CWS Market Review – September 30, 2025

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The third quarter of 2025 comes to an end today and it was another good one for Wall Street. For Q3, the S&P 500 gained 7.79%, and if we include dividends, then the S&P 500 was up 8.12%. With three months to go, the stock market is on track for another winning year (+13.72% or +14.83% with divs). This was the market’s second-best September of the last 27 years.

What’s remarkable is that the stock market has rallied despite all the scary pitfalls that we were told would certainly derail the bull market (wars, tariffs, the Fed).

The latest worry is that a potential government shutdown will sink the market. At midnight tonight, the money runs out. I won’t get into the politics of the shutdown, but the major sticking point is money for enhanced Affordable Care Act subsidies.

I will say that previous government shutdowns (there have been several) haven’t hurt the stock market. Economists generally believe that any short-term damage from a shutdown can quickly be rectified.

On Monday, there was a last-ditch effort to stave off a shutdown but that went nowhere, as expected. The Senate plans one more vote before Zero Hour but that also appears to have little chance of passing.

Asked if there’s any room for negotiations on Obamacare subsidies by Tuesday’s midnight shutdown deadline, Republican Sen. John Kennedy said, “Not unless Chuck stops smoking wizard weed.”

The condensed version of the story is that the Republicans are blaming the Democrats, and the Democrats believe the exact opposite.

Our fiscal issues are indeed very large, and there’s no easy fix. Fiscal 2025 also comes to an end tonight, and it looks like the deficit will be about $2 trillion. When I say “about,” I’m speaking of a range of hundreds of billions of dollars.

More than half the federal deficit racked up over the last 230 years has come about since 2020. Over the last 11 months (ending in August), the IRS has collected 6% more taxes than the same period last year.

The White House budget office has threatened mass firings if there is a shutdown.

The move by Senate Majority Leader John Thune is intended to maximize pressure on his counterpart, Senate Minority Leader Chuck Schumer, who has so far blocked a plan for a status-quo funding bill without commitments to extend the Obamacare subsidies. Schumer, for his part, said the outcome is up to Trump and his GOP leaders.

“It’s now in the president’s hands. He can avoid a shutdown if he gets the Republican leader to go along with what we want,” Schumer said Monday night, hours after Congress’ top four party leaders met with Trump for a last-ditch meeting at the White House.

I’m definitely not the person who will add any insight to this political standoff. I’m only interested in any possible economic or financial outcomes, and there are several.

For one, when the money gets tight, the government can furlough workers. During the 2018-19 standoff, 340,000 employees were furloughed. Although at that time, the government had passed some bills to keep parts of the government working. Not this time. Some estimates say that furloughs could be as high as 800,000. Salaries for government employees could also be delayed which would have a further impact on consumer spending.

Another outcome of a government shutdown would be a delay of important economic data. That would include the September jobs report which is due out on Friday. The inflation report may also be delayed.

Wall Street expects Friday’s jobs report to show a gain of 51,000 net new jobs last month. Economists also expect to see a 0.3% increase in wages and it expects the unemployment rate to stay at 4.3%. I’d really like to see those wage numbers improve. Consumer spending is the main driver of the U.S. economy.

Tomorrow we’ll get the ADP report on private payrolls. That report won’t be delayed since it’s from a private company. I’ll caution you that the ADP report is a very imperfect bellwether of the BLS’s report. Also tomorrow, we’ll get the ISM Manufacturing Index for August. I like this report since it’s a survey, and we get it with very little lag time.

We got the August job openings report today, which is officially called the Job Openings and Labor Turnover Survey, or JOLTS report. It showed that jobs openings increased a little bit in August. Job openings rose by 19,000 to 7.227 million. Economists had been expecting 7.185 million.

Hiring decreased by 114,000 to 5.126 million, and layoffs fell by 62,000 to 1.725 million.

This is further evidence that the labor market isn’t completely healthy. Exxon said today that it plans to cut 2,000 jobs, which is 3% to 4% of its workforce. Over the last three months, job gains have averaged 29,000 per month. That’s down from 82,000 over the same period last year. We’re at an odd point because the demand and supply for labor are falling. It would be nice to have more data.

If the government shuts down, economic data from the Federal Reserve would continue since the Fed isn’t funded by the government. The weekly jobless claims report also won’t be impacted since it’s collected at the state level, but I am concerned about the jobs report and the CPI report.

RIP: Larry Mendelson

We had some sad news this week. HEICO said that its long-time CEO Larry Mendelson died. In the 1950s, he took a finance class taught by David Dodd. Fans of value investing will recognize Dodd’s name. He was the co-author of Security Analysis with Ben Graham. Security Analysis is probably the foundational text of value investing.

Mendelson took those lessons to heart. He made a good deal of money in real estate and wanted to diversify his holdings. That led him to invest in an under-performing industrial company. He really didn’t care what he bought, as long as it was cheap and had potential to be retooled for future growth. He chose well.

Since 1995, the stock has increased more than 1,000-fold.

HEICO was originally founded in 1957 by Dr. William Heinicke as Heinicke Electronics. By the 1980s, Mendelson controlled a sizeable share in the company and was able to make himself CEO. The family still owns a large chunk of the voting shares, and several family members hold key positions within the company.

HEICO makes replacement parts for the airline industry. If a commercial aircraft needs some obscure new part, the airline can’t run down to the local hardware store. Instead, it needs to special-order it. Moreover, there’s a great deal of cost pressure on the airlines to keep the older planes serviceable.

Also, the aircraft parts often need to meet strict regulatory guidelines. The part maker really has to know what it’s doing. That’s where HEICO comes in. The business is lean and well run.

When airplane owners need a new part and go back to the original equipment manufacturer (OEM) to get replacements, they’re often charged a steep price. The profit margins can exceed 30%. That provides enormous opportunity for HEICO. Consider that many aircraft are over 20 years old.

The aviation industry is broadly diversified, and HEICO is also able to get sales from commercial and military customers. That means that if there’s a drop-off on one end of the business, the other side can pick up the slack. Wherever there’s a demand to cut costs, HEICO has the potential to do well.
HEICO’s role is like that of a generic drugmaker. HEICO provides a low-cost copy of the original product, which is regulated by the Federal Aviation Administration. HEICO does more than aircraft parts. They also supply parts for satellites, rockets, missiles and even medical instruments.

HEICO is in an enviable position and nearly dominates its market. The company sells to 19 of the top 20 airlines in the world, and their customers love them.

That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

Posted by on September 30th, 2025 at 6:24 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.