Cayside Review: 2025 Q3
This newsletter includes our 2025 Third Quarter review, global market update and outlook, key numbers, and announcements.
“The intelligent investor is a realist who sells to optimists and buys from pessimists.”
-Benjamin Graham, The Intelligent Investor
The quarter was marked by a familiar combination: constructive risk appetite alongside fading interest rate pressures. Equity indices pushed higher with the S&P 500 up +8.1% QTD and 14.5% YTD. The markets digested incremental signs of cooling inflation and softer forward policy paths. Against that backdrop, quality tech and Artificial Intelligence (“AI”) infrastructure beneficiaries remained firm, energy and uranium/nuclear exposures found strong support, and precious metals continued to act as a macro and geopolitical hedge.
Policy interest rates are likely past their peak in the near term which may challenge forward returns for traditional 60/40 stock and bond portfolios. Further, we expect return dispersion across asset classes and styles to remain elevated. Additionally, inflationary pressures will likely cause real interest rates to go lower which often influences investor behavior through excess risk taking and potentially persistent demand for precious metals and other real assets. From a portfolio management standpoint, we will look to favor (1) selectivity within equities (owning businesses with pricing power, cash generation and durable market share growth, and (2) a larger role for alternatives to add uncorrelated return drivers and risk management to portfolio construction. Global Market Update & Outlook
Q3 2025 Market Commentary
Equities: Strong gains led by AI and Energy renaissance alongside softening interest rate policy
S&P 500: best 3rd quarter since 2021 Q3: +8.1%, YTD: +14.5%
Nasdaq Composite: Strong returns led by AI and semi-conductors Q3: +9.1%, YTD: +18.7%
Dow: Value has lagged growth and AI, but made fresh highs into quarter-end Q3: +5.2%, YTD: +9.7%
Source: FactSet
Equities posted one of the stronger 3rd quarters in recent years. Softening interest rate policy and the potential for more rate cuts on the horizon has instilled confidence amongst investors as funds flowed heavily into major indexes over the quarter, specifically into companies related to AI and power generation.
Despite concerns around consumer stress and geopolitical outcomes, we remain positive on equities in this environment due to the rapid growth in technological advancements, potential for large amounts of capex spending and continued expansion of money supply and deficit spending.
Fixed Income: Defensive Yield in Uncertain Terrain
Bond markets produced modest performance amid persistent inflation concerns and shifting interest rate expectations. We continue to favor short-duration assets such as U.S. Treasury Bills, which can offer compelling risk-adjusted yields and provide a stable anchor in today’s volatile credit environment.
Additionally, select municipal bond markets remain attractive, offering quality credits and tax-efficient income focusing on state diversification given uneven pension and tax bases.
Commodities: Precious Metals and Digital Assets Continue to Perform Strongly
Commodities demonstrated robust performance during the quarter and year to date (YTD):
The Gold Price went to new records in late-Q3 (nearly doubling from all-time highs; spot near $3,850–3,900/oz), on falling USD/real yields and safe-haven demand; a large YTD gain (~45% YoY) and one of the best performing assets classes this year.
Bitcoin: ~+22% YTD into end of Q3; range-bound through much of Q3 around $110–117k.
Important Topics
The AI and Power Renaissance
Energy in High Demand
We had the privilege of attending a speech by Chris Wright that highlighted current and future US energy policy. The major takeaway was that the U.S. is committed to growing the existing energy base while pivoting to advanced nuclear power generation to meet AI-driven loads. Measures have been taken to provide tailwinds such as reclassifying nuclear as “clean energy”, tax-advantaged legislation and unlocking state/local financing.
A re-industrialization of the U.S. is currently taking place as AI growth fuels a critical need for recalibration and expansion of the U.S. Energy Complex. In a few short years, AI has seen growing adoption, usage and advanced processing requirements which has increased demand for computing and the ability to power it.
If 20-30% of the U.S. population has used ChatGPT and 5-10% use it daily, what happens when these number reach 80%? The growing demand has the potential to create a bottleneck in U.S. energy.
U.S electricity generation has seen very little growth of output in the past 15 years. The demand for electric capacity is re-accelerating— and now utilities plan for 8× the demand growth pace of the prior 15 years, driven by AI/data centers and onshoring. While the U.S. Energy Dept has committed to increasing Natural Gas and Nuclear production, these projects take years. In the interim, the value of electricity and energy production may find high prices and demand for the foreseeable future.
From an investment standpoint, public policy is favoring the buildout of AI Infrastructure and Energy infrastructure through tax-advantages and legislative support. This may compel long-term growth on capital expenditures amongst businesses that seek to expand in a tax-advantaged way.
Source: EIA, JPMorgan
Changes in AI to AI²
The initial stages of AI favored the chip makers as a supply-constrained Covid environment met simultaneously with the rise of AI demand growth. After continued commitment to expand the data center industry, AI² companies (AI² = component makers and enablers of processing power) have benefited from above market returns. The implications of computing & networking demand persist, but the bottleneck is power & latency which favors semis, accelerators, cooling, optical interconnects, and power-proximate data-center infrastructure among others.
INVESTMENT OPPORTUNITIES & RISKS
Why Alternative Assets make sense now
As equities markets continue to make new peaks alongside substantial technology growth, we increasingly look to diversify capital to opportunities that seek a differentiated performance outcome to traditional equity and fixed income markets.
Several practical reasons to add/expand alternatives in this environment:
Diversification: Many hedge fund strategies (L/S equity with disciplined gross/net control, macro, systematic and relative value, etc.) target low-to-moderate correlation to stocks and bonds and help stabilize total portfolio volatility
Risk-Adjusted Absolute Returns: With changing industry and business cycles, dispersion is fertile ground for stock selection and capitalizing on growth trends
Differentiated Performance and Risk Outcomes: Many Alternative Strategies offer differentiated asset class and investment profiles that can provide both risk management and performance despite challenging market environments.
How Cayside implements: We build measured allocations across complementary strategies with a focus on manager talent and alpha. Sizing is coordinated with each family’s liquidity plan and tax profile, and we leverage our platform relationships for institutional access and terms. We are currently developing additional investment solutions in this area.
Wealth Planning
In 2025, significant changes in U.S. tax policy and estate planning are underway, particularly affecting high-net-worth families. The “One Big Beautiful Bill Act” (OBBBA), was passed earlier this year and contains significant developments:
Estate & Wealth Transfer:
Higher federal estate & gift exemption (up to $30mn). For ultra-high-net-worth families, consider topping up existing SLATs, GRATs, funding 529s, and revisiting lifetime gifting schedules now that the bigger exemption isn’t set to sunset.
Charitable giving tweaks. Philanthropy strategy is shifting under OBBB. DAFs and appreciated-asset gifts remain powerful, but itemization dynamics and new income rules mean gift timing and asset selection matter more.
Family Tax Planning & Cash-Flow:
Child Tax Credit increased. The CTC is higher starting with 2025 returns—use income management (Roth conversions, capital gains harvesting/deferral, entity comp choices) to stay within phase-out ranges
529 plan flexibility expanded. Updated rules make college savings more versatile (and in some cases friendlier to retirement planning). Coordinate grandparent 529 funding with estate-freeze techniques
100% bonus depreciation restored/expanded. For businesses and rental real estate, pair year-end acquisitions (and cost seg on improvements) with trust/estate strategies (e.g., gifting equity interests while retaining depreciation at entity level).
Implications for Families
These proposed evaluation points offer an opportunity for families to reassess their estate planning strategies before year end. Given the potential for significant tax implications, we are actively consulting with our client’s tax and estate planning professionals to navigate these changes for clients.
Business Update & Personnel News
Cayside completes its first SEC examination. We are pleased to share that Cayside Partners successfully completed its inaugural SEC examination in the Third Quarter. This is an important milestone as we strengthen our controls, processes, and fiduciary culture. We appreciate our clients’ trust and view this outcome as a step in our firm’s maturation.
Platform & Data Enhancements. We expanded our market data and analytics toolkit to sharpen underwriting, improve portfolio management, and enhance client reporting continuing the infrastructure improvements critical to our business.
FAMILY OFFICE SERVICES
Beyond Portfolio Construction, we provide Family Office Solutions across wealth decisions. Core services include:
Investment Governance & Consolidated Reporting — multi-custodial, across entities and accounts reporting; cash management
Cash, credit & lending optimization of idle balances, securities-based lending solutions via our relationships with financial institutions, Treasury Bill cash management
Tax & Estate Coordination — proactive collaboration with your CPAs/attorneys on tax payments, gifting, GRATs, estate planning, and wealth solutions
Risk Management — insurance reviews, long-term advanced planning and estate strategy, key-person and liability coverage coordination
Next-gen Education & Governance — tailored curriculum and workshops for rising generations; family meeting design and facilitation
Philanthropy & Mission Alignment — DAF/foundation administration and impact alignment
We appreciate your support and confidence in our process and are excited to keep adding value for each of our client families.
Disclosures: Cayside Partners, LLC ("Cayside") makes no warranty as to the accuracy or completeness of any data herein. Information presented in this report is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Past performance is not indicative of future results. This report is intended for the recipient(s) only and not for further distribution without written consent. Investment advice offered through Cayside Partners, LLC, a Securities and Exchange Commission registered investment advisor able to provide investment advice in states where it is registered, exempt, or excluded from registration. Content contained herein should not be construed as an offer or solicitation for investment advice or for the purchase or sale of any security, insurance, or other investment product. Investments involve the risk of loss, including possible loss of principal. Please consult with a qualified financial, tax, accounting, or legal professional before implementing any ideas or strategies discussed here. Content provided is obtained from sources believed to be reliable but cannot be guaranteed as to its accuracy or completeness. Our firm's AUM figures are reported on a gross U.S. Dollar basis and may include assets managed on a discretionary and non-discretionary basis. Past performance is not indicative of future results, and AUM figures are subject to change. For further information regarding our firm's AUM or to obtain a copy of our most recent Form ADV, please contact us.