Weekly Update 10/31/2025: Fed Cuts Rates Another Quarter Point as Corporate Earnings Come in Strong

Domestic Economic News  

US stocks gained on Monday while gold declined and bonds were mixed on progress over the weekend on trade talks, in particular between the US & China. US and Chinese trade negotiators have lined up a docket of key agreements on issues including tariffs, shipping fees, fentanyl and export controls ahead of a meeting between President Donald Trump and Xi Jinping later in the week. Trump told reporters on Monday, “I really feel good,” about a deal with China. Adding to the optimism, further Federal Reserve interest-rate cuts appear to be on the way and the profit outlook is looking increasingly brighter. Mexico’s peso gained as President Claudia Sheinbaum said US is extending a deadline to reach a trade deal. Argentina’s markets rallied as President Javier Milei’s party pulled off a victory in legislative elections. Progress was also made over the weekend on trade talks with Malaysia and Cambodia.

On that note, Donald Trump and Xi Jinping agreed to extend a tariff truce, roll back export controls and reduce other trade barriers in a landmark summit on Thursday, potentially stabilizing relations between the world’s biggest economies after months of turmoil. In the first sit-down between the leaders since Trump’s return to the White House, the pair agreed China would pause sweeping controls on rare-earth magnets in exchange for what Beijing said was a US agreement to roll back an expansion of restrictions on Chinese companies. The US will also halve fentanyl-related tariffs on Chinese goods, while Beijing resumes purchases of soybeans and other American agricultural products. The US is also extending a pause on some of its so-called reciprocal tariffs on China “for an additional year,” the Commerce Ministry in Beijing said in a statement, adding that China “will properly resolve issues related to TikTok with the US side.” Trump said he would visit China next April, with Xi planning to head to the US afterward. “I guess, on the scale from zero to 10, with 10 being the best, I would say the meeting was at a 12,” Trump told reporters on Air Force One, which he boarded immediately after the meeting with Xi in Busan, South Korea. “You know, just the whole relationship is very, very important. I think it was very good.”  

Treasury Secretary Scott Bessent said the agreement was finished “in the middle of the night” before the leaders met. “I expect that we will exchange signatures, possibly as soon as next week,” he said of the deal, speaking on Fox Business. Xi emphasized that dialogue is better than confrontation, calling for more communication between the two sides and cooperation in areas such as trade, energy and artificial intelligence, according to the official Xinhua News Agency. “Both teams should refine and finalize follow-up work as soon as possible, maintain and implement the consensus, and provide tangible results to reassure the economies of China, the US and the world,” Xinhua cited Xi as saying. The outcome is poised to resolve — at least for now — months of trade brinkmanship in which the US and China threatened a series of levies and export controls on their products that had the potential to disrupt global supply chains and hurt the world economy. Still, it falls short of a comprehensive agreement that addresses issues at the heart of the US-China economic competition.

In additional trade news, US President Donald Trump and South Korean President Lee Jae Myung finalized a trade deal Wednesday, capping months of negotiation over implementation of a framework agreement struck in July. The deal will see Seoul make $150 billion in shipbuilding investments, with an additional $200 billion earmarked for an investment pledge designed to look like a similar agreement with Japan, South Korea Policy Chief Kim Yong-beom said Wednesday. That suggests South Korea can use not only equity but loans and loan guarantees to fund the investment package, a key concession. Trump called his meetings with South Korea “tremendous” and said they had “pretty much finalized a trade deal” during a dinner hosted by Lee in his honor on Wednesday night. “I think we came to a conclusion on a lot of very important items,” Trump said. The won gained as much as 0.9% against the dollar following the first report of the deal. South Korea’s finance minister said last week that recent weakness in the won reflected concern that the deal hadn’t been finalized. Trump in a social media post hailed the investments from South Korea and the lowered tariff rate for the country, while providing few additional details beyond those offered by Seoul. Trump said South Korea had “agreed to buy our Oil and Gas in vast quantities,” and that investments made by the country’s businesses in the US would top $600 billion. The US president added that he had “given them approval to build a Nuclear Powered Submarine, rather than the old fashioned, and far less nimble, diesel powered Submarines that they have now.”  

In a subsequent post, Trump said that South Korea would be building the nuclear-powered submarine “in the Philadelphia Shipyards,” touting it as a boost for the US shipbuilding industry. Lee had pressed Trump to allow South Korea to reprocess nuclear fuel for submarines to replace diesel-powered ships in their fleet. Ahead of the breakthrough, South Korea and the US had played down the notion that the two sides could finalize the agreement, which will see the US cap tariffs on South Korean goods at 15%, during Trump’s visit. US duties on Korean car imports had remained at 25% while the talks continued. That left the nation’s automakers at a competitive disadvantage against their Japanese rivals since Tokyo finalized its deal in September. Those duties will now come down to 15%, according to Kim. Just days before the deal was sealed, Lee said key details of a $350 billion investment package remained sticking points, while Trump called the agreement “pretty close” to completion, highlighting a gap in perceptions even as talks neared the finish line. The agreement runs through January 2029, though actual disbursement will be spread over the long term, Kim said. South Korea will also receive guarantees that its pharmaceutical exports match the lowest tariff offered to any US trading partner, Kim said. Kim said that under the deal investment in the US would be capped at $20 billion annually. Earlier this month the Bank of Korea had specified that sum as the maximum that could be supplied in dollars without having a negative impact on the local currency market. The US is also allowing Korea’s $150 billion shipbuilding investment to be guaranteed by domestic and international commercial banks, reducing the burden on the foreign exchange market. Profits will be split 50-50 between the two nations until the principal and interest are repaid.  

The two sides also agreed to apply tariff levels on semiconductors that are not disadvantageous compared to those applied to Taiwan, the main competitor to Korean firms. Kim said the government built multiple safeguards into the investment package to limit financial risk and protect the foreign-exchange market. Only “commercially viable projects with guaranteed cash flow” will be pursued, he said, noting that this clause will be explicitly stated in the memorandum of understanding. He added that the two sides agreed to adjust profit-sharing terms if Korea is unable to recover its principal within 20 years, allowing flexibility in repayment. The agreement also limits annual disbursements to $20 billion and uses an umbrella- type special purpose company structure so that losses in one project can be offset by gains in another. “These measures ensure that the $350 billion commitment does not create shocks in the FX market,” Kim said, stressing that investments will be made in phases and not sourced through direct dollar purchases. Full details of the agreement, which is expected to include additional security guarantees, will be released in the coming days. The agreement gives Trump another success he can put on a list of deals struck during his trip through Asia.  

SGK core holding ADP via ADP Research will now be releasing US payroll data on a weekly basis, in addition to its monthly report, to provide high-frequency insights into the labor market. The figures, which are a four-week moving average of the latest total private employment change, will be released on Tuesdays at 8:15 a.m. New York time. ADP estimates payrolls increased 14,250 on average in the four weeks ended Oct. 11, according to a statement Tuesday. Up until recently, ADP provided a version of weekly payrolls to the Federal Reserve, which the central bank used to gain insight into the private-sector job market. It isn’t clear why the data-sharing arrangement was suspended. ADP will continue to publish its monthly estimate. The October report is scheduled for release Nov. 5. “ADP’s near real-time employment data, released weekly, will now provide an even clearer picture of the labor market at this critical time for the economy,” said Nela Richardson, chief economist at ADP. Data from third-party sources have been particularly valuable since the government shutdown began earlier this month, suspending official data releases in the process. The figures, which are produced in collaboration with the Stanford Digital Economy Lab, are based on weekly payroll data of more than 26 million private-sector employees.

Home prices gained the least in over two years, slowing for the seventh straight month in August as buyers gained leverage in negotiations and inventory grew. A national measure of prices rose 1.5% from a year earlier, according to data from S&P Cotality Case-Shiller. It was the smallest gain since mid-2023 and followed a 1.6% increase in July. The easing of price growth is good news for buyers after a prolonged affordability squeeze caused by soaring prices and high mortgage rates. The index measures a three-month period ending in August, when mortgage rates were beginning to drop from near 7% and available listings were growing. Among 20 cities, New York again led the S&P Cotality Case-Shiller index, with a 6.1% annual gain in prices. Following were Chicago and Cleveland with increases of 5.9% and 4.7%, respectively. Prices in Tampa fell 3.3%, the lowest of the 20 cities measured. “Looking ahead, the housing market appears to be finding a new equilibrium after the pandemic boom,” Nicholas Godec, head of fixed income tradables and commodities at S&P Dow Jones Indices, said in a statement. “With price growth running at half the rate of inflation and several major markets in decline, the rapid appreciation of recent years has clearly ended.”

US consumer confidence fell in October for a third straight month on dimmer views about the outlook for the economy and labor market. The Conference Board’s gauge decreased 1 point to 94.6, the lowest since April, data out Tuesday showed. The median estimate in a Bloomberg survey of economists called for a reading of 93.4. A measure of expectations for the next six months fell in October to 71.5, the lowest since June, while a metric of present conditions increased. Confidence remains stuck below levels seen last year as consumers fret about the labor market and the cost of living. Job growth has significantly slowed, inflation remains above the Federal Reserve’s target and President Donald Trump’s tariff policies continue to drive heightened economic uncertainty. The share of consumers that said jobs were currently hard to get edged up to 18.4%. At the same time, the share saying jobs were plentiful increased to 27.8%. The difference between these two — a metric closely followed by economists to gauge the job market — widened slightly. Expectations for the job market, however, weakened. A greater share of consumers expect fewer available jobs in the next six months, and their outlook on income prospects were less positive. The Conference Board’s report showed buying plans for big-ticket items like homes, cars and appliances were generally muted. Vacation plans, however, picked up. Despite underlying consumer anxiety, household spending was solid in the second quarter, and the most-recent retail sales data indicate that resilience extended into July and August. Meanwhile, the ongoing government shutdown has left policymakers without major data at a crucial time for the economy. Several key economic reports, including the monthly employment report, are on hold.  

Pending sales of existing US homes stalled in September, suggesting anxiety about the job market kept potential buyers sidelined despite a welcome easing in mortgage rates. An index of contract signings held at 74.8 after climbing a revised 4.2% a month earlier to the highest level since March, according to National Association of Realtors data released Wednesday. Economists expected a 1.2% increase, based on the median estimate in a Bloomberg survey. “A record-high stock market and growing housing wealth in September were not enough to offset a likely softening job market,” NAR Chief Economist Lawrence Yun said in a statement. Nonetheless, “mortgage rates are trending toward three-year lows, which should further improve affordability, though the government shutdown could temporarily slow home sales activity.” Even with middling results for last month, housing economists see the resale market slowly thawing after several years of lackluster demand. Mortgage rates have shown signs of stabilizing below 6.5%, and home prices are cooling. Moreover, the so-called “lock-in effect” — in which homeowners resist selling because of their existing low-rate mortgages — is waning and helping to boost inventory. Figures out Tuesday from S&P Cotality Case-Shiller showed buyers are gaining leverage in negotiations with sellers. A national measure of home prices rose 1.5% in August from a year ago, the smallest annual gain since mid-2023. By region, contract signings on previously owned homes rose 1.1% in the South to the highest level since March. Pending sales also climbed in the Northeast, while falling in the West and Midwest.

The broader housing market has experienced more momentum recently, with new-home sales surging in August to the highest level since 2022. While some economists chalked up the sharp advance to monthly volatility, builders are using price cuts and sales incentives to drive buyer interest. Pending-homes sales tend to be a leading indicator for previously owned homes, as houses typically go under contract a month or two before they’re sold. US mortgage rates fell to a fresh one-year low, encouraging more homeowners to refinance and drawing prospective buyers into the market. The contract rate on a 30-year mortgage fell 7 basis points to 6.3% in the week ended Oct. 24, according to Mortgage Bankers Association data released Wednesday. The group’s measure of refinancing jumped to the highest level since mid-September, and the index of home-purchase applications rose for the first time in five weeks. Mortgage rates track US Treasury yields, which dropped last week as declining oil prices eased concern about the inflation backdrop. Yields temporarily fell further after a belated report showed tame growth in US consumer prices last month, which encouraged bets that the Federal Reserve will cut interest rates beyond Wednesday’s rate reduction. The drop in mortgage rates — if sustained — stands to potentially lull the housing market out of its years-long slumber. Sales of previously owned homes rose in September, and economists expect contract signings advanced then too, which would bode well for closings in the coming months.  

Interest Rate Insight and the Fed

Federal Reserve officials delivered their second consecutive interest-rate reduction to support a softening labor market, and said they would stop shrinking the central bank’s portfolio of assets on Dec. 1. In their post-meeting statement, Fed policymakers on Wednesday repeated their assessment that “job gains have slowed” and said “risks to employment rose in recent months.” Officials characterized economic growth as “moderate” and said inflation “has moved up since earlier this year and remains somewhat elevated.” The Federal Open Market Committee voted 10-2 to lower the target range for the federal funds rate by a quarter percentage point to 3.75%-4%. Fed officials on both ends of the policy spectrum opposed the decision. Governor Stephen Miran, who joined the central bank last month and is on unpaid leave from his post as chair of the White House Council of Economic Advisers, dissented again in favor of a larger, half-point reduction. Kansas City Fed President Jeff Schmid said he preferred not to cut rates at all, after supporting last month’s rate reduction. The statement nodded to the fact that an ongoing government shutdown has limited their access to economic data. In describing the labor market, officials referenced the unemployment rate “through August.” The Fed’s job is growing increasingly difficult as officials are forced to make policy decisions without most of the economic data they typically rely on. The shutdown has frozen or pushed back the compilation and release of reports tracking the labor market, prices, spending and other key indicators. Policymakers did, however, receive a delayed report last week on the consumer price index. It showed underlying inflation rose in September at the slowest pace in three months. The figures were likely welcomed by officials worried about price pressures, but still showed core inflation rose 3% from a year earlier, well above the Fed’s goal.

Treasury Secretary Scott Bessent on Monday confirmed the names of five finalists to succeed Federal Reserve Chair Jerome Powell, with the president saying he expected to make his decision by year-end. The candidate pool has narrowed to current Fed board members Christopher Waller and Michelle Bowman, former Fed Governor Kevin Warsh, White House National Economic Council Director Kevin Hassett and BlackRock Inc. executive Rick Rieder, Bessent told reporters Monday on Air Force One. Bessent, who is leading interviews for the position, reiterated that he’s planning to do a further round of interviews, and hopes to present a “good slate” to President Donald Trump after the Thanksgiving holiday. The president also on Monday reiterated that he didn’t expect Bessent to leave his current post to helm the Fed.

Impactful International News

German business confidence improved to its highest level since 2022 at the start of the fourth quarter, bolstering hopes that Europe’s largest economy is finally emerging from two years of contraction. An expectations index by the Ifo institute rose to 91.6 in October from a revised 89.8 in September, a release Monday showed. That’s above the 90 median estimate in a Bloomberg survey. A measure of current conditions unexpectedly fell. “Companies remain hopeful that the economy will pick up in the coming year,” Ifo President Clemens Fuest said in a statement. “However, the current business situation was assessed as slightly worse.” The numbers add to surveys published Friday showing German private-sector activity unexpectedly jumped in October to its highest level since 2023, putting the euro-area on a firmer footing. Germany saw output shrink for two years, with only marginal growth — if any — expected in 2025. In particular, the manufacturing sector is still suffering from structural problems like red tape and higher US tariffs.Japan and the US unveiled a list of potential projects for their $550 billion US investment vehicle, providing a first look into what specific proposals could be funded by the mechanism that’s a key part of the two countries’ trade deal. At a signing ceremony Tuesday in Tokyo, US Commerce Secretary Howard Lutnick outlined many of the highest-profile commitments. The corporate names included SoftBank Group, Westinghouse and Toshiba Corp., and the size of the potential projects ranged from $350 million to as much as $100 billion. A fact sheet released by Japan’s trade ministry Tuesday detailed other Japanese companies interested in launching projects in areas ranging from energy and AI to critical minerals. “You’re at the beginning. You are it. You are the foundation. And this is really, really exciting,” Lutnick said at the event. The announcements were intended to flesh out a framework trade agreement reached earlier this year, where Trump lowered and capped tariffs on Japanese goods in exchange for a pledge for Japan to fund $550 billion in US projects. We hope all of our clients are safe and well. Our planning and client service team has been engaging in a client outreach program to check to see how all our clients are doing – so please do not be surprised when you receive an email and/or phone call from a member of our outstanding team. As always, stay tuned!  

Company Events

SGK writes additional weekly commentary for clients of the firm detailing recent events and earnings of core equity holdings.

Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Steigerwald, Gordon & Koch, Inc. [“SGK”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from SGK. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. SGK is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the SGK’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.sgkwealthadvisors.com. Please Note: SGK does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to SGK’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please Remember: If you are a SGK client, please contact SGK, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.