Macro Overview
The Federal Reserve announced a rate reduction of a quarter point on the Fed Funds Rate in late October, yet is casting doubt on further rate cuts this year. Concerns surrounding underlying inflation are focal to the Fed as well a weakening jobs market with increasing layoffs across various industries.
The U.S. government shutdown, a result of a congressional impasse, surpassed the prior longest shutdown of 34 days which occurred in 2019, making the current shutdown the longest on record. Air traffic control, national parks, and programs that provide benefits, such as food stamps and small business loans have been affected by the shutdown.
There are a growing number of companies reporting rising profitability with the implementation of AI and the reduction of employee count. Companies have been investing heavily in AI infrastructure from data centers to semi conductor chips and utilities. Concurrently, layoffs have been rising in certain sectors where AI is thought to be most effective.
Some economists believe that the “wealth effect”, primarily composed of rising equity prices and home values, have helped sustain consumer expenditures among higher income earners.
Global debt-fueled stimulus has become a significant concern. Devised as a solution for faltering global growth during the pandemic, countries worldwide issued massive amounts of government debt to boost their economies and to stimulate growth. Some of the debt has become an extreme burden, with only economic expansion providing any alleviation.
A growing number of analysts and economists believe that the Fed’s current easing of rates may be too little too late, as consumer loan payment delinquencies continue to rise. Commercial real estate loans are also under duress due to elevated variable rates brought about by the rapid Fed tightening in 2022 and 2023, and which haven’t fallen since then.
Japan’s new Prime Minister, Sanae Takaichi, is the nation’s first female Prime Minister, with ample support for her ambitious fiscal and economic objectives. Japan currently ranks as the world’s fourth largest economy, behind Germany, China and the United States. Japan’s trade pacts with neighboring countries as well as the U.S. is critical to global trade due to its expansive manufacturing capabilities.
Falling rental rates nationwide are alleviating inflationary pressures for renters and hindering landlords’ rental income. A glut of apartments and rental units have been gradually coming on the market since the pandemic, with over-building leading to lower rental costs. Continued lower rental rates may eventually contribute to a drop in overall inflation, since housing makes up the largest portion of the Consumer Price Index (CPI).
Unemployment is highest among those aged 16-24, more than double the overall rate for all workers. Younger applicants are increasingly having a difficult time finding jobs as more companies are initiating layoffs and reducing the number of new hires.
Inflation rose less than expected in the most recent data release, signaling that lessening inflation data may help entice the Fed to continue forward with its rate reduction trajectory. The Fed hinted at a possible pause in rate reduction in December should inflation data not warrant another rate cut. The inflation rate, as measured by the CPI rose 3% year over year increase as of September 2025, a steep drop from June 2022 when inflation was running at 9.1%.
Delinquent auto loan payments hit a 30-year high in October and car repossessions have climbed to the highest level in 16 years. Some lenders have also become more cautious about extending credit to car buyers.
Sources: Dept. of Labor, Fed, BLS, Bloomberg, Treasury Dept.
Earnings & Dwindling Inflation Propel Equities in October - Domestic Equity Update
The information technology sector continued to lead stocks in October, as it has since the beginning of the year. Utilities and communication services have also contributed to S&P 500 Index performance this year, as attention to artificial intelligence (AI) related companies have been a focus in 2025 thus far.
More analysts are expecting equity markets to become much more of a stock pickers market, rather than just buying an index. The enormous concentration of the “magnificent seven” stocks that have been the key driver behind the S&P 500 Index is indicative to analysts that particular stocks are and may continue to outperform the broader markets.
Thus far this year, sectors outperforming other sectors include biotech, telecom, semiconductors and aerospace, while transportation, homebuilders, and regional banks have lagged.
Sources: S&P, Dow Jones, Nasdaq, Bloomberg
Bond Market Hesitant About Economic Data - Fixed Income Overview
The Fed announced that it would cease selling its inventory of Treasury bonds in the markets, a process it used since 2022 when it initiated increasing rates. The reduction in the supply of Treasuries hitting the market is expected to help reduce bond yields, as less supply increases prices. The Fed has been passively reducing its $6.6 trillion asset portfolio since mid-2022, when those holdings peaked at nearly $9 trillion as part of an extraordinary effort to support financial markets and the economy.
Inflation and job data reliability has become a challenge for the Federal Reserve’s rate objectives, encouraging the Fed to rely on private sector data as well as their own compilations, such as the Beige Book.
Sources: Treasury Dept., Federal Reserve
It’s The Wealth Effect That Keeps Everyone Spending - Consumer Economics
The risk to the economy now is that a significant portion of the nation’s consumer spending is led by top earners due to the wealth effect. Should the stock market pull back and housing prices fall, the momentum could quickly dissipate.
Even as inflation and higher rates have been an ongoing hindrance, consumers remain resilient and continue to spend. The reasoning behind the confidence and tenacity of consumers is believed to be what is known as wealth effect, which is the change in spending that accompanies a change in perceived wealth.
An increase in the wealth effect has been a result of the increase in real estate and equity values, which has created a sense of wealth thus prompting consumers to spend more. Real estate and equities have pushed the level of household net worth up an astonishing $10.3 trillion over the past year, encouraging consumers to spend more out of current income. Some analysts and economists relate this scenario to what occurred in the late 1990s.
Economists view the wealth effect as a psychological phenomenon where an increase in home and stock values are perceived as a justification to spend more, as though it was an increase in income. In actuality, the increase in asset values may not be sustainable and may even result in a devaluation, erasing confidence and spending motivation for consumers.
Source: Federal Reserve Bank of St. Louis
Social Security COLA Increase of 2.8% Lags Medicare Premium Increase in 2026 - Retirement Planning
Social Security recipients are due to receive an increase of 2.8% in 2026, a slight increase from the COLA in 2025. For many recipients, the increase in payments will go towards higher living expenses as well as increased Medicare premiums. The increase in benefit payments is effective in late December 2025 for SSI (Supplemental Security Income) recipients and in January 2026 for Social Security recipients.
Many are concerned that the Social Security benefit increase may not cover expenses that are rising at a faster pace, including essential items such as food, energy, and medical expenses not covered by medicare. Medicare Part B premiums are expected to increase 11.6% at the beginning of 2026, four times the 2.8% COLA increase for Social Security.
The establishment of Social Security occurred on August 14, 1935, when President Roosevelt signed the Social Security Act into law. Since then, Social Security has provided millions of Americans with benefit payments. The payments are subject to automatic increases based on inflation, also known as cost-of-living adjustment (COLA) which has been in effect since 1975. Over the years, recipients have received varying increases depending on the inflation rate.
Source: Social Security Administration
Why A TV Only Costs $6 Today - Technological Advancement
The average cost of a standard TV in the US, adjusted for inflation, has significantly decreased over the past 50 years. A television that cost $1,000 in 1950 would cost approximately $6.19 in 2025 for an equivalent product.
Technology is what has driven the cost of televisions dramatically lower over the past few decades, as resistors, semiconductors, and screens became lighter, better, and less expensive to manufacture.TVs are one of the few products that have seen dramatic deflation in price relative to overall inflation trends.
In 1980, a typical 19" color television cost about $400 adjusted for inflation, while today that same amount can buy a much larger 65" TV with smart technology that didn’t exist 45 years ago.
Technology has also driven down the price for a range of products over the past few decades, particularly in electronics, energy, and software, as well as making them more accessible for millions of consumers.
Sources: Federal Reserve Bank of St. Louis, BLS
**Market Returns: All data is indicative of total return which includes capital gain/loss and reinvested dividends for noted period. Index data sources; MSCI, DJ-UBSCI, WTI, IDC, S&P. The information provided is believed to be reliable, but its accuracy or completeness is not warranted. This material is not intended as an offer or solicitation for the purchase or sale of any stock, bond, mutual fund, or any other financial instrument. The views and strategies discussed herein may not be appropriate and/or suitable for all investors. This material is meant solely for informational purposes and is not intended to suffice as any type of accounting, legal, tax, or estate planning advice. Any and all forecasts mentioned are for illustrative purposes only and should not be interpreted as investment recommendations.