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From its December 1989 inception through the end of 2022, the Dividend Aristocrats (DA) Index handily outperformed the S&P 500, posting an 11.8% annualized return compared to the parent index’s 9.7% gain. However, the AI mania driving the market today has erased much of that 33-year advantage, and Dividend Aristocrats rank as the worst performing style since the beginning of 2023. We were intrigued by this turnabout and what it means for investing in dividend growers going forward.

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Markets continued their late-year rally in September, and all three Leuthold strategies delivered positive results. Core stayed competitive with net equity exposure under 60%, Select Industries benefited from broad sector strength and a new Biotechnology allocation, and Grizzly Short found opportunities even in a strong tape.

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Interest-rate cycles driven by Fed-policy changes can be the most powerful determinants of economic and market conditions. Decisions to raise or lower the fed funds rate impact sectors and styles differently; September’s rate cut prompted us to review equity winners and losers from prior episodes.

We’re in the third upleg of a cyclical bull market that began at full employment, yet  this rally is tracking the path of a bull market that launched in the aftermath of a recessionary bear market bottom.

While our traditional breadth and leadership studies advise the market is quite healthy, we’ve lately observed some broader disagreement from long-term leaders, including the Magnificent Seven—of which only two have made new 52-week highs over the last month.

Officially, as of September 30th, five of our eight bellwethers have confirmed the latest S&P 500 high. That’s typically good enough for the boat to stay afloat—and looks healthier than at February’s high.

FOMO is in full gear and—unlike the meme-stock mania of 2021—it’s been underpinned by an extremely compelling storyline: The seemingly limitless possibilities of artificial intelligence.

Biotechnology has reentered the Select Industries portfolio as improving fundamentals and a sharp sentiment rebound lifted the group into Attractive territory. While policy risks remain, the backdrop of stronger earnings revisions and reasonable valuations supports a renewed allocation to the sector.

With the second and third quarters’ results in the books, 2025 is back to following the exact same playbook seen the past two years. The eight largest firms in the S&P 500 posted an average return of +50% since the end of Q1. That octet—now a 37% index weight—has contributed a little over two-thirds of the S&P 500’s +20% return during the last six months.

Russell 2000 Growth gained 26% since the end of March—the largest two-quarter bump for that index measured back to 2020. It fell just short of eclipsing its all-time high set in February 2021.

Small Caps have come alive the past two quarters with the Russell 2000 posting a 21% price increase. Why hasn’t our Ratio of Ratios turned higher (lower SC discount)? This vignette excludes firms with no earnings. Note that the higher-quality S&P 600 has gained 13% since the end of March.

The Up/Down ratio reads 1.51. This is the first time the “three-month” tally has been above the vignette’s 41-year average since Q3-21 (15 quarters ago). Both the level and the momentum of this survey would suggest that an economic recession is not imminent.

With a supportive backdrop of a more accommodative Fed and expansive fiscal stance, markets have grown accustomed to spinning both good and bad news into a positive narrative. Within fixed income, we remain constructive toward higher-quality credit.

The stock rally and associated wealth effect make an imminent recession less likely (data that corroborates our Up/Down Earnings figures). Yet, things can change quickly when so much is riding on the market. Employment is still the biggest threat.

While the U.S. is the center of attention for global investors, Chinese stocks have quietly outperformed. At first glance, it might be tempting to give credit to the surge in Chinese Tech names. In reality, the upswing is much broader and began long before the Alibaba rally.

In contrast to its solid showing through the mega-cap-growth boom of recent years, Quality was a Q3 outlier, trailing SPX by over 5%. Part of the cause is sector allocation, as defensive stocks are badly out of favor. The other force was stock selection—for example, the absence of NVDA.

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