Q3 2025 Review: Trust

At Berkshire Hathaway’s 2024 annual meeting, Warren Buffett was asked if he would change anything about his life. For someone who has long managed Berkshire well beyond financial necessity, his reply struck a chord: “I really enjoy managing money for people who trust me…I just like the feeling of being trusted.”

We’ve spoken directly with many of you about adding Charles Schwab as a new custodian, and one response came through again and again: “We trust your judgment.” We are profoundly grateful for that vote of confidence, and excited to begin this new partnership with Schwab.

That trust isn’t something we take for granted and has been built through consistency over decades. Since our founding in February 1997, when Bill and Carolyn broke away from PaineWebber to establish an independent registered investment advisor — a rarity at the time — Compass has stayed true to our core. While we’ve upgraded our technology, expanded into financial planning, and built a growing team, our commitment to simplicity, transparency, and client-centric decision making has never wavered.

Our mission is clear: to help clients build a healthy relationship with their assets, while pursuing long-term growth, through the good times and the challenging ones. The fact that we now work with the 4th generation of many of the families who placed their trust in us 28 years ago, speaks volumes about that consistency.  

That enduring trust is rooted not just in relationships, but in a philosophy that has guided our investment strategy since day one. Our approach remains anchored in value principles yet flexible enough to adapt as the world evolves. While markets and technologies have changed dramatically, human psychology has not, and that has always been our edge. We avoid getting swept up in the latest craze, even if it means missing a hot stock or two, and we maintain a steady, realistic optimism as the storm clouds grow darkest.

That perspective shaped our recent letter on AI. We didn’t attempt to call a market top, nor did we dismiss AI’s long-term potential. Instead, we cautioned against the euphoria that has increasingly defined today’s markets.

The third quarter reflected that tension: while AI-related investments pressed ahead at full speed, the broader industrial and consumer economy continued to lose steam. This divergence showed up in the underperformance of broad market indices relative to big tech, and more tangibly in a housing market that has flatlined and entered correction territory in several regions.

That weakness, plus a softening labor market, gave the Fed cover to cut interest rates by .25% in September, with further cuts expected. Alongside credit spreads at twenty-year lows and IPO activity up more than 30% year-to-date, the backdrop looks constructive.

Still, the outlook for policy hangs on inflation. While the wealthy have been largely insulated, high prices caught up with much of the country. Tariff induced inflation is just starting to rear its head, but the real elephant in the room is rising power and electricity costs directly tied to AI datacenter demand, a force that could reshape the investment narrative in the years ahead.

The speed at which these narratives can flip has been striking. Just a few months ago, investors worried Google was losing search traffic to AI while celebrating Meta as an obvious AI winner; 90 days later, Google is hailed as a leader, and Meta looks adrift despite pledging hundreds of billions over the coming years. That reversal showed up starkly in performance, with Google’s stock beating Meta’s by 37% this quarter.

Moments like this highlight how fragile narratives can be and why we prefer to anchor portfolios in value rather than momentum. Market recaps today rarely look beyond the S&P500 and a handful of tech giants, but as we’ve written before, the investment menu is far broader. The current hype argues for tilting defensive and focusing on companies and sectors with strong relative value. Ironically, this allows us to stay aggressive in pursuing growth, while taking less risk, given the available bargains.

Buffett ended his reflection by noting, “I think the one thing you can aspire to be—because this can be done by anybody—is to be kind…and the world is better off for it.” As the season changes, that reminder feels especially fitting. Just as kindness compounds over time, so too does disciplined investing. Both give us confidence that we can navigate today’s euphoria while building lasting value in the years ahead.

All the best,

Compass

_{Compass Wealth Management LLC is a SEC registered investment advisor, clearing transactions primarily through Pershing Advisor Solutions and Pershing LLC subsidiaries of Bank of New York Mellon Corp. This letter is written by Compass for the benefit of its clients and does not necessarily represent the opinions of its affiliated organizations. It is based on information believed to be reliable, but which is not guaranteed to be correct. Nothing herein shall be construed to be a solicitation to buy or sell securities, indicate that past performance is predictive of future returns, or recommend individual investments.}