Weekly Market Commentary October 6, 2025 The Markets It was a stellar quarter for investors. The last three months have delivered stock market gains amid signs the economy might not be doing as well as previously thought. Here’s what we saw: Stock markets advanced Solid corporate earnings growth, enthusiasm for artificial intelligence (AI), and expectations for a Federal Reserve (Fed) rate cut helped drive stock markets in the United States higher during the third quarter of 2025. “The broad U.S. equity indices were higher across the board in both September and Q3. For the S&P [Standard & Poor’s] 500 and Nasdaq-100, September marked their 5th and 6th consecutive monthly gains, respectively. And for the S&P 500, this was its 2nd best September…in 27 years,” reported the Nasdaq Market Intelligence Desk Team. Stock valuations moved higher The downside of recent stock market performance is that valuations have reached lofty levels. As a result, investors are paying “the most for future earnings in more than two decades, adding a new element of risk to the market’s rally,” reported Martin Baccardax of Barron’s. The risk is that earnings may not meet investors’ expectations, which could lead to lower stock prices. Questions rose about the strength of the economy Economic data is usually revised several times before the final numbers arrive. In September, the employment report revision showed 911,000 fewer jobs may have been created over the past twelve months than previously thought. The change raised questions about the strength of the economy – and the quality and collection of data for the report, reported Jeff Cox of CNBC. “The revisions were more than 50 [percent] higher than last year’s adjustment and the largest on record going back to 2002. On a monthly basis, they suggest average job growth of 76,000 less than initially reported.” The Fed lowered the federal funds rate Investors have been anticipating a Fed rate cut for some time. In September, the Fed’s concerns about inflation were offset by data suggesting the U.S. labor market is softening rapidly, and the Fed lowered the federal funds rate by one-quarter percentage point. While investors expect more rate cuts this year, it’s unclear whether that will happen. “At the center of the tension are rising prices. While inflation has slowed from its pandemic highs, it remains above the Fed’s 2 [percent] target. Several regional Fed presidents cautioned on Monday that policymakers shouldn’t move too quickly to ease policy, even as investors and Wall Street analysts bet on more cuts,” reported Nicole Goodkind of Barron’s. Consumer sentiment moved lower, too While investors had a lot to celebrate in the third quarter, consumers’ optimism faded in August and September. The University of Michigan’s Consumer Sentiment Index showed that sentiment was down about five percent month over month in September, and more than 21 percent year over year. “Although September’s decline was relatively modest, it was still seen across a broad swath of the population, across groups by age, income, and education, and all five index components. A key exception: sentiment for consumers with larger stock holdings held steady in September, while for those with smaller or no holdings, sentiment decreased,” reported Surveys of Consumers Director Joanne Hsu. The fourth quarter began with a government shutdown. The closure had little effect on market optimism, and major U.S. stock indexes moved higher last week. Yields on U.S. Treasuries generally dipped lower or remained steady over the week. | 
