Week ended October 10th, 2025

There was not a lot of significant news as far as markets this past week, with the release of U.S. economic data regarding jobs and other essential reports deferred due to the ongoing shutdown of the U.S. government. However, the BLS has asked some staff to return to work in order to produce a September inflation report later this month (target Oct 24th), mainly because Americans on social security get their annual COLA increase each year based on the September CPI report. Naturally, the dearth of economic data puts investors – and certainly the Federal Reserve (next FOMC decision Oct 29th) – in a bit of a quandary, forcing them to rely on limited private sector data and sentiment indicators.

Threat of additional tariffs on China

In spite of the lack of economic data, risk markets continued their slow melt up, that is until Friday when markets got a bit of a jolt. All was fine as the U.S. session started on Friday morning, but then a post on Mr Trump’s Truth Social account appeared which said that the U.S. would impose an additional 100% tariff on all Chinese imports started November 1st, following China’s tightening of its rare earths and critical minerals exports. Mr Trump also cancelled a meeting with China President Xi that was scheduled for the APEC forum later in October. As an investor who has in any event been doubtful of this ongoing rally largely led by A.I. FOMO, I can’t help but wonder if this is the beginning of the end of this insanity, or just another blip? Recent history suggests that dip buyers will emerge and ride to the rescue, but I am slightly sceptical if for no other reason than it has been way too easy to make money in stocks over the last six months or so. To add to the anxiety looking forward, there have been plenty of October Mondays over the last few decades that are memorable for all the wrong reasons (e.g. “Black Monday” on October 19, 1987, when the S&P 500 declined 20.5% in one day).,

S&P 500 earnings; Delta

Setting aside the never-ending trade rhetoric coming from the Trump Administration, the dearth of the usual economic data means that investors will be very focused on the upcoming earnings of S&P 500 companies which kicked off this past week. Providing some cheer to investors – and viewed as a sign of the ongoing strength of the U.S. consumer – Delta reported much better top- and bottom-line results, and provided an improved outlook for the fourth quarter into 2026. Here is commentary straight from the horse’s mouth:

“Looking to 2026, Delta is well positioned to deliver top-line growth, margin expansion and earnings improvement consistent with our long-term financial framework,” CEO Ed Bastian said in an earnings release.

Delta reported that although travel was down in the first half of the year, consumers returned to the skies and started spending on travel again in July, contributing to the company’s strong 3rd quarter results. Moreover, all premium class cabins showed growth, with only economy class travel shrinking. The thought of this gives me shivers if you are a person that is concerned about wealth inequality. This coming week, investors will be focused on 3rd quarter earnings and outlooks from the large U.S. banks, which begin to report on Tuesday (JPM, GS, C and WFC).

The Fed: FOMC minutes

In other things that mattered last week, minutes from the last FOMC meeting were released on Wednesday, and you can find them on the Fed’s website here. Below is one of the key paragraphs in the minutes, stressing how much the Fed remains on edge as far as balancing its twin mandates of inflation and jobs:

“In discussing risk-management considerations that could bear on the outlook for monetary policy, participants generally judged that upside risks to inflation remained elevated and that downside risks to employment were elevated and had increased. Participants noted that, in these circumstances, if policy were eased too much or too soon and inflation continued to be elevated, then longer-term inflation expectations could become unanchored and make restoring price stability even more challenging. By contrast, if policy rates were kept too high for too long, then unemployment could rise unnecessarily, and the economy could slow sharply. Against this backdrop, participants stressed the importance of taking a balanced approach in promoting the Committee's employment and inflation goals, taking into account the extent of departures from those goals and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with the Committee's mandate.”

French budget impasse and politics

In news outside of the U.S., the ongoing political gridlock being experienced in the National Assembly in France in terms of agreeing a budget for the upcoming year remains front and centre in Europe. It certainly has some parallels to the inability of the U.S. Congress to agree a budget for the year that began October 1. However, unlike the U.S. Congress, the National Assembly in France is made up of several different parties ranging from the far left to the far right, none with anything close to a majority. This has cost a series of Prime Ministers their jobs (six in two years), because bringing together these factions to agree a budget has proven impossible so far. Underlying this is a political crisis in which several parties – particularly the far right National Rally party – would like to see President Macron call early elections, something he has refused to do so far. France remains one of the most indebted nations in the Eurozone as you can see in the graph below. (For comparison, U.S. debt-to-GDP is around 125% and rising.)

The 10-year French government bond (OAT) spread is more than 80bps higher than the same-maturity benchmark German bond, the Eurozone “gold standard”. Interestingly, French government bond spreads are also wider than all the former “PIIGS” in the Eurozone except for Italy. Oh how the tables have turned!

Markets

U.S. stocks got hammered on Friday, splattering European stocks in the process. The best performing stocks last week were in Asia, with Japanese equities up over 5%. The Yen weakened sharply, and Japanese stocks rallied as investors digest the likely economic path of newly elected Prime Minister Sanae Takaichi. U.S. Treasuries rallied into the end of the week, shaking off a multitude of longer-term fiscal concerns regarding the U.S. and behaving like a safe haven asset. Gold rallied above $4,000/ounce, and Bitcoin showed its “risk on” profile as the cryptocurrency got hammered – along with U.S. stocks – at the end of the week. As I mentioned last week, my concerns are concentrated at the moment more around U.S. credit markets. Although the economy looks to be slowing, it certainly isn’t collapsing although there have been a couple of recent high profile bankruptcies to remind investors that it is not all one way travel as far as credit spreads, which remain incredibly tight. As might have been expected as investors pivoted to risk off, corporate bond spreads widened last week, with high yield being the worst affected.

Below are updated tables for the week ended October 10, 2025.

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