Overview
U.S. equities delivered another strong month in October, with major indexes reaching new record highs. Solid corporate earnings, ongoing enthusiasm around AI-driven innovation, and a broadly supportive monetary backdrop continued to reinforce market momentum. While the government shutdown delayed several economic releases, investor sentiment remained constructive. As markets enter November, the focus turns to the Federal Reserve’s policy path, upcoming labour data, and inflation indicators that will guide expectations for the durability of U.S. growth.
U.S. Market Performance & Policy
The S&P 500 rose 2.3% in October, the Dow gained 2.5%, and the Nasdaq advanced 4.7%, extending multi-month rallies across all major benchmarks. Technology led the market once again, driven by strength in semiconductors and AI-related activity. Healthcare also performed well, while Materials lagged with a notable decline.
Corporate earnings for the third quarter exceeded expectations, helping sustain investor confidence despite the ongoing government shutdown. However, market breadth narrowed, with mid-cap and value segments underperforming. Even with delayed data releases, optimism held firm as investors looked ahead to key monetary and economic signals.
The main policy event was the Federal Reserve’s 25 basis points rate cut, bringing the federal funds rate to a range of 3.75% to 4.00%. While the move reflected a more dovish stance, policymakers avoided committing to further easing, keeping future decisions dependent on inflation and employment trends.
Heading into November, markets are watching the next Fed meeting, along with updated inflation and labour reports, for confirmation that economic activity remains on stable footing.
Key Economic Data
- Federal Funds Rate: Lowered by 25 basis points to 3.75%-4.00%, marking a cautious shift toward easing
- Unemployment Rate: Official data was delayed, but private estimates place unemployment near 4.3%, mostly unchanged
- Consumer Confidence Index: Fell slightly to 94.6, indicating modest cooling in expectations
- ISM Manufacturing Index: Declined to 48.7, pointing to deeper contraction in factory activity
- ISM Services Index: Improved to 52.4, returning to expansion on stronger business activity and new orders
U.S. Market Outlook
October underscored a market defined by resilient earnings, proactive monetary policy, and fiscal uncertainty. As November begins, investors will closely monitor upcoming labor and inflation reports, the potential resolution of the government shutdown, and additional signals from the Federal Reserve for direction heading into year-end.
With monetary conditions easing and corporate fundamentals holding firm, U.S. markets approach the close of 2025 with cautious optimism tempered by policy risks.
Canadian Market Overview
The S&P/TSX Composite delivered a steady 1% increase through October. Energy was the strongest contributor as oil prices advanced on global supply concerns, supporting broader market resilience. Materials also gained, benefiting from a mild rebound in gold prices that helped lift mining names. Financials added stability, with banks showing consistent domestic performance and steady credit conditions. While corporate earnings were generally constructive, market sentiment remained balanced by uncertainty around monetary policy and the potential impact of evolving trade measures.
The month’s primary policy event was the Bank of Canada’s widely anticipated 25-basis-point rate cut, bringing the policy rate to 2.25%. The decision signalled a more cautious stance, with policymakers indicating a preference to pause before considering additional easing. This approach reflects an effort to support a cooling economy while remaining attentive to stubborn inflation dynamics. Looking ahead, investors will focus on labour market strength, upcoming inflation data, and global trade signals, particularly given recent volatility in commodity markets.
Key Economic Data
- Bank of Canada Rate: The policy rate was lowered by 25 basis points to 2.25%, the lowest since mid 2022, with officials suggesting a near-term pause
- Unemployment Rate: Unemployment held near 7.1%, highlighting continued weakness in goods-producing industries
- Consumer Confidence: The Ipsos index remained slightly negative at –6, reflecting cautious sentiment toward the macro backdrop
- Manufacturing PMI: The PMI improved slightly to 49.6, still below expansion levels but showing signs of stabilization