Knowledge Center
Market Currents – 11/7/25
- A Market of Treats, But With a Few Tricks. October delivered plenty of treats for investors, as the S&P 500 once again closed the month near record highs for its sixth consecutive month of gains. The strength was powered by two familiar forces: solid corporate profits and another rate cut from the Fed. Peeling back the mask on this rally, however, reveals a “frighteningly” narrow market. A small group of mega-cap technology stocks has provided most of the market’s gains, while the average stock has lagged. This divergence does not make the rally a “trick,” but it does leave the market more uneven and top-heavy, one that calls for selectivity over the temptation to chase momentum.
- The Fed Delivers Another Cautious Cut. As widely expected, the Federal Reserve lowered its benchmark interest rate by 0.25% at its late-October meeting, its second consecutive cut. Policymakers described the move as a precaution against softening employment trends and an effort to steady a labor market showing signs of strain. However, the Fed was careful to signal that this is not a pre-set path. With inflation still hovering around the 3% level, officials indicated that any additional easing will be highly dependent on incoming data, suggesting a “wait-and-see” approach for December.
- A Fog of Uncertainty from Washington. The ongoing government shutdown in Washington, now the longest on record, has introduced a different kind of challenge for investors. While it has not derailed the market’s upward trend, the closure of key agencies has delayed the release of important economic data, clouding visibility into the true state of the economy. The September inflation (CPI) data were eventually published late in the month – an exception made to allow for the annual Social Security adjustment – but other key releases, such as the official employment data from the Bureau of Labor Statistics, were not. As a result, both investors and policymakers are operating with an incomplete picture heading into year-end.
- AI “Arms Race” Fuels Strong Earnings Season. The Q3 earnings season is now in full swing, and results have once again surpassed expectations. With more than half of companies reporting, corporate profits are on track for a ninth consecutive quarter of growth. The clear standout remains the technology sector, where artificial intelligence continues to drive both significant corporate spending and investor enthusiasm. At the same time, this strength also underscores the market’s growing dependence on the technology sector. Some analysts have raised concerns over the “circularity” of this AI cycle, in which tech firms are increasingly reliant on one another’s spending to sustain growth. As infrastructure spending continues to outpace revenue, questions about the long-term sustainability of AI-driven business models are beginning to emerge.
- Market Outlook: Staying Disciplined Amid a Narrow Rally. As we move into the final stretch of the year, the market’s strength remains impressive, but increasingly concentrated. The old saying “Don’t fight the Fed” continues to serve as a powerful tailwind, and with corporate earnings holding strong, the overall backdrop for equities remains constructive. Still, much of this momentum has been driven by a single theme. The “AI house” may be handing out full-size chocolate bars, and investors appear convinced it is the only treat on the block. In the rush, many seem to be overlooking plenty of other houses still offering perfectly good, and often more reasonably priced, candy. Our investment discipline is guiding us not to follow the crowd. We view this as a time for selectivity, using the rally to prudently trim positions that have performed well and to build the dry powder needed to seize high-quality opportunities in those other, less-crowded sectors.