Market Commentary

 With less than two months to go in 2025, the major U.S. stock indices are approaching another year of double-digit returns. The S&P 500 is up nearly 18%, the Dow Jones Industrial Average is above 14%, and the Nasdaq-100 has surged more than 22%. The ongoing rally has been fueled by robust Q3 earnings, easing U.S.-China trade tensions, and fading concerns about the negative impact of tariffs. Market breadth narrowed, with large-cap growth stocks outperforming while midcaps and equal-weight indices lagging slightly. While this can raise concern about concentration risk, this factor is less worrisome with all asset classes moving upward. Technology has led the charge, cementing its role as the market’s growth engine. The “Magnificent Seven” collectively represents nearly 40% of the S&P 500 Index’s market cap, helping to drive tech sector gains.

Highlighting the impact of technology and especially Artificial Intelligence on the overall market performance, Apple surpassed a $4 trillion market cap, underscoring investor confidence in its ecosystem.  Microsoft finalized a landmark deal with OpenAI, acquiring a 27% stake and securing long-term access to advanced AI models, reinforcing its leadership in artificial intelligence.  Computing chip manufacturer NVIDIA maintained its momentum as AI infrastructure spending accelerated across industries. Overall, the Technology Select Sector has advanced nearly 27% YTD, reflecting a strong investor appetite for innovation-driven growth.

However, not all industries and sectors have fared as well as technology and AI. October showed more evidence of a fragile global economic backdrop: slowing growth, persistent inflation, and mounting debt risks along with geopolitical tensions and structural imbalances. The slowing labor market is a cause for concern although the lack of timely data from government agencies has made accurate economic forecasts difficult.  While central banks are pivoting toward easing, policy uncertainty and concentrated sectoral gains (notably in tech) leave markets exposed to sharp corrections. For investors and businesses, risk management and diversification remain paramount.

The Federal Reserve delivered its second consecutive rate cut, lowering the federal funds target range by 25 basis points to 3.75%–4.00%. This move, widely anticipated, was aimed at countering a weakening labor market while managing inflation that remains above the 2% target. The Fed also announced it will end quantitative tightening (QT) on December 1, signaling a pivot toward more accommodative policy.  Chair Powell emphasized “downside risks to employment” but cautioned that a December cut is not guaranteed.