The U.S. stock market has continued its impressive rally into record high territory. Hard to believe, but the S&P 500 index has surged 35.5% since April’s Liberation Day panic.
Recent strength has been ignited by the resumption of rate cutting by the Federal Reserve. History has proven that an accommodative monetary policy is bullish for equities and, as always, the trend of stock prices will be influenced by the central bank. Wall Street is expecting two additional reductions of the Fedfunds rate before year-end and most projections foresee gradual easing lasting into mid-2026.
Today everyone is a Fed watcher. Powell’s F.O.M.C. is in a tough position. The September policy statement says the following: “Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated.” Both elements of the Fed’s governance mandate are heading in the wrong direction. Right now, the priority has shifted to stabilizing the job environment, but a serious rekindling of inflation would be a bearish development. Furthermore, the battle over the central bank’s independence combined with the government shutdown makes the situation unnecessarily complex. Godspeed Jay Powell…
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CIO Vantage Point | October 2025
2025 serves as a perfect example of the axiom that the stock market climbs a wall of worry. The Magnificent Seven and beneficiaries of the hyperscaling of artificial intelligence continue to bolster the returns of U.S. large capitalization indices, but a broader cross section of companies began to participate in the advance during the late summer. Lately, small capitalization indices such as the Russell 2000 and S&P 600 have been outscoring the big boys. This could be a game-changer.
