Published October 31, 2025
A survey of headlines this week reveals the challenges facing the Federal Reserve as they consider further interest rate cuts. While the AI trade remains robust, holding stocks near record highs, news of layoffs across many companies and industries is rising. The Wall Street Journal has an article noting that sales of homes in East Hampton, a wealthy enclave, are the strongest in years, while a government shutdown threatens benefits for a big chunk of American households. Those two headlines alone reconfirm the two-headed economy the Fed faces. Weakness in labor markets and increasing economic difficulties at the lower rungs of the economic pyramid argue for more aggressive rate cuts. But the overall economic growth numbers still largely show strong topline results. The stock market generally rewards the layoffs as they raise profitability, though the blow to consumer spending could eventually cause broader economic weakness. Then there are the stubborn inflation numbers, stuck above the Fed’s target with few companies seeing improvement anytime soon. The only clarity is that we continue to have two very different economies.
Turning to the stock market though, Delta’s latest note reminds us that there are upcoming tailwinds that should keep stocks largely on track. Aggressive tech fund manager Cathie Wood noted recently that the negative turning point for stocks will happen when the Fed shifts course and begins raising interest rates. When that happens is anyone’s guess. But it isn’t within the 6-9 month outlook timeframe that is the focus for the stock market.
Here are the positive forces Delta sees ahead:
“Goldman Sachs forecasts $1 trillion in corporate buybacks next year. Households are expected to purchase $500 billion worth of stock. Combined, that implies roughly $6 billion of average daily demand ($1.5T divided by 250 trading days).
Fed Cut Followed by a Higher Market
This week marked the fifth time the Fed cut rates with the S&P 500 index at an all-time high. In all prior instances, the index was higher a year later with an average return of 20%. The worst one-year outcome was a 15% gain, which occurred last year.
Company Updates
Visa (V): Consumer Still Solid
Visa reported better-than-expected earnings and revenues this week. Management cited continued strong U.S. spending and now expects revenue growth at the upper end of its long-term growth guidance as U.S. payment volumes accelerate.
Nvidia (NVDA): Keynote Address
Nvidia’s CEO Jensen Huang presented a keynote address at the company’s GPU Technology Conference in Washington, DC on October 28. He indicated revenue visibility of $500 billion in cumulative datacenter revenue in 2025-26. $500 billion is 12% above the current Wall Street analyst consensus expectation of $447 billion. NVDA traded ~8% higher over the two days following this announcement. We remain in the early phases of AI implementation, suggesting ongoing upside catalysts.
Fiscal Legislation Bullish for 2026 GDP
The chart below illustrates how increased government spending and lower taxes should boost GDP through 2027. The peak spending impact is expected in Q2 2026.
Bottom Line
Macro data continues to illustrate a resilient economy with potential for re-acceleration higher. Trade talks with China, South Korea and Mexico seem to be going well. The Fed is cautious to commit to a rate cut in December as inflation is running at 2.8% (higher than their 2% target) and the economy may be stronger than expected. The Bullish thesis remains in place.
Market Update
Investors had a lot of news to consider this last week of the month. Many of the market’s largest companies reported earnings while President Trump’s planned meeting with Chinese leader Xi offered potential market-moving news. Monday brought optimism around those events with the Nasdaq rising almost +2%. Strength in shares of Nvidia (+5%) along with an upside earnings surprise from delivery and logistics company UPS kept a bid under stocks Tuesday en route to a +0.8% Nasdaq lift. An expected 0.25% interest rate cut from the Fed highlighted Wednesday trading. Fed Chair Powell’s cautious words in the announcement took the wind out of the market in the afternoon leaving the indexes mixed though the Nasdaq continued its recent climb. After the close, earnings from Meta, Microsoft and Alphabet offered mixed inputs. Meta’s plan to issue debt to further increase AI-related spending sent shares lower while investors took a “sell the news” approach to the Trump-Xi meeting. The Nasdaq slumped -1.6% in Thursday’s session. After the bell, earnings from Apple and Amazon were well-received. That kicked off a solid start to trading Friday with the Nasdaq largely recouping its Thursday slide. The gains dwindled over the course of the day, though indexes managed to post a +0.5% rise on October’s last trading day.
Stocks closed October with another positive week with the S&P 500 (SPY) rising +0.71%. The Nasdaq 100 (QQQ) surged +1.94% on the Mag 7 earnings reports and Nvidia’s strong week. But non-tech areas of the market were not as fortunate with the small cap index (IWM) falling -1.28% this week.
Warm wishes and until next week.