November Commentary

Building on strong momentum from September, the first month of the fourth quarter turned out to be a positive one for U.S. equity markets, with the four major averages posting solid gains in October. The S&P 500 rose roughly 2.3%, the Dow around 2.5%, the NASDAQ advanced about 4.7% and the Russell 2000 was up about 1.5% for the month. These averages reached record highs in October, thanks in part to a very strong earnings season. More than 80% of companies that reported beat analyst expectations in terms of revenue and earnings per share. This was led by the technology sector, which reported better-than-expected results and strong forward guidance. AI enthusiasm also continues to be a major catalyst for market gains. To little surprise, during its October meeting the Federal Reserve decided to cut interest rates another 25 basis points to a target range of 3.75%-4.00%.

These gains did not come without some mid-month market volatility. Partially due to heightened trade tensions between the United States and China. On October 10th, the U.S. imposed additional tariffs on all Chinese imports in response to China’s export controls on rare earth and other critical materials. Toward the end of the month, the U.S and China announced a one-year trade truce after President Trump and President Xi Jingping met in South Korea. On top of this, the federal government was shut down all of October, after congress failed to pass a funding resolution. As of writing, there are no clear signs of when the government will reach an agreement and reopen. Congress remains in a stalemate as the senate has failed repeatedly to advance a bill to fund the government. With many federal employees not receiving paychecks and SNAP benefits at serious risk of interruption, pressure is growing for congress to reach an agreement. Historically, such shutdowns have minimal effect on markets. But with limited official economic data releases, a prolonged shutdown could cause some short-term volatility and investor caution. After the October FOMC meeting, Fed chair Jerome Powell was perceived as more hawkish than expected. As he pushed back on the idea that a December rate cut was almost certain, describing it as “not a foregone conclusion”.

All in all, October was another strong month for equities, as resilient corporate earnings outweighed the policy uncertainty and geopolitical risks mentioned. At SAM, we remain cautiously optimistic in our outlook for the remainder of 2025.