Quarterly Market Update - October 2025

If the past few years have taught investors anything, it’s that capital markets and the broader economy don’t always move in sync. Headlines can sound dire - government shutdowns, geopolitical tensions, stubborn inflation - yet stocks may continue to rise. That disconnect may seem illogical, but it’s often how capital markets work.

Capital markets are forward-looking. They tend to move several months ahead of the economy, reflecting investors’ expectations rather than current conditions. When investors believe the worst is behind them, even when economic data continues to look weak, capital markets often begin to recover well before economic headlines turn positive. Conversely, when the economy feels great, future upside may be limited because markets may have already priced in the good news.

A perfect example came in 2023–2024. Inflation cooled, but not perfectly. The Federal Reserve stayed cautious, yet the S&P 500 climbed anyway, mostly driven by optimism around earnings growth, productivity gains, and new technologies like artificial intelligence. The market wasn’t ignoring the economic challenges of the day. It was looking past them.

That same principle applies today. With a government shutdown, persistent uncertainty around the timing of future rate cuts, and an increasingly polarized society, it’s easy to wonder whether a period of volatility is around the corner. But history shows that these episodes, when they occur, are usually short-lived. Capital markets care less about whether Washington meets another deadline and more about where growth, inflation, and corporate profits will be a year from now.

For investors, the lesson is simple but powerful: don’t anchor decisions to today’s headlines. Focus on a financial plan with a clear, long-term investment strategy based on diversification and consistent contributions. Remember that markets are always pricing based on the outlook for tomorrow and not the noise of today.

The next time you feel uneasy reading about shutdowns or political standoffs, remember that capital markets already have those risks in their sights. Long-term progress isn’t built on perfect timing; it’s built on steady participation.

 

The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by any entity for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor.