October 2025 Market Chartbook

Sean Gross, CFP®, AIF® | Co-Founder & CEO

Click here to view our October 2025 Market Chartbook.

October 2025 Market Review: Trade Policy, Government Operations, and Retirement Planning

Sean Gross, CFP®, AIF® | Co-Founder & CEO

Major stock indices posted solid gains in October and reached fresh record highs, even as investors navigated uncertainty surrounding government operations and evolving trade policy with China. Fixed income assets also delivered positive returns as yields fell, supported in part by the Federal Reserve's continued monetary easing.

The month presented notable challenges alongside these gains. Ongoing disruptions in government operations dominated news cycles and sparked concerns about economic growth, while tensions over rare earth minerals triggered the sharpest daily market retreat since April. Yet the swift recovery demonstrated why investors benefit from avoiding reactive decisions based on headlines. Gold surged to unprecedented levels during this period before moderating as the month concluded.

The Social Security Administration revealed a 2.8% benefit adjustment for 2026, representing a more moderate increase than recent years that may fall short of covering actual expense growth for many beneficiaries. When considered alongside declining yields on cash investments, this development highlights why portfolios need to balance current income needs with long-term appreciation potential.

October's results demonstrate that staying committed to a strategy designed for long-term objectives continues to be the most effective way to manage market uncertainty.

Key Market and Economic Drivers

• The S&P 500 rose 2.3% in October, the Dow Jones Industrial Average 2.5%, and the Nasdaq 4.7%. Year-to-date, the S&P 500 is up 16.3%, the Dow is up 11.8%, and the Nasdaq is up 22.9%.
• The Bloomberg U.S. Aggregate Bond Index gained 0.6% in October. The 10-year Treasury yield ended the month lower at 4.08%.
• International developed markets gained 1.1% in U.S. dollar terms using the MSCI EAFE index, while emerging markets jumped 4.1% based on the MSCI EM index. Year-to-date, the MSCI EAFE index has gained 23.7% and the MSCI EM index 30.3%.
• The U.S. dollar index stabilized and rose slightly to 99.8.
• Bitcoin fell somewhat in October, ending the month at $109,428.
• Gold prices ended the month lower at $3,997, after reaching a new all-time high of $4,336 earlier in the month.
• The Consumer Price Index was reported late due to the government shutdown but showed that prices rose 3.0% on a year-over-year basis in September. This report is used to calculate the Social Security cost-of-living adjustment (COLA), which will be 2.8% in 2026.
• Other economic data, such as the monthly jobs report, has been delayed due to the government shutdown.

Government operations disruption had limited market impact

The month opened with disruptions to government operations now nearing historic duration records. This situation arises when Congress cannot reach agreement on budget legislation or deadline extensions. Numerous agencies, including those responsible for releasing key economic indicators, have maintained only skeleton staffing since then.

These disruptions create genuine hardships for affected workers and their families, yet it's crucial to maintain appropriate context regarding portfolio implications. Past episodes have typically not produced lasting effects on financial markets, as government expenditures tend to be deferred rather than eliminated. The longest previous episode spanned 35 days during 2018 to 2019, after which the S&P 500 proceeded to advance 31.5% in 2019. While past results don't guarantee future outcomes, this history suggests markets frequently move beyond these events.

Workforce reductions have also generated concern. Federal employment constitutes just 1.8% of total U.S. employment, and recent reduction notices represent merely 0.002% of the national workforce. Though these disruptions create real challenges for affected individuals and interrupt services, their broader economic influence remains constrained.

Trade policy developments sparked temporary market reaction

Markets experienced their most significant single-day retreat since April amid heightened tensions between the U.S. and China concerning rare earth minerals, with the possibility of 100% tariffs on Chinese goods. These minerals represent a critical leverage point in trade negotiations. China accounts for roughly 70% of worldwide rare earth production and nearly 90% of refining capacity, creating substantial supply chain dependencies.

Markets rebounded swiftly after more measured communication from the White House. A late-month meeting between Presidents Trump and Xi led to reduced tensions and a 10% reduction in tariffs applied to China.

This dynamic has occurred repeatedly throughout the year, with trade-related uncertainties causing brief declines before markets regained ground. The S&P 500 has climbed 37% from its April trough and established 36 fresh record highs this year through October. Markets never advance in a linear fashion, so these episodes remind us that temporary periods of volatility represent normal market behavior.

Federal Reserve continues accommodative policy shift

The Federal Reserve reduced interest rates by 0.25% to a range of 3.75% to 4.00% at its October gathering, representing the second consecutive reduction. This action reflects efforts to sustain economic expansion while balancing inflation considerations and softening employment conditions. The Fed's statement acknowledged that "uncertainty about the economic outlook remains elevated" and that "downside risks to employment rose in recent months."

Market pricing indicates another reduction appears probable by January, with one or two additional reductions possible in 2026. Beyond rate policy, the Fed announced it would conclude its balance sheet reduction in December. This means continued bond purchases, effectively maintaining accommodative conditions. After three years of policy tightening that reduced the balance sheet by $2.2 trillion, halting this process provides further economic support. Declining rates and supportive monetary conditions have historically created favorable environments across asset classes.

Retirement income considerations amid modest benefit increases and declining yields

The Social Security Administration announced a 2.8% benefit adjustment for 2026, indicating continued but moderating inflation. For typical beneficiaries, monthly payments will reach approximately $2,064, representing an increase of just $56. Though helpful, this adjustment appears modest compared to the 8.7% increase in 2023, which marked the largest since 1981.

The difficulty for beneficiaries is that the adjustment calculation uses an index that may not accurately capture their actual cost experience. Healthcare expenses, housing costs, and other categories representing significant portions of retiree budgets frequently increase faster than the overall measure. Medical care services rose 3.9% over the past year, health insurance advanced 4.2%, and home insurance climbed 7.5%. Food prices increased 3.1%, though meat, poultry, and fish rose 6.0%.

With longevity continuing to extend—many beneficiaries will reach their 90s—preparing for multi-decade retirement periods requires portfolios capable of generating both current income and long-term growth. Understanding how to construct portfolios for these extended timeframes, while managing distribution rates and adjusting to evolving market environments, emphasizes the importance of thorough financial planning.

The bottom line? Markets delivered strong October results despite disruptions in government operations, trade policy developments, and other uncertainties. Staying committed to a flexible portfolio designed for long-term goals remains the most effective approach as the year draws to a close.

Understanding Gold's Recent Surge and Currency Concerns

Sean Gross, CFP®, AIF® | Co-Founder & CEO

Gold prices have surged more than 60% this year, climbing above $4,300 per ounce alongside gains in numerous other asset classes. This remarkable advance has generated significant attention and raised questions among investors about whether this rally differs from previous episodes.

The current environment has been characterized by some as a "debasement trade," reflecting concerns that governments may be inclined to diminish currency values through expansive fiscal spending and supportive monetary policies. These factors, combined with a softer dollar, have drawn certain investors toward assets like gold, which are perceived as preserving value, particularly as equity market volatility has increased once more.

Although fiscal deficit concerns are valid, historical evidence demonstrates that forecasting gold's trajectory is challenging. Additionally, multiple factors beyond currencies and interest rates are contributing to broader market strength. For investors with long-term horizons, the key question isn't whether to choose between stocks and bonds versus gold but rather determining the appropriate allocation to each asset class within a well-balanced portfolio.

Most crucially, investors must recognize the distinction between short-term trading opportunities and long-term financial objectives such as generating income and achieving growth, particularly when an asset has already experienced substantial appreciation.

Historical context on currency debasement

Although currency debasement is an ancient concept dating back thousands of years, it remains a recurring concern that reemerges periodically. The traditional meaning of "debasement" describes governments reducing the precious metal content within coins. Historically, this practice enabled governments to produce more coins from identical quantities of precious metal, though it simultaneously diminished each coin's purchasing power.

Today, most currencies operate as "fiat currencies," deriving their value from confidence in the issuing governments rather than backing by gold or other precious metals. Contemporary debasement concerns therefore focus on whether governments might tolerate elevated inflation levels and currency weakness, as this approach would facilitate management of outstanding debt obligations.

This concept relates closely to theories that gained prominence following the 2008 financial crisis. Economists Reinhart and Rogoff, for example, described "financial repression" - policies maintaining artificially suppressed interest rates to diminish the real burden of government debt. Such policies disadvantage savers when interest rates fail to match inflation, eroding cash values. Given the national debt's continued expansion, investor concerns about these policies and the resulting search for value-preserving assets are understandable.

Despite these long-term concerns, current evidence regarding whether this is occurring today remains mixed. First, inflation measures remain persistent but not extreme. The Consumer Price Index, Personal Consumption Expenditures Index, and Producer Price Index all register at 3% or below. Second, bond markets aren't pricing in significant inflation expectations. The 10-year Treasury yield has recently declined to 4% or less, while Treasury Inflation-Protected Securities (TIPS) imply inflation expectations of just 2.3%.

Two additional factors merit consideration. First, central banks globally have been accumulating gold to strengthen their reserves. This trend has intensified amid geopolitical uncertainty and dollar weakness. Second, although the dollar has declined approximately 10% this year, it remains near the upper end of its twenty-year range. From a long-term perspective, the dollar maintains considerable strength relative to historical levels.

Forecasting gold rallies presents challenges

As a speculative investment, gold naturally attracts investor attention. Throughout recent decades, gold has experienced dramatic rallies with varying outcomes. During the late 1970s, gold surged amid concerns about stagflation and Federal Reserve independence. Prices peaked above $800 in 1980 - a level not revisited until 2007.

A comparable pattern emerged following the 2008 financial crisis as central banks implemented substantial stimulus programs. Many investors understandably feared runaway inflation and dollar collapse, neither of which materialized. Gold doubled between 2009 and 2011, reaching approximately $1,900 per ounce, before declining toward $1,000 over subsequent years. This occurred despite the Fed not beginning to reduce stimulus until 2013 or raising rates from zero until 2015.

The accompanying chart compares gold's performance to the S&P 500 since the 2007 market peak. Although gold has delivered strong performance during certain periods, providing diversification benefits, the S&P 500 has delivered superior returns over the complete timeframe. For investors focused on daily market movements, this outcome may seem unexpected. This underscores the importance of evaluating all asset classes from a comprehensive portfolio perspective.

Multiple asset classes have enhanced portfolio performance this year

The present gold rally, which commenced in 2024, has coincided with robust performance across numerous assets, including artificial intelligence-related stocks like the Magnificent 7, international equities, bonds, and cryptocurrencies. The accompanying chart illustrates how various asset classes have contributed to portfolio gains this year. While gold has certainly delivered strong results, individual stocks and other assets consistently outperform in any given year.

For numerous investors, gold serves as part of a broader commodities allocation, potentially connected to other alternative asset classes. The Bloomberg Commodity Index, for instance, initiated the year with a 14.3% target allocation to gold. Combined with other commodities including silver, industrial metals, energy, grains, and additional components, this index has appreciated 10.6% year-to-date.

Additional rationales support maintaining diversified asset class exposure aligned with long-term financial objectives. One fundamental consideration is that gold produces no income, unlike bonds or dividend-distributing stocks. Consequently, portfolios with excessive gold exposure sacrifice the longer-term appreciation potential of equities and the income generation of bonds.

The bottom line? Certain investors are troubled by dollar debasement concerns, especially given gold's continued rally. Investors should consider gold as one element within a flexible, diversified portfolio constructed to support long-term financial objectives.

Will a Prolonged Government Shutdowns Affect Portfolios?

Sean Gross, CFP®, AIF® | Co-Founder & CEO

As we look at markets and the economy, our goal is always to provide perspective for our clients. We understand that news headlines can send mixed messages, so we want to make sure you're informed of what is most important to your financial progress.

The government shutdown is at the forefront of the current news cycle and is now entering its third week. We expect these headlines to grow louder, adding to political noise and perhaps polarization. For investors, there are also growing concerns about a possible recession. To be clear, the goal of financial planning is not to take sides on which side of Washington is "right," but rather to make sense of it all, especially with an eye toward risks and opportunities.

Key Points to Consider:

• The current government shutdown is now in the top five longest shutdowns ever, primarily affecting government workers and their families, as well as those who depend on government services. By law, furloughed employees should receive all backpay once the shutdown ends.

• What makes this shutdown unique is that the federal government is pursuing layoffs, also referred to as "reductions in force" or RIFs. Without minimizing the impact on the lives of government workers and their families, the reality is that federal government employment only makes up 1.8% of the entire workforce. Recent reduction in force notices represent just 0.0018% of the total labor market, a small slice of the entire economy.

• Historically, government shutdowns have never had long-term effects on the stock market. The longest shutdown in history lasted 35 days during President Trump's first term from 2018 to early 2019. While the past is no guarantee of the future, the S&P 500 went on to gain 31.5% with dividends in 2019.

• Extended shutdowns can create modest economic growth headwinds as federal employees postpone spending and government services experience disruptions. However, much of this lost economic growth is simply postponed until the government reopens.

• The key drivers of investments, such as corporate earnings, valuations, interest rates, and inflation are unlikely to significantly shift because of the government shutdown. The shutdown is also distinct from the debt ceiling, which has led to credit downgrades in the past.

The chart below shows that historical government shutdowns have often had limited impact on markets, regardless of which party was in power.

Taken together, government shutdowns will likely attract media attention, present difficulties for federal employees, and interrupt essential services, but they historically represent temporary interruptions and have minimal financial market impact. Related to your situation, the government shutdown is not a reason to make changes to your financial plan. That said, if your financial situation or objectives have shifted, please don't hesitate to reach out and we'll explore it in detail together.

Government Shutdowns: What They Mean for Investors

Sean Gross, CFP®, AIF® | Co-Founder & CEO

The federal government is now officially shut down as policymakers work to reach a new funding agreement. This development comes during a year already marked by significant uncertainty surrounding government policies on trade, taxes, immigration, and other critical issues that impact both the economy and financial markets.

It's understandable that investors may be concerned about how political developments could influence their investment portfolios, particularly those who are worried about the growing budget deficit and national debt. By examining historical trends and understanding why markets typically move past these events, investors can maintain a balanced perspective even during times of political disagreement in Washington.

Although political tensions in Washington can generate uncertainty, historical evidence indicates that government shutdowns generally have a modest effect on financial markets. While these shutdowns can present real challenges for government employees, their influence on financial markets has been historically limited. For investors with long-term horizons, these situations underscore the importance of distinguishing between political perspectives and financial planning strategies. This distinction becomes particularly relevant when news coverage emphasizes contentious issues that have not traditionally influenced investment outcomes.

Markets and the economy have historically weathered government shutdowns

Each year, the federal government is required to approve a budget for the upcoming fiscal year, which starts on October 1. Although the government enacted the "One Big Beautiful Bill Act" earlier this year establishing tax and spending frameworks, a budget is still necessary to distribute actual funding to various departments and agencies. If this deadline is not met, the government may shut down, leading to interruptions in government services and the furloughing of employees.

Congress rarely meets the deadline for passing budget bills on time. This pattern is perhaps unsurprising given Washington's increasingly divided political climate, where finding common ground has become progressively more challenging. Throughout nearly five decades, Congress has successfully passed appropriations bills before the fiscal year deadline only on a handful of occasions, making eleventh-hour negotiations standard practice. A frequently employed workaround is a "continuing resolution," which provides temporary government funding while lawmakers continue discussions. Republicans are currently advancing a seven-week stopgap measure for this purpose.

The accompanying chart demonstrates that government shutdowns have been a recurring feature since 1980 across administrations of both political parties, with limited lasting effects on financial markets. The data shows this held true even during particularly contentious shutdowns, such as those during the Reagan years, Clinton's 21-day shutdown in 1995, Obama's 16-day shutdown in 2013, and Trump's 35-day shutdown spanning late 2018 to early 2019—the longest in history. From an investment standpoint, shutdowns have typically represented brief interruptions rather than fundamental challenges to economic expansion.

Underlying political disagreements drive shutdown scenarios

The present circumstances stem from disputes regarding spending priorities, with healthcare being a primary focus. Although immediate government funding remains the central issue, these budget confrontations reveal more fundamental disagreements about government's proper role and fiscal accountability. With federal debt currently approaching 120% of GDP, there is broad consensus about the necessity of fiscal discipline, yet significant disagreement persists regarding implementation methods.

A distinctive aspect of this situation involves the administration's instruction to agencies to develop permanent workforce reduction strategies beyond the usual temporary furloughs. This marks a shift from earlier shutdown approaches and may produce more enduring effects on employment and government spending. It should be noted that furloughed federal employees automatically receive back pay after a shutdown concludes, a provision established during the negotiations that resolved the 2018 to 2019 shutdown.

Some investors may view the prospect of a government shutdown alongside other fiscal concerns like the debt ceiling. Debt ceiling challenges arise when previously approved government spending requires payment, but the Treasury Department lacks authorization to borrow beyond a specified threshold. The sole remedy in such scenarios is for Congress to increase the debt limit, otherwise the government faces the possibility of defaulting on its financial obligations. These various fiscal challenges have led major credit rating agencies to lower the U.S. debt rating from AAA. Fortunately, the One Big Beautiful Bill Act also increased the debt ceiling by $5 trillion, postponing this particular concern for the foreseeable future.

Financial markets prioritize fundamentals over political developments

Despite concerns many investors hold regarding the nation's fiscal direction, government shutdowns have typically proven unremarkable for financial markets. The explanation is clear: shutdowns represent temporary interruptions that don't alter fundamental economic conditions.

Shutdowns may affect the release of economic data, potentially influencing critical information used by investors and economists, including the Bureau of Labor Statistics' employment reports and Consumer Price Index. However, this generally only postpones data availability, with normal reporting resuming after the shutdown ends. Extended shutdowns can also create modest challenges for economic growth, as federal employees postpone purchases and government services experience disruptions.

The Economic Policy Uncertainty chart shown above illustrates how tariffs and taxes earlier this year posed substantial challenges for investors. Nevertheless, with recent resolution on both matters, this indicator has declined toward its historical average. While the shutdown could potentially generate increased uncertainty, historical patterns indicate that even prolonged government disruptions have not typically affected investors significantly.

The bottom line? Although government shutdowns may capture media attention, pose difficulties for federal employees, and interrupt essential services, they have historically exerted minimal influence on financial markets. Investors are best served by maintaining focus on their financial strategies rather than day-to-day political developments in Washington.