Market Insights Recap — Week of October 27, 2025

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

First gear, rate cut done and rally on. What do they mean for our portfolios? What should we be thinking about?

A fun week to close out October. Everything is at or near all-time highs. And we're hip deep in earnings announcements, month-end performance gaming and of course the 96th anniversary of the 1929 crash. Now the economy drives earnings. Let's start there. Consumer price index continues to tick higher. Last month's reading of 3% pleased Wall Street because it wasn't 3.1%. You know that back in July it was 2.3%. Then again in August it was 2.9%. So, headline CPI is probably going to moderate the next couple of months thanks to lower prices at the gas pump. But we believe this 3% reading is going to get revised higher as more housing data comes in.

Business-wise, East Coast surveys weakened in the last couple of months probably due to import tariffs. But the Kansas City Fed's reports show manufacturing is strengthening in the Midwest. So overall, a partly cloudy economy rolling along in first gear. No need to change there. 

Now the Fed is going to have more to say on the economy at the conclusion of its Wednesday meeting. We expect the FOMC to take its Fed funds rate down a quarter of a percent. The new range is going to be 3.75% to 4%. Now, Wall Street still expects those short-term rates to end up near 3% by the end of next year. We think the economy is stronger than that level, so we'll see. We also think the Fed is going to announce the end of its Quantitative Tightening program. Now this is a fancy economist way of saying they're going to start buying more Treasury bonds soon. Buying Treasury bonds in size pushes the price of the bonds up, which lowers the interest rate. Homebuyers are going to like lower interest rates. We're keeping market exposure in our bond portfolios right now. 

Gold has grabbed the headlines the last two months with a 30% run. Central bank buying and overnight liquidity issues are the main drivers there. What happens to gold after a run like this? Now we have six cases this century where gold has run higher in the exact same pattern. And in four of those six cases, gold was at least 7% lower three months later. So perhaps fade the gold rally in here. Now stocks continue to make new highs, but breadth and momentum are waning a bit recently. So it looks like kind of a wait-and-see market. But we are seeing very good earnings for the third quarter. Year-over-year growth for the S&P 500 is running above 13%. Five of the Magnificent Seven report this week. So all eyes on big tech. But don't forget the real economy. Sherwin-Williams, Nucor Steel, Kraft, Chevron and Exxon are among the heavyweights turning in their report cards this week.

OK, let's wrap it up. Shutdown continues; Monday is day 27, closing in on that 35-day record back in 2018 to 2019. Inflation is still sticky at 3%. The Fed is going to cut a quarter of a percent and likely announce increased bond buying. Stocks continue to like tariff certainty and very good earnings despite tariff uncertainty. Top-end consumers continue to spend. All of the above keeps our indicator dashboard green and fully invested; 'til next time.