October 2025 Market Commentary

Market Update and Economic Developments

• Equities continued their strong rally with the S&P 500 posting a 2.34% increase for the monthand reaching multiple new all-time highs, with the technology sector being a consistentstandout. Large cap U.S. stocks outperformed small caps, and the most recent earnings seasondelivered many upside surprises, further bolstering the market. Notably, 83% of the 424 S&P 500companies reporting earnings exceeded their earnings estimates this quarter, surpassing the 10-year average of 75%.

• International stock markets posted broad gains in October rising 1.18%. International equites,particularly in emerging markets, experienced notable strength on the weaker U.S dollar, postinga 4.18% increase. Japan and Asia outperformed on growth expectations linked to AI, while Chinadeclined amid tariff tensions. Recent U.S. and China talks eased fears with the pause of steepertariffs, boosting sentiment but leaving uncertainty. Specifically, China agreed to suspend tariffson U.S. imports such as metals and raw materials, which had been as high as 25-40% in somecategories. Meanwhile, data from the Peterson Institute for International Economics shows theaverage tariff rate on Chinese exports stood at 57.6%. Following the October 30, 2025 meeting,the administration agreed to a ten percentage point reduction in tariffs on Chinese goods,bringing the effective rate down to approximately 47%.

• AI had large influence on market performance contributing to strong gains in technology and AIrelated stocks. Robust third quarter earnings from major AI driven companies, combined withcontinued investor optimism and substantial capital expenditure in AI infrastructure, fueledpositive movement. While the AI sector may appear frothy at times, some of the growth of theindustry is rooted in real business models and profitability, not merely speculative excess.Investor sentiment remains strong, driven by expectations that AI will continue to thrive.

Fixed Income Market Update

• In its October meeting, the Federal Reserve cut the target federal funds rate by 0.25% to a range of 3.75% to 4.00%, hoping to support a cooling labor market and improve economic growth. Although recent data was sparse due to the government shutdown, the Fed pointed to declining job gains, and a slight rise in unemployment. This easing helped lower borrowing costs, and encourage investing and consumer spending, which in turn supports equity markets.

• The most important commentary from Jerome Powell’s speech at the October meeting was a December rate cut was “not a foregone conclusion – far from it.” Futures markets for a December rate cut now assign a ~60% chance, down from 75% before Powell’s comments. Fed members felt waiting another meeting would be prudent and this surprised markets.

• The prolonged government shutdown is estimated to reduce U.S. GDP growth by up to1-2 percentage points in the fourth quarter, which creates a cautious environment for investors. Moreover, the suspension of key economic data limits market visibility and policy-maker decision making, further amplifying volatility and risk aversion in financial markets. While much of the economic impact may be temporary and recover once operations resume, such extended uncertainty continues to weigh on overall market sentiment and outlook.