Market Insights Recap — Week of October 20, 2025

Hello, I'm Steve Orr, Chief Investment Officer for Texas Capital's Private Bank.

Still drifting along. Cuts coming, and onward and upward. What do they mean for our portfolios? What should we be thinking about? No government data last week, thanks to continued government shutdown. This Friday, we should get the delayed consumer price index for last month. Expect 3.1% for the headline; inflation is here to stay. The Fed's Beige Book of economic conditions and regional Fed surveys suggest the economy is ticking along in first gear. Some places okay, some good, some great; consumers are still spending. Home prices are starting to soften a little bit in some areas. In a speech last week, Fed Chair Powell all but promised an October 29 rate cut. The committee is clearly worried about jobs, and Powell noted that the Fed may soon start buying some more Treasury bonds. 

After the Tricolor and PrimaLend bankruptcies, we're beginning to wonder if some of that jobs concern is really a cover for problems in the private lending markets. Jobless claims have moved very little since the D.C. area layoffs started, so low jobless claims means fine economy. Long-term Treasury rates have dropped nearly three quarters of a point this year. The 10-year Treasury note keeps trying to push below 4%, but it appears stuck at that level. We think only aggressive Fed buying or a sudden slowing in the economy pushes rates down into the mid-3% range. We don't see that happening at the moment. So keep the bond exposure; rates don't look like they want to go anywhere at the moment.

Now short-term interest rates, they're probably about 2/10 higher than they should be right now. There are some funding pressures related to the dollar and availability of Treasury bills. That keeps your money market rates above 3.8%. That's still a nice return on your cash versus inflation. The stock market's treat was a rare low volatility rally in September. Now we're finding some hidden tricks in October courtesy of some bad bank loans at Zions and Western Alliance. The headlines and monthly option expiration last week caused the rally to pause, but we believe the longer-term bull remains in place. Earnings for the real economy ramp up this week. Eighty-nine S&P 500 members report, including Tesla, Lockheed, Texas Instruments and Southwest Airlines.

So let's wrap it up. Shutdowns on track for another week. Inflation reports this Friday. It's steady and sticky at 3.1%. Interest rates are not signaling big problems in credit or the economy. The Fed is pushing for another quarter point cut on October 29. Stocks are hanging near all-time highs. They're waiting on earnings reports. Third quarter earnings should show 8% growth year over year. Just fine. So steady as she goes; 'til next time.