaining how they support members and veterans of the United States Armed Forces, their immediate families, and the immediate families of deceased veterans.

As always, we are happy to contribute to the Fair Lawn Food Pantry and the All Faiths Food Bank in Sarasota whenever we host a client event. Our next event will take place in Sarasota, Florida, at the Spring Training home of the Baltimore Orioles. As of this writing, the schedule has not been made public. Look for more information in the weeks to come.

As previously mentioned in this newsletter, October is Financial Planning Month, as well as the time for Medicare Open Enrollment. Visit our website blog to read or view our educational content on a wealth of financial topics, such as retirement and financial planning, Social Security, Market Update videos, Medicare, and more. The Baron Advisors are often called upon by journalists for their insights on financial planning and investing.

Additionally, October is Cybersecurity Awareness Month, another topic we hope to educate our clients about. We have several cybersecurity-related  posts and videos on our blog with alerts and protection advice. It is especially important to let us know if you receive any suspicious calls or emails related to any of your accounts.

Remember that you can also visit our website to gain access to your client portal. Just click on the client-portal tab, which will allow you to view your account information. The client login requires a username and password to gain access to the portal. Please let us know if you would like to create your portal login or if you would like to learn more about what the portal provides, including paperless statements. Contact Baron at 1-866-333-6659 or at info@baron-financial.com to enroll.

For enhanced security with your Baron portal, multi-factor authentication will be enabled starting in November. You will receive a one-time-password via email upon sign-in. Look out for an email next month with more details.

The Baron client portal is expected to go through an update in the coming months and could be as early as January. Although it may be organized a bit differently, the same information will be there and there will be options to further customize your information.  Once the date for the update is finalized, we will provide further guidance.

As always, thank you for your continued support!  
We hope you have a healthy and happy holiday season!

Warmest Regards,

 Baron Financial Group, LLC
www.baron-financial.com

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of October 9, 2025 and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by Baron Financial Group to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investment involves risks. International investing involves additional risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. The two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments. Index performance is shown for illustrative purposes only. You cannot invest directly in an index. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client or prospective client’s investment portfolio. Historical performance results for investment indices and/or categories generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. Inclusion of index information is not intended to suggest that its performance is equivalent or similar to that of the historical investments whose returns are presented or that investment with our firm is an absolute alternative to investments in the index (if such investment were possible). Investors should be aware that the referenced benchmark funds may have a different composition, volatility, risk, investment philosophy, holding times, and/or other investment-related factors that may affect the benchmark funds’ ultimate performance results. Therefore, an investor’s individual results may vary significantly from the benchmark’s performance.