Dear Valued Clients and Friends –
Lots to cover today as we head into the last week of October, a Fed week, and the busiest week of earnings season of the quarter…
Dividend Cafe on Friday did a deep dive into the world of index funds, evaluating why people use them, why we don’t, and how they have changed over the years. The question of whether or not their popularity has fundamentally changed investing is addressed, as is the way that indexing now affects all investors (even ones who do not own them). The written commentary is here (my favorite), the video is here, and the podcast is here.
Off we go…
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Market Action
- Markets opened up over +200 points today and then zigged and zagged throughout the day.
- The Dow closed up +337 points (+0.71%) with the S&P 500 up +1.23% and the Nasdaq up +1.86%.
*CNBC, DJIA, Oct. 27, 2025
- Markets rallied today on optimism that, yes, a U.S.-China deal is going to happen (with the President saying it will be done before his meeting with Xi).
- Fun fact: The $65 trillion market cap of the U.S. stock market is $25 trillion higher than it was at the end of 2022. That growth in market cap in less than three years – just the increase – is higher than the total market cap of Japan, all of Europe, and the UK – combined!! That growth is higher than all of China’s equity market value. And this is with almost no positive return from U.S. small-cap or mid-cap sectors at all. (h/t Louie Gave)
- The ten-year bond yield closed today at 3.98%, down one basis point on the day.
- Top-performing sector for the day: Communication Services (+2.30%)
- Bottom-performing sector for the day: Consumer Staples (-0.27%)
- Gold’s decline of 9% from its high of a week ago has come with massive volume. The silver story is much the same. I do not have anything to add about reasons or explanations because I don’t believe any are worthwhile.
Public Policy
- The President says he is going to implement higher tariffs on Canada because they ran a commercial he didn’t like, and he says he is giving Mexico an extension of their deadline because talks continue to advance.
- The U.S. government is talking about taking equity positions in various quantum computing companies, the latest in an expanded conversation about an expanded role for the federal government in ownership of U.S. means of production.
Economic Front
- The CPI rate was up +0.3% on the month in September, hitting +3% year-over-year, with core (ex-food and energy) up +0.2% and also 3% (y/y). The slowing trend in rent growth (and related shelter measurements) is helping to hold the overall number steady, as some components move higher from tariffs, but the overall number stays in the same place. The bond market seems to agree!
Housing & Mortgage
- Existing home sales increased by +1.5% in September, in line with expectations, and sales volume is up +4% from where it was a year ago. The median price for these sales was down on the month (and yes, there is a correlation between price and volume).
- Look what happens where new supply is actually allowed to come to market … Prices actually soften, affordability increases, and buyers gain negotiating power. This is all going to take time to play out, but the extra time on the market means the “seller’s advantage” is dissipating, and better conditions for buyers are developing (particularly where there is new supply). This will take time to lead to actually reduced prices, but it’s a beginning.
- 20% of mortgages have an outstanding rate of 6% or more (lots of refinance opportunity if rates are to meaningfully drop). Over 70%, though, remain below 5%.
Federal Reserve
- I am far more interested in what the Fed announces about QT this week (if anything) than the fed funds rate (which futures show is a 100% chance of a quarter-point cut).
Oil and Energy
- WTI Crude closed at $61.52, basically flat on the day.
- MLPs were up quite a bit last week (+2.7%), even as other midstream names were even.
Against Doomsdayism
My friend, Michael Poulos, sent this to me this morning from the Wall Street Journal, and I felt it needed to be added in today. We have way more service workers than we used to. They make way more money (as everyone does) than they used to (even after adjusting for inflation). And they get this higher wage and better job with way fewer hours needed to work. Other than that, we have a crisis on our hands and everyone is longing for the good ole’ days… ay yi yi.
On Deck
- The Fed meeting is Tuesday, with the presser on Wednesday, and it ought to be a nothing-burger.
- Earnings season hits its peak this week, and that is far more important than anything else.
- Dividend Cafe on Friday will do the deeper dive into private equity and private credit that has so many in hysterics, and so many others in denial.
With that, have a good night, and bring on the Bruce Springsteen movie!
With regards,
David L. Bahnsen
Chief Investment Officer, Managing Partner
The Bahnsen Group
www.thebahnsengroup.com
The Dividend Cafe features research from S&P, Baird, Barclays, Goldman Sachs, and the IRN research platform of FactSet.
