November 2025 Market Commentary

November 13, 2025

• Federal Reserve cuts rates by 0.25%.
• US Government shuts down first time since 2018.
• October Returns: S&P 500 2.3%. Bloomberg US Aggregate Bond index 0.6%.

October witnessed the start to the longest government shutdown on record, in which ~700,000 government workers were furloughed, a similar number continued to work without pay, government data went unpublished, and funding for assistance programs began to expire. Markets, however, barely seemed to notice, with the S&P 500 setting eight new record highs, propelled by ongoing AI mania. In the absence of government data, investors focused on trade-related headlines, the Fed, and later in the month, third quarter corporate earnings reports.

In August, President Trump extended his China tariff pause for 90 days allowing the two countries to work towards a comprehensive trade deal. Nonetheless, trade tensions between the two countries intensified in October over familiar issues including rare earth minerals, agricultural commodities, and computer chips. In early October, China announced new export controls on rare earth minerals, critical to the production of high-tech components found in computers, cell phones, batteries, automobiles, and military hardware. In response, Trump announced he would increase tariffs on Chinese goods by 100% “over and above” any existing tariffs, beginning November 1, resulting in an effective tariff rate of 130%. Trump also threatened to ban imports of cooking oil from China following news that China, the largest export market for US soybeans, had not placed orders for the current year’s crop. According to the American Soybean Association, prior to the 2018 trade war during Trump’s first term, exports to China accounted for ~28% of all soybeans produced in the US and 60% of all US soybean exports, valued at nearly $13B.

A meeting between Trump and Chinese President Xi at the end of the month helped deescalate tensions between the two countries. China agreed to stop the flow of fentanyl-precursor exports to the US, eliminate current and proposed rare earth mineral export controls, and resume purchases of US soybeans. In turn, the US agreed not to implement Trump’s threatened 100% tariff increase and to reduce tariffs by 10%. In addition, the US suspend for one year an investigation into China’s shipbuilding sector which could have resulted in punitive actions. Following the agreement, the tariff rate on Chinese goods now stands at 47%. For financial markets, the agreement represented the removal of another large source of uncertainty.

Critical to President Trump’s tariff agenda has been the International Emergency Economic Powers Act (IEEPA), passed by Congress in 1977, providing the president with broad, but limited, power to regulate international commerce after declaring a national emergency. Though previous presidents have invoked the Act to impose sanctions and embargos on different countries, none used it to levy tariffs. In response to multiple lawsuits, the Supreme Court heard oral arguments regarding the legality of Trump’s invocation of the (IEEPA) to justify his reciprocal tariffs on nearly every country in the world. During the hearings, a number of justices appeared skeptical of the administration’s assertion that the president has the power to unilaterally impose tariffs without Congressional approval. Typically, the court takes months to announce its decisions, though in this case, it could act sooner given the issue’s importance. Should the Court rule against Trump, he will still have other ways in which to impose tariffs, albeit in a more limited fashion. An adverse ruling would likely provide a boost to financial markets, but would also create newfound uncertainty for businesses as they attempt to adjust to another change in trade policy, while bracing for how Trump might attempt to continue imposing tariffs using other methods.

One of the most visible casualties of the government shutdown has been the absence of official government data. The one exception being the September Consumer Price Index (CPI) inflation report. Despite the shutdown, the government produced the report, primarily so the Social Security Administration (SSA) could calculate its 2026 cost-of-living adjustment for recipients. The report also benefited Federal Reserve officials as it was released days before the Fed’s October Federal Open Market Committee (FOMC) meeting. The report showed prices continued to increase in September, albeit at a slower pace than economists expected. On a headline basis, prices rose 0.3% for the month and 3.0% from a year ago. Though higher than August’s 2.9% pace it was below the 3.1% expected increase. Nonetheless, it marked the highest level since January. Excluding food and energy prices, core CPI rose 0.2% for the month, below the 0.3% expected increase. Compared to a year ago, core prices rose 3.0%, down from the 3.1% pace recorded the prior two months. The report indicated prices, particularly for goods, continue to face upward pressure from tariffs but at a relatively modest pace.

Against the backdrop of slowly rising prices, the Fed cut rates by 0.25% at its October meeting, lowering the target range for the fed funds rate to 3.75-4.00%. Ten members supported the cut. Two members voted against it, one favoring a 0.50% cut, the other preferring no cut. Speaking at his post-meeting press conference, Chair Powell said the decision to cut rates was based on the downside risks to employment, which have increased in recent months. Regarding the possibility of an additional rate cut in December, Powell said it was far from a forgone conclusion. The forcefulness of his comment seemed to catch markets off guard, driving yields across the Treasury curve higher, and market expectations for a December cut lower by nearly 30%, from 92% to 63%.

Without government data, the ability to monitor the health of labor markets was made more difficult for investors and policy makers alike. Headlines, however, suggested further weakness as multiple notable companies announced large layoffs during the month including UPS (48,000 jobs, including 34,000 in operations; Amazon (14,000 corporate jobs); Target (1,000 jobs), GM (3,250 jobs of which about half will be permanent and the other half temporary). According to outplacement firm Challenger, Gray & Christmas, US companies announced 153,074 job cuts in October, up 175% from the 55,597 cuts announced in October 2024. Through the first 10 months of the year, companies have announced ~1.1M job cuts, up 65% from the same time last year and the highest level since 2020. At the same time, year-to-date hiring plans have slowed to their lowest level since 2011. Despite Fed Chair Jay Powell’s remarks regarding the possibility of a December rate cut, further slowing in the labor markets might compel the Fed to do so. As of this writing, market expectations for a December rate cut now stand at 68%.

Markets continued to move higher in October fueled by seemingly endless AI excitement. Strength of corporate earnings also buoyed markets. Following Trump’s April tariff announcement, there was considerable concern corporate earnings would be impacted, particularly in cases where companies were unable to pass along price increases to consumers. Despite those concerns, data from industry group FactSet suggests tariffs have not had a discernable impact on margins. In fact, the third quarter blended net profit margin for the S&P 500 is expected to be 13.1%, better than the 12.8% recorded in the second quarter, and the 12.5% recorded a year ago. As a result, earnings growth has continued to impress. As of Friday, November 7, 91% of S&P 500 companies had reported third quarter earnings, of which 82% have beaten their consensus estimate. Consolidated S&P 500 earnings growth for the quarter is now expected to 13.1%, which would mark the fourth consecutive quarter of double-digit earnings growth.

One issue that garnered increased attention during October was potential stress in credit markets. In September, subprime auto lender Tricolor Holdings filed for bankruptcy, followed shortly thereafter by auto parts manufacturer First Brands Group. Collectively, the failures ignited concerns about the general health of credit markets, leading to questions about whether the were indicative of broader issues, or due to more idiosyncratic, company-specific issues. JP Morgan CEO Jamie Dimon made his thoughts on the issue clear during the company’s third quarter earnings call in which the bank disclosed a $170M loss related to Tricolor Holdings. In discussing the incident, Dimon said, “When you see one cockroach, there are probably more,” before going on to say, “Everyone should be forewarned on this one.” suggesting he expects there will be other bankruptcies moving forward.

For the month, large caps (S&P 500) gained 2.3%, the sixth consecutive month of positive returns, while small caps (Russell 2000) were up 1.8%. International markets also enjoyed positive returns, with developed markets (MSCI EAFE) rising 1.1% while emerging markets (MSCI EM) jumped 4.1% aided by signs of easing inflation.

US fixed income markets also enjoyed positive returns, with the Bloomberg US Aggregate (“Agg”) Bond index, the broadest measure of the US bond market gaining 0.6%, aided by falling rates across the Treasury yield curve. Through October, the Agg is on track for its best year since 2020.

Similar to equity markets, the dearth of government data left investors to focus on trade tensions between the US and China, which drove periodic bouts of intra-month volatility. However, by the end of the month, following the Fed’s October rate cut and the meeting between Presidents Trump and Xi, Treasury rates had moved modestly lower resulting in Treasuries gaining 0.6% for the month. Other fixed income sectors also experienced positive returns with high grade corporates gaining 0.4% and securitized bonds gaining 0.8%. The corporate high yield index trailed the pack with a return of 0.2%. The returns aligned with safe-haven driven trading fed by ongoing concerns about tariffs and a weakening job market.

Munis jumped 1.2% for the month, their best monthly performance in 30 years. The gain defied October norms as munis were able to manage a heavy calendar of $55 billion in new issuance. The long end of the muni yield curve continued to see higher demand after lagging earlier in the year. The steepness of the curve and strong tax-equivalent yields have helped drive recent demand.

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