The Big Picture
October extended the equity rally as the Fed delivered a quarter-point cut, mega-cap tech reported solid results, and bond yields eased off early-month highs before finishing near ~4.1% on the 10-year. Inflation progress continued at a 3.0% y/y pace for September (released in October).
What Moved Markets in October
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- Fed: 25 bps cut, and a more hawkish tone. On October 29, the FOMC lowered the fed funds target range to 3.75%–4.00% and signaled a patient approach to further moves, noting elevated uncertainty and announcing plans to conclude balance-sheet runoff on December 1. Markets took it as supportive but not a “cut-every-meeting” promise.
- Inflation: cooling, with pockets of stickiness. The September CPI (published Oct 24) rose 0.3% m/m and 3.0% y/y; core CPI increased 0.2% m/m and 3.0% y/y. Energy was a notable monthly contributor, while core shelter remained firm.
- Earnings: tech still doing the heavy lifting. Q3 results from large platforms and AI infrastructure names helped sentiment, while banks kicked off season with better-than-expected trading and investment banking activity. Headlines around AI capex and cloud spend supported semiconductor and equipment/automation names.
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Performance Snapshot
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- Equities: U.S. stocks notched a sixth straight monthly gain in October, with the S&P 500 eking out another positive month and the Nasdaq adding to its multi-month streak. Big Tech/AI remained the leaders, while mid- and small caps lagged.
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- Sectors: Technology led as AI-linked names led October’s individual winners. Utilities continued to benefit from data-center-driven electricity demand narratives. At the other end of the spectrum, Communications Services and Materials lost the most ground during the month.
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- Rates: The 10-year Treasury ended the month near 4.1% after a volatile path around the Fed meeting. While yields drifted higher in the final days of October, they finished slightly lower month over month—resulting in positive total returns for most fixed income segments. Over the past twelve months, bonds have quietly delivered mid–single-digit gains.
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Final Thoughts
Stocks continued their upward climb in October even as the federal government remained shut down in what could very well end up being the longest closure in U.S. history. Despite the political gridlock in Washington, markets looked past the noise, focusing instead on solid corporate earnings and the Fed’s continued shift toward easier policy. The S&P 500 logged its sixth consecutive monthly gain, while lower bond yields provided additional support to both equities and fixed income returns.
Looking ahead, ongoing developments around the budget standoff, interest rates, and company earnings reports will likely keep volatility elevated in the near term. As always, we believe investors are well served by tuning out the daily headlines and maintaining focus on long-term financial goals.
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