One Capital Management

Nothing great lasts forever. Not one of the top 10 S&P 500 companies since 1985 is still in the top 10 today. Only GE & Exxon lasted 30 years in the top 10. By 2025, only Microsoft had spent 20 years in the top 10 & just 4 of the top 10 had been there for 10 years or more.

Affordability isn't just a political buzzword. The strength of an economy is rooted in affordability, in households being able to meet their expenses & have a little left over for savings. Here's how we look at affordability & what economic data tells us: ow.ly/tMzP50Y1i1F

Strong stock market returns may have led to portfolio drift & a higher risk portfolio. Consider that a portfolio of 60% stocks & 40% bonds at the start of 2019 would have grown to over 70% in stocks & just 25% in bonds by Sept. 30, 2025, assuming dividends were reinvested.

Today's innovative, asset-light companies & industries are not the same businesses, & investors are rightly treating them that way. Net profit margins have expanded through the last 3.5 decades. Technology companies now make up about 45% of publicly traded U.S. companies.

Much of the US economy is driven by innovative, asset-light companies w generally stronger balance sheets. Non-financial companies now use less leverage (left chart) & about 45% of the S&P 500 is now tech companies w higher margins & larger moats (right chart).

While valuations (chart at upper right) are higher than the long-term average, especially in the technology & communication services sectors, their higher earnings growth rates are driving near record profitability (left hand chart).

The effective YTD tariff rate is 6.2%, which is 4% above the 2.3% average of the last 45 years, but lower than you might assume, given the estimates in April 2025. Tariffs on goods have been rising, rather than on services, which currently account for most of overall inflation.

The elephant (& the donkey) in the room won’t be ignored. We’ll address the U.S. government shutdown. But first, let’s take a trip back to January 1984 when tensions between the U.S. & the Soviet Union were running high. ow.ly/t3yX50Xgutc

We expect inflation to rise over the next year due to tariffs & fiscal stimulus but fall later in 2026. Tariffs are starting to impact inflation, w/ YoY CPI inflation rising to 2.9% in August. We believe this will increase as retailers apply mark ups to new inventories.

Earnings have continued to be strong, driving markets upward, while revenue has been steady. Net profit margins remain healthy at 12.8%.

Labor markets are currently an under-the-radar but crucial piece of the global economy, especially when it comes to the U.S. & Canada. Labor markets can be understood by thinking about...the bathtub. Find out more in the Summer folio: ow.ly/j0CF50WrAz8

The universe of #midcap & #smallcap companies is fraught with unprofitability.

AI enthusiasm significantly drove US large-cap stocks over the last 2 years as the #Magnificent7 stocks generated outstanding returns & earnings growth. Without the #Mag7, the remaining stocks had almost zero earnings growth, but the wealth is likely to expand.

The makeup of large companies and small companies is quite different from a sector lens. Technology & telecom dominate the large-cap space, while financials, industrials, & health care drive the universe of small companies.

Our Spring 2025 folio was inspired by this Warren Buffett advice. We shared what we believe is important and knowable about volatility & tariffs. Read it here: ow.ly/Cjrv50VN1UA

Our perspective on the early April tariff tumult, starting with an assessment of the markets’ immediate reaction and some insights on capital markets and tariffs in general. ow.ly/ONsu50VJXUV

Tariffs & the ensuing market volatility have caused anxiety & uncertainty. So, let’s take Warren Buffett's advice: “What you really want to do in investments is figure out what’s important & knowable." Here's what we believe is important & knowable: ow.ly/4BSb50VFREN

Bird flu is decimating the egg-laying hen population (layers) w/ nearly 40 million layers slaughtered. The supply of eggs is strained, & egg prices are up. However, it is temporary. Unfortunately, this has occurred twice since 2023.

Loosening labor market slack has led to a moderation in wage growth. After peaking at 7.0% in March 2022, wage growth has slowed. Productivity growth in the current business cycle so far is higher than the previous cycle & below the long-term rate of 2.1%.

Take a closer look at the key drivers behind recent GDP growth: Consumer spending powered the economy forward, contributing 2.5% to the 3.1% increase in real GDP in Q3 2024. Other segments, such as business investment & government spending, also performed well.