Monday Market Review: October 13, 2025

Weekly Summary

Although the U.S. government shutdown continued through last week, it was a period with little economic data scheduled to be released anyway, so there wasn’t much to be missed.

Equities fared negatively last week around the world, but only due to a trade-related downturn on Friday. Bonds were mixed, with Treasuries higher and credit lower. Commodities saw gains in precious metals offset by declines elsewhere.

 What to know about the markets:

Despite a benign start, U.S. stocks suffered its most negative week in a few months. Early in the week, a deal for AMD to supply AI chips to OpenAI boosted the stock by 20%. However, a tranquil week ended Friday, as stocks pulled back as the U.S. administration threatened a ‘massive tariff increase’ on China (upwards of 100% as well as controls on exported critical software), in addition to threats of cancelling an upcoming diplomatic meeting. This was in response to China tightening export controls on some rare earth metals, imposing new port fees on U.S. ships, an antitrust review into Qualcomm, and halting buys of U.S. soybeans. In addition, federal worker layoffs were announced by the administration in the midst of the ongoing government shutdown, which shows no signs of ending in the next few days. By sector, defensive utilities and consumer staples led with gains, while all other sectors declined, led by cyclicals energy and consumer discretionary down -3% to -4% each. Real estate also fell by over -3%.

This coming week marks the start of the Q3 earnings season. Per FactSet, estimates for the S&P 500 earnings growth rate year-over-year are starting at 8.0%. This would mark the 9th consecutive quarter of positive earnings, above the Q2 growth rate of 7.3%, and remains above-average for the past thirty years. Leading sectors in the estimates include information technology (again, with strong revenue and profit margin fundamentals), followed by utilities (helped by AI buildout), and materials (from a lower base), while energy and consumer staples are bringing up the rear with expected earnings declines of -3% to -4%. Overall revenue growth is expected to be robust again as well, up 6.3% for the index, led by technology and communications.

Foreign stocks fell back to an even greater degree than U.S. stocks, again mostly due to Friday’s bad day, and a stronger U.S. dollar. The U.K. and Europe fared a bit better than Japan and emerging markets. Over the prior weekend, Japan elected its first likely upcoming female prime minister, Sanae Takaichi. Markets appeared quite satisfied with the choice, despite it being a surprise, and from a minority party, as she was known for not being keen on the BOJ hiking interest rates. As has been the case in a variety of developed countries, voters were frustrated with rising inflation, although it appeared in Japan a bit later than other locations. As a key member of former PM Abe’s administration, she is expected to continue the ‘three arrows’ economically stimulative and pro-shareholder policies of his administration that ended in 2020. She also looks to former British PM Margaret Thatcher as a role model, being pseudo-libertarian, pro-innovation, anti-regulation, which markets also appreciated. Within hours of new Japanese leadership, the French PM resigned after only two weeks, as the governing coalition couldn’t agree on a cabinet. The key takeaway is that France has been increasingly perceived as the more volatile political environment in continental Europe, a role traditionally held by Italy, with bond spreads widening as a reflection of this. Then again, the political situation in Europe have always been more ‘fluid’ than the set election pattern of the U.S. In EM, Chinese stocks led the declines (mostly tracked via ETF as local markets were closed for Golden Week holiday until Thurs.), negatively affected by the trade rhetoric with the U.S., while other nations were down to slightly lesser degrees, affected by potentially more trade disruptions and the dollar’s impact.

Bonds were mixed, with yields not changing by much as might be expected for a downturn in stocks. U.S. Treasuries led with gains for the week, investment-grade corporates were little-changed, while high yield and floating rate bank loans fell back. Foreign bonds were driven in both directions, with the U.S. dollar rising by over a percent.

Commodities were down for the week, with lower energy and agriculture prices offset by gains in precious metals. Crude oil fell by -3% last week to $59/barrel, as output remains high relative to economic uncertainty, which is more closely related to expected demand. The price of gold reached $4000/oz. for the first time, which generated further excitement, on top of existing positive momentum. Gold’s strength has been propped up by the economic policy uncertainty surrounding tariff impacts, but even more so by the ramped-up buying of emerging market central banks, seeing it as insurance against any potential U.S. sanctions, after the 2022 episode between the U.S and Russia. Expected easier Fed policy has given it a bit of a second wind, as lower-yielding Treasuries offer less competition for risk hedges than when yields are higher.

 Our Weekly Economic Notes:

Notes key: (+) positive/encouraging development, (0) neutral/inconclusive/no net effect, (-) negative/discouraging development.

(0) The preliminary Univ. of Michigan index of consumer sentiment for October declined by -0.1 of a point to a level of 55.0 staying above the 54.0 expected by consensus. Data under the hood was similarly little-changed, with assessments of current conditions rising 1% while expectations for the future fell by -1%. Over the past year, the overall sentiment index has fallen -22%, largely led by consumer expectations, which were down -31%. Inflation expectations for the coming year fell by -0.1% to 4.6%, while 5-10 year expectations were unchanged at 3.7%. Per the survey sponsor, interviews conducted noted that the federal government shutdown “reveal little evidence” of having moved consumers’ views of the economy at this point. While there few changes in attitude from the prior month, “pocketbook issues like high prices and weakening job prospects remain at the forefront of consumers’ minds,” and consumers “do not expect meaningful improvement in these factors.”

(0) The FOMC minutes from the September meeting were released, and while they chose to cut rates, supported by “almost all” committee members, “a few” saw “merit” in keeping rates unchanged at that meeting, with “some” noting a “cautious approach” was warranted going forward. However, “most” members felt that further easing would likely be appropriate this year. Difference of opinion between members continued in the two mandate areas of labor and inflation. On the labor side, “a few” participants were concerned that conditions had been softening “for longer than was previously reported,” and that downside risk had increased in a variety of indicators, other data “did not show a sharp deterioration” in conditions. At the same time, a “majority” of members saw inflation risks also tilted to the upside, with data “moving further from 2 percent,” although debate remained about how much this was due to look-through inflation caused by one-time tariff-driven price level changes, relative to other factors like stronger productivity growth that could act to dampen long-term inflation influences. Based on how long the U.S. government shutdown lasts, key data points for both labor and inflation may or may not be available, although the start of rate cuts in September points to further cuts this year as opposed to a ‘one and one’ narrative, per past history.

Have a good week.

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Sources: Ryan M. Long, CFA; Director of Investments; FocusPoint Solutions, Inc.

FocusPoint Solutions, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Citigroup, Deutsche Bank, FactSet, Financial Times, First Trust, Goldman Sachs, Invesco, JPMorgan Asset Management, Marketfield Asset Management, Morgan Stanley, MSCI, Morningstar, Northern Trust, PIMCO, Standard & Poor’s, StockCharts.com, The Conference Board, Thomson Reuters, T. Rowe Price, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wall Street Journal, The Washington Post. Index performance is shown as total return, which includes dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product. FocusPoint Solutions, Inc. is a registered investment advisor.