October Market Commentary

October 2025 Market Commentary

October 2025 reminded investors just how unpredictable markets and policymakers can be. The Federal Reserve cut rates for the second time this year, inflation remained stubbornly above target, and a prolonged government shutdown left everyone, from economists to airline passengers, navigating with incomplete information.

And yet, despite all that uncertainty, the stock market climbed higher. The NASDAQ (1) hit a new record, powered by technology and AI-related companies. The S&P 500 (1) and Dow (1) followed suit, finishing October in positive territory. Investors rewarded companies that delivered real profits and punished those whose promises outpaced their results.

By the first week of November, however, the rally hit turbulence, delivering a small dose of humility to markets that had grown accustomed to smooth sailing. Tech stocks gave back some of their gains amid concerns about stretched valuations. Interestingly, not all sectors participated in the selloff. Health care, energy, real estate, and financials showed relative strength, suggesting the market’s leadership is broadening beyond the technology giants that have dominated much of 2025. That’s a healthy development for the long run. While, for now, what appears to be a garden-variety pullback of less than 5% may rattle some nerves, it serves as a reminder to investors that even strong markets take breathers to digest gains. It is to be expected, but it’s hard not to wonder if it is a sign of something bigger coming.

In short, October’s story was one of resilience amid noise. November’s early chapter is one of recalibration. Together, they underscore a timeless truth: predicting short-term market direction is like trying to predict every delay at the airport. You might guess right occasionally, but it’s no way to plan a journey.

An Economy That’s Cooling, Not Cracking

Even in the absence of a steady flow of government data due to the federal government shutdown, a few key signals stand out. Because the Bureau of Labor Statistics (BLS) and Bureau of Economic Analysis (BEA) have suspended or delayed many of their major releases (including the monthly non-farm payrolls report and key inflation measures) due to the shutdown, the Fed must rely more heavily on private and ancillary reports.

Unemployment appears to be ticking modestly higher in some of these alternative measures. For example, private payroll processor ADP reported a decline of 32,000 jobs in September, the largest since early 2023, indicating job growth has slowed. Similarly, the Chicago Federal Reserve’s bi-weekly estimate suggests that the jobless rate may have edged up to 4.4% in October.  Other trackers, such as the Challenger, Gray & Christmas layoff announcements and job posting data, indicate that the labor market is under pressure, with layoffs increasing and hiring plans at multi-year lows.

Meanwhile, inflation remains a source of concern. Although official monthly numbers (such as the CPI and the Fed’s preferred PCE measure) may be delayed, private and business-survey data point to sticky price pressures that are squeezing households, particularly in housing, energy, and other essentials.

Against this backdrop of patchy economic data and heightened uncertainty about the true state of the economy, the Fed has had to make policy decisions with less clarity than usual. Their decision to lower rates for the second time this year in October was a sign that the Fed is willing to support the economy if job growth continues to slow. The Fed’s message is clear: inflation is easing, but the labor market needs to be closely watched. The benchmark federal funds rate now sits between 3.75% and 4.00%, which is its lowest level since 2022. Lower rates generally translate into more favorable borrowing costs for mortgages, business loans, and consumer credit. They can also support asset prices by making bonds and cash alternatives less attractive.

If there’s a single word to describe today’s economy, it’s “mixed.” Job growth has slowed, but the labor market has not collapsed. Unemployment is creeping up, but mass layoffs remain contained. Growth continues but isn’t uniform. Inflation is moderating, but unevenly. Confidence wavers, but only slightly. It’s not the roaring boom some had hoped for, nor the deep slump others feared. It’s something in between a soft-landing scenario that continues to hang in the balance.

Focus on the Destination not the Detours

If there’s one thing 2025 has taught investors, it’s humility. Every time the market seems to find its footing, something comes along to shake confidence. Predicting “what’s next” has never been harder. The market’s recent behavior reflects the push and pull between optimism and worry.

On one side, the optimists point to:

• Strong corporate earnings.
• A Federal Reserve that’s easing policy.
• An economy that’s proving more durable than expected.

On the other side, the pessimists highlight:

• Inflation that refuses to fade completely.
• High stock valuations, especially in technology.
• Political dysfunction, trade uncertainty, and a government that’s been partially shut down for weeks.

Both sides have valid points. The truth, as usual, lies somewhere in the middle. Markets inhale and exhale. They surge when optimism dominates and retreat when doubt creeps in. The key for investors isn’t to guess which breath comes next, but to stay balanced and disciplined through both.

In such an environment, patience and balance are more crucial than ever. Diversification remains the best defense against unpredictability, smoothing the ride when volatility spikes. Investors who stay focused on long-term goals, rather than headlines, tend to fare better over time. History repeatedly shows that missing even a handful of the market’s best days can dramatically reduce long-term returns. And those best days often arrive when investors least expect them, sometimes right after the worst ones. Our role is to help maintain perspective, to zoom out when emotions run high, and remind you that long-term progress is rarely linear.

October’s story was about resilience. Early November’s story is about perspective. The months ahead will likely bring more surprises, but that’s the nature of investing in real time. The economy may not be roaring, but it continues to move forward. Inflation is moderating, earnings are holding steady, and policy is shifting to a more supportive stance. For investors, that’s not a bad setup heading into year-end.

The key, as always, is not to react to every headline or market swing but to stay grounded in your plan. The future may not be predictable, but your process can be. And in investing, that’s where genuine confidence comes from.

So, whether you’re in the optimistic camp or feeling a bit wary, remember that even with canceled flights and cloudy data, the long-term destination hasn’t changed. Stay patient. Stay diversified. And stay the course.

Your monthly portfolio reports are available in your eMoney vault. If you’d like to review your report, discuss your portfolio, or review your year-end tax planning opportunities, we’re always happy to schedule a conversation, whether in person, over the phone, or virtually.

As always, thank you for your continued trust.

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1. The Dow, NASDAQ, S&P 500 are unmanaged groups of securities considered to be representative of the stock market in general