Weekly Newsletter: October 20, 2025
“Ain’t nothing gonna break my strike, nobody gonna slow me down.” Government shutdown into the third week? Nope. Tariff tiffs with China getting amped up? Nope. Bad bank loans? For about 18 hours. There is plenty to worry about in and around the financial markets. Little has moved the markets much beyond a day, which seems to turn into a buying opportunity. Lack of “good” economic data may make the Fed meeting in ten days a bit more interesting. Some of the staff are being brought back to “create” inflation data later this week, just so the Fed has something to work with. The on-again, off-again discussions, negotiations, and cajoling with China have impacted the technology sector for a bit. But then another AI agreement gets inked, and everything else is forgotten. Private credit loans and those where fraud may be involved have raised fears of another banking crisis, a la 2023, or worse yet, the mortgage crisis in 2008. The announcements come as banks reported good earnings. Even the regional banks that are in the crosshairs reported good earnings. Overall, banks are very well capitalized vs. 2008. Whether this is just “one cockroach” or if there are many more will take some time, but investors sold without asking many questions. Cooler heads prevailed after a good night’s sleep, and many of the financials recovered a good chunk of those losses. Just a blip for the financial markets that keeps striding higher.
The “big” news is that investors should get some type of inflation data later this week, a week later than usual, as some staff have been asked to put the data together so the Fed will have something to chew on when they meet next week. The lack of economic data has put additional focus on earnings, especially for those companies close to the consumer. Airlines came in with good reports, and their commentary indicated a still robust traveler. American Express did well as more affluent consumers continue to spend. Banking earnings were good, and generally lower interest rates may help them some if they can maintain loan growth. This week, Capital One will report earnings. Their earnings, along with those of recently purchased Discover, should give a good picture of the “average” consumer. In total, roughly 15% of the SP500 companies will report, with the bulk of companies reporting over the next two weeks, culminating with the technology names appropriately enough, just before Halloween.
Interest rates are gradually continuing their trend lower, as they have been over the past four months or so. Short-term rates have been “stuck” and follow the Fed policy. So, if the Fed does cut rates next week, we could see short-term rates tick down a bit. Longer-term rates are driven more by a combination of fear and inflation. The bad credit announcements pushed investors into bonds from stocks, pushing yields to yearly lows. Inflation data due later this week could also move investors in/out of bonds, depending on whether inflation is trending toward the Fed’s target or if it remains stubbornly high. For now, the path of least resistance looks to be lower rates ahead.
That little bit of rotation toward value and away from growth that we saw a few weeks ago has almost been completely wiped out, as investors keep buying the AI-related names. One “hope” that investors are rethinking their tech investment is that consumer staples, the boring food companies, grocers, toothpaste, and paper goods companies, have been performing better than the SP500 so far in October. Two weeks is barely enough to declare victory, but it has been their longest “winning” stretch since the market bottom in April. Even an investment in 7–10-year treasury bonds has matched the SP500 since the end of July. Again, it may be too early to declare the death of AI stocks, but there are some signs that they may be taking a bit of a break. Time will tell if this is something more than just a pause in an otherwise manic part of the market.
The lack of economic data will continue this week, save for inflation figures at the end of the week. Earnings season gets into high gear, and the Fed chatter stops as they enter their quiet period ahead of their rate decision. Expect plenty of geo-political news that could move markets, if only temporarily. A possible end to the government shutdown should be viewed positively by the markets.
The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable but are opinions and do not constitute a guarantee of present or future financial market conditions.