November 2025 Market Commentary

For the period October 1 – October 31, 2025.

Executive Summary

Equity markets extended their rally in October, once again closing out the month near record highs. The Fed’s second rate cut of the year helped reinforce optimism across risk assets, even as policymakers signaled a more measured approach ahead.

What Piqued Our Interest

Global equities continued their climb in October, once again led by Large Cap Growth stocks—particularly the “Magnificent Seven,” which remain the primary beneficiaries of the ongoing artificial intelligence (AI) tailwind.

AI continues to be one of the most powerful forces driving both corporate spending and investor enthusiasm. Recent estimates suggest that AI-related capital expenditures accounted for more than 90% of U.S. GDP growth in the first half of 2025, with “hyper-scaler” investment projected to exceed $1.4 trillion between 2025 and 2027.

At the same time, some analysts have expressed concern over “circularity” in this spending cycle—where technology firms, suppliers, and financiers are increasingly reliant on each other’s capital to sustain growth. This dynamic has raised questions about profitability, returns on investment, and the long-term durability of AI-driven business models, especially as infrastructure spending outpaces realized revenue.

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We continue to view AI as a long-term productivity catalyst, with the potential to lift U.S. labor productivity by as much as 15%. However, we remain mindful that concentrated capital flows and lofty expectations can create vulnerabilities if liquidity tightens or earnings growth slows.

The Fed Cuts Rates—Again

The Federal Reserve reduced the federal funds rate by 25 basis points in October, marking its second cut of the year. Policymakers cited softer labor data and further progress on disinflation, with headline CPI at 2.9% and core PCE near 2.8%.

The decision was largely expected and reinforced the view that the Fed may be nearing a “soft landing.” Lower borrowing costs supported both equities and fixed income, with the Bloomberg U.S. Aggregate Bond Index gaining 0.62% for the month. Fed Chair Jerome Powell emphasized that future policy moves will remain data-dependent, suggesting a cautious pace of easing until inflation settles closer to target.

Market Recap

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October was another strong month for equities. Despite a brief mid-month pullback, the S&P 500 rose 2.34%, the Dow gained 2.59%, and the Nasdaq 100 surged 4.81%, extending its year-to-date gain to nearly 24%. Large Cap Growth stocks remained the primary drivers of performance, while Small Caps and Value-oriented sectors saw more modest gains.

International markets also posted solid returns, with the MSCI ACWI ex-US up 2.02%, and emerging markets outperforming developed peers. The MSCI EM Index climbed 4.18% and is now up more than 32% year-to-date, buoyed by currency strength and improving liquidity conditions abroad.

Wealth Enhancement Perspective

Markets continue to balance optimism around monetary easing with recognition of structural risks. The Fed’s pivot toward rate cuts provides a supportive backdrop for asset prices, but it also reflects a slower underlying economy. This comes as the government shutdown is now the longest on record, impacting everything from food stamps, economic data releases, air traffic controllers, and much more. Fiscal uncertainty, tariffs, and geopolitical tensions remain unresolved, all of which may influence market dynamics in the months ahead.

Valuations are difficult to ignore. The S&P 500 now trades at roughly 23 times forward earnings, well above its five-year average of 20, while the Nasdaq 100 commands a multiple near 28, signaling elevated expectations. While valuations are a poor predictor of short-term performance, they can temper long-term return potential if earnings growth moderates.

For investors, discipline and diversification remain essential. As we approach year-end, maintaining balance between risk assets, quality fixed income, and other diversifying assets—while avoiding overconcentration in any one sector or theme—will be critical to navigating the next stage of the market cycle and positioning portfolios for long-term success.

This information is not intended as a recommendation. The opinions are subject to change at any time and no forecasts can be guaranteed. Investment decisions should always be made based on an investor’s specific circumstances.

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