Tomoro Monthly Market Update: October 2025 Edition

Insights

Fixed Income: A Delicate Balancing Act

The Federal Reserve made its first rate cut of the year, trimming the Fed Funds rate by 25 basis points to a range of 4.00% to 4.25%. While this move was widely anticipated, it was framed as a cautious step toward neutrality rather than the beginning of a broader easing cycle. Chairman Powell emphasized the Fed’s dual mandate—stable prices and full employment—and acknowledged the growing tension between the two. Inflation remains elevated, but signs of labor market softening are becoming harder to ignore.

Raymond James highlighted that Treasury yields responded unevenly. Short-term yields fell slightly, while longer maturities saw modest increases. Investment-grade corporate bonds mirrored this trend, with short-end yields dipping and longer maturities ticking up. Municipal bonds held steady, and brokered CDs offered competitive yields, with 3-month to 1-year maturities averaging around 3.85%.

Goldman Sachs echoed the Fed’s cautious tone, noting that while disinflation has slowed, labor market risks are rising. Their projections suggest two more rate cuts could be on the table before year-end, though the decision remains data-dependent. Globally, central banks are also holding steady. The Bank of England and Bank of Japan kept rates unchanged, with the latter hinting at possible hikes later this year.

BlackRock added a global perspective, pointing out that currency hedging has made European fixed income particularly attractive for U.S. investors. Euro investment-grade credit yields, when hedged back into dollars, now rival or exceed those in the U.S., offering compelling income opportunities.

Equities: Strength at Home, Selectivity Abroad

U.S. equities continued their upward march, with the S&P 500 reaching new highs and tech stocks leading the charge. Nvidia’s announcement of a $5 billion investment in Intel added fuel to the rally. Year-to-date, the S&P 500 is up over 14%, and the Nasdaq has gained nearly 18%.

Goldman Sachs reported strong performance across small and mid-cap stocks, with the Russell 2000 up more than 10% for the year. Sector-wise, communication services, tech, and consumer discretionary have been standout performers. However, real estate and energy lagged, reflecting broader macro concerns.

BlackRock remains constructive on U.S. equities, especially those tied to AI and productivity gains. They also see opportunity in European markets, though with a more granular lens. Financials, industrials, and utilities in Europe have outperformed, and Spanish equities are particularly well-positioned due to their exposure to emerging markets and infrastructure spending.

Globally, emerging markets have shown resilience, with China A-shares outperforming developed markets year-to-date. Goldman Sachs attributes this to domestic inflows, policy support, and attractive valuations. Still, they caution that selectivity is key, especially given ongoing trade and regulatory risks.

Looking Ahead

Key data releases in the coming weeks—including PCE inflation, durable goods orders, and GDP—will shape the Fed’s next moves. Markets are likely to remain sensitive to any surprises, especially in inflation readings.

At Tomoro, we continue to monitor these developments closely, balancing risk and opportunity across asset classes and geographies. Whether it’s navigating rate changes or identifying sector-specific equity plays, our focus remains on delivering personalized strategies aligned with your goals.

Sources:

Raymond James – Fixed Income Weekly Primer – Sept 22, 2025
Goldman Sachs Asset Management – Market Monitor – Sept 19, 2025
BlackRock Investment Institute – Weekly Commentary – September 22, 2025