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October Market Commentary: Is the Market Tuning Out the Noise or Ignoring a Warning Siren? Thumbnail

October Market Commentary: Is the Market Tuning Out the Noise or Ignoring a Warning Siren?

Markets & Economy

September Recap and October Outlook

After keeping rates steady since December 2024, the Federal Reserve finally cut rates by a quarter point at its September meeting.

Chairman Powell called it a “risk management cut,” signaling that the Fed is trying to strike a balance between keeping inflation in check and supporting an economy that’s starting to show cracks in the labor market. Job growth has slowed, and the once-resilient employment data is now pointing toward weakness.

Minutes from the Fed’s October 8th meeting confirmed that most officials expect more cuts before the end of the year.

Let’s dig into the data:

  • Jobs: With the government shutdown, official labor statistics were delayed. Private payroll data from ADP showed a loss of 32,000 jobs in September. Job postings on Indeed fell 2.5%.
  • Services: The Institute for Supply Management Services Index dropped two points to 50%, the breakeven line between growth and contraction.
  • Consumer Sentiment: The University of Michigan’s Consumer Sentiment Index fell 21.4% from September 2024 to 55.0, lower than it was during the 2008 financial crisis.
  • Spending: Personal spending rose 0.6% in August, driven mostly by durable and non-durable goods.

What Does It All Mean?

Consumers are feeling down about the economy but are still spending. The job market is cooling, wage growth has stalled, and while inflation has slowed, most households are still feeling the squeeze from years of higher prices, especially at the grocery store.

Tariffs, geopolitical tension, and stricter immigration policies have all created new economic headwinds. A recent Moody’s Analytics report found that 22 states are either already in recession or close to it.

That’s the gloomy side. The bright side is that GDP grew 3.8% in the second quarter, and the Atlanta Fed’s GDPNow model expects the same for Q3. Powell’s “risk management” comment was taken as reassurance that the economy isn’t falling off a cliff, the Fed just wants to protect jobs and keep things moving forward.

The longer end of the yield curve, often seen as a warning signal for recessions, isn’t flashing red. That suggests the bond market agrees with the Fed’s steady approach. Many investors seem to believe that while the rest of 2025 might be bumpy, 2026 could bring new growth and a healthier economy.

Meanwhile, the government shutdown has delayed key data releases, but there’s one exception: the September inflation report will now come out on October 24th. The Bureau of Labor Statistics made that a priority since the number determines next year’s Social Security cost-of-living adjustment. That release should bring at least a bit of clarity back to the markets.

Chart of the Month: Equities Are Marching to Their Own Drummer

Source: Axios

September Equity Market Highlights

  • The S&P 500 rose 3.53% for the month
  • The Dow Jones Industrial Average gained 1.87%
  • The S&P MidCap 400 climbed 0.29%
  • The S&P SmallCap 600 increased 0.80%

Source: S&P Global, data as of September 30, 2025

Seven of the eleven S&P 500 sectors were positive, led by Information Technology with a 7.21% gain. Materials lagged, down 2.31%. Market volatility eased, with average daily moves shrinking to 0.69% from 0.77% in August. Notably, there were zero trading days in September with moves of 1% or more, the calmest stretch in months.

September Bond Market Highlights

  • 10-Year Treasury: 4.16%, down from 4.23%
  • 30-Year Treasury: 4.74%, down from 4.94%
  • Bloomberg U.S. Aggregate Bond Index: +1.09%
  • Bloomberg Municipal Bond Index: +2.32%

The Takeaway

As we close out the year, the smartest move is still the simplest: stay grounded in your plan. Market headlines can make a lot of noise, but most of it doesn’t change your long-term trajectory.

The IRS recently clarified new rules for catch-up contributions. Starting in 2026, workers age 50 and older who earned more than $145,000 the previous year must make all catch-up contributions as Roth contributions. For those ages 60 to 63, the “super catch-up” allows up to 150% of the regular limit, a powerful way to boost retirement savings even if it means giving up a current-year tax break.

The Roth advantage is clear: tax-free growth, flexibility in retirement, and the potential to lower future tax burdens. Opening or funding a Roth account now can also make future Roth conversions smoother.

This is a good time to revisit your year-end plan, run tax projections, and fine-tune your strategy. Aligning your money with your values isn’t just about feeling good, it’s about taking control of your financial story and keeping your wealth working toward the world you want to live in.

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