October 2025 Market Recap
1) Monetary policy: the Fed cuts, but keeps flexibility
At its October 29, 2025 meeting, the Federal Open Market Committee lowered the federal funds target range to 3.75%–4.00%, effective October 30.
That move mattered less as a single 25 bp adjustment and more as a signal: the Fed acknowledged enough cooling in the economy (and enough progress on inflation) to continue normalizing policy, while still emphasizing data dependence.
Two important takeaways from the Fed’s communications:
Implementation details still matter. In a world where small changes in liquidity and funding conditions can ripple quickly through markets, the operational language in the Fed’s implementation notes like how the Desk conducts operations and manages reinvestments. This was a reminder that “plumbing” decisions can be almost as important as the headline rate.
The Fed had to operate with imperfect data. With parts of the federal statistical pipeline disrupted during the shutdown, policymakers increasingly leaned on “available indicators” and what could be observed in real time (credit conditions, survey data, corporate commentary, and market-based measures).
2) Inflation: progress, but not “mission accomplished”
Inflation did not re-accelerate in October’s narrative, but it also didn’t validate an “all clear” message. The biggest inflation headline came from September CPI, which was released later than scheduled due to the shutdown.
The U.S. Bureau of Labor Statistics published the September 2025 CPI on October 24, 2025. This was done to explicitly meet statutory deadlines tied to Social Security benefit calculations; while noting that other releases would remain paused until normal government operations resumed.
The September report showed:
Headline CPI: +3.0% year-over-year
Core CPI (ex food & energy): +3.0% year-over-year
Energy: +2.8% year-over-year
Food: +3.1% year-over-year
Separately, the BLS documented that most CPI operations (including data collection) were suspended during the funding lapse from October 1 through November 12, 2025, with limited staff recalled to produce the September report.
Why this matters: even when the CPI print is “clean,” the process behind it matters. Data delays and potential gaps in collection can create uncertainty about revisions, comparability, and how representative a single print is relative to trend.
3) Growth and labor: the data blackout becomes part of the story
The most underappreciated macro driver in October was not a single datapoint—it was the absence of many datapoints. When key releases are delayed, markets tend to:
Overweight private surveys (PMIs, business sentiment, hiring intentions),
Over-interpret corporate guidance (especially on pricing power and wage pressure),
Use market-based signals (breakevens, forward curves, credit spreads) as real-time “macro dashboards.”
October’s environment pushed investors into a world of inference. That often increases short-term volatility because pricing becomes more narrative-driven: one strong survey can swing expectations, and one cautious corporate update can do the same.
4) Rates and the curve: direction matters more than decimals
With the Fed cutting and inflation still above target, the market’s job was to weigh two competing forces:
Policy normalization (supportive for duration and rate-sensitive assets), versus
Term premium and fiscal uncertainty (which can keep longer yields from falling “too far, too fast”).
For context, the 10-year Treasury yield ended October 31, 2025 at 4.11%
At a high level, the curve continued to reflect a market balancing moderating growth and improving inflation against a still-elevated uncertainty premium.
5) Macro plumbing: liquidity, funding, and “how markets clear”
October was also a reminder that modern macro is not only about CPI and Fed funds—it’s also about market plumbing:
Funding conditions and repo availability can influence risk appetite.
Balance sheet policy and reinvestments can affect the marginal supply/demand for duration.
Data disruptions can change how quickly expectations reset (and how violently).
The Fed’s implementation note is a good example of why these mechanics matter: it provides the operational blueprint for maintaining the target range and executing tools used to guide overnight rates.
What we’re watching coming out of October
Here are the forward-looking themes we think mattered most as investors exited the month:
Data normalization after the shutdown: how quickly does the official calendar come back, and do delayed releases introduce revisions or measurement noise that changes the story?
The inflation “last mile”: does core inflation keep drifting lower, or does it settle into a range that’s too hot for comfort?
The Fed’s reaction function: cutting is one thing; the key is whether the Fed sees easing financial conditions as helpful, neutral, or problematic if inflation progress slows.
Rates volatility and term premium: even if the economy cools, the long end can remain “stubborn” if investors demand higher compensation for duration risk.
Disclosure
This commentary is provided by Girard Capital Management for informational and educational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security. Views are as of the end of October 2025 and may change as new information becomes available.