Powering Ahead

Quick Take: U.S. stocks and bonds extended their winning streak in October on the back of solid corporate earnings and the second Fed rate cut of the year.[1]

Stocks powered ahead in October, notching six months in a row of gains — its best run since August 2021. The S&P 500 index has set 36 new all-time highs this year.[2] A cocktail of strong earnings reports, lower interest rates, and a cooling off in trade tensions with China propelled the S&P 500 2.4% higher in October.[3]

Source: https://www.wsj.com/finance/stocks/tech-earnings-extend-nasdaq-hot-streak-4ae3e7d0?mod=stocks_news_article_pos3

Since the April selloff, the S&P has returned almost 40%, with tech stocks leading the way.[4] The tech-heavy Nasdaq rose higher for a seventh straight month in October, scoring its longest stretch of monthly gains since 2018. Out of the Magnificent Seven mega-cap tech stocks, Nvidia managed to become the world’s first $5 trillion company, while Apple and Microsoft topped $4 trillion.[5] The Mag 7 now account for around 38% of the entire S&P 500.[6] As we’ve mentioned in previous newsletters, this level of concentration is in record-breaking territory.  

Wobble in Rate Cut Expectations

October marked a third straight month of falling long-term yields, helped by steady inflation numbers.[7]

Mid-month, the benchmark 10-year Treasury yield fell below 4% (bond prices rose) and registered its lowest daily close in more than a year.[8] This reflected investor confidence that additional rate cuts lie ahead.

Although the Federal Reserve (Fed) delivered a widely expected interest rate cut at the end of the month, bonds slumped after Chairman Powell said another cut in December was not a foregone conclusion.[9] This caught the market by surprise, sending yields up (prices lower) by the most since June.[10]

Source: https://www.bloomberg.com/news/articles/2025-10-29/treasuries-fall-after-fed-cuts-rates-on-worries-over-job-hiring

Traders reduced bets on another interest rate cut in December, though a cut still remains likely.[11] Members of the rate-setting committee have different views on how to approach December, which further clouded the outlook.[12] They also don’t have a clear view of the economy as the government recovers from the longest government shutdown on record[13]

Earnings Beat

With fewer economic indicators to lean on, investors have found some confidence in healthy corporate earnings.[14]

With 91% of S&P 500 companies reporting 3^rd quarter earnings so far, 82% of companies have beaten analyst expectations.[15] If this holds up, it would be the highest percentage of S&P 500 companies reporting earnings surprises since 2021, after the economy was rebounding from the pandemic.[16]

Source: https://www.bloomberg.com/news/articles/2025-10-27/most-s-p-500-companies-in-four-years-are-beating-sales-estimates?itm_content=Brighter_Profit_Outlooks-3

Strategists said that US companies have been able to protect margins by both raising prices and reducing costs, which could support growth into next year and brighter prospects for profits.[17]

Roller Coaster Relations

On the geopolitical front, trade relations between Washington and Beijing shifted sharply during the month. In early October, the administration threatened to impose a 100% retaliatory tariff on Chinese imports after Beijing restricted exports of rare-earth minerals, a group of materials essential for manufacturing smartphones, electric vehicles, and advanced defense technologies. [18] The announcement initially unsettled markets and renewed fears of another round of tariff escalation.

In the weeks leading up to high-level meetings between U.S. and Chinese officials in South Korea, however, expectations of a thaw began to build. By late October, the United States promised to cut its fentanyl-related tariff on China in half to 10%, lowering the overall average tariff rate on Chinese goods to roughly 47% from 57%, while China agreed to suspend its rare-earth export curbs for one year.[19]

Under this framework, Beijing also committed to large-scale purchases of U.S. agricultural goods, including soybeans and other farm commodities, providing a boost to an export sector that has been overcast with uncertainty. [20]

Looking Ahead

As of the publishing of this market update, the U.S. government is beginning to reopen following its longest-ever shutdown in history – 43 days. Funding for the legislative branch, the Department of Agriculture and the Department of Veterans Affairs, among others, will be fully funded for the fiscal year. However, the fate of various other areas remain unknown and discussion will likely continue into the new year.[21]

Arguments in front of the Supreme Court have begun on the legality of the administration’s broad emergency tariffs.[22] A final ruling may not follow until the end of the year or early next year, but prediction markets have been leaning towards the possibility that the justices will eventually rule against the administration, which could mean refunds on tariffs.[23] The administration still has other authorities to enact tariffs, mostly with more procedural roadblocks.

As we move into the final stretch of the year, investors are weighing competing forces: the reality of higher valuations and the resilience of corporations that have driven markets so far. A tug of war is to be expected, with companies having to justify record-high stock prices.

At JSF, we continue to stay focused on long-term strategic planning over short-term prediction. Markets will fluctuate, policy narratives will change, but consistency and patience provide the foundation to achieve financial goals.

Now is the time to connect with us for a year-end meeting should you have questions or concerns. This is a great opportunity to refocus and recenter in preparation for the new year. As always, please make sure to reach out if your financial situation has changed in any way.

This Thanksgiving season, we’re grateful for your trust and the opportunity to help you navigate your financial lives.

From your friends at JSF