Halloween week brought investors tricks and treats in equal measure. Positive momentum in markets continued as the Federal Reserve (“Fed”) delivered a 25 basis point cut – cue large sighs of relief from equity markets and a flutter of optimism across bond desks. After months of waiting, the sweet taste of easing finally arrived.
The tone from Fed Chair Jerome Powell was careful, even cryptic. His words were measured but his message was murky. He confirmed what everyone wanted to hear - that the economy remains resilient and inflation is easing while firmly avoiding any hint that another rate cut is guaranteed. Powell stressed that a further reduction “is not a foregone conclusion,” citing a lack of consensus among Fed members. In other words: don’t assume there’s more sweets in the bag. That uncertainty was enough to keep markets simultaneously comforted and cautious.
Still, risk appetite proved resilient. US large cap stock indices climbed for the third consecutive week and pushed their record levels higher, even as small and mid-cap indices lagged. The NASDAQ did particularly well, powered by strong results from major technology firms. Earnings season has, for the most part, exceeded expectations, helping analysts to upgrade forecasts for overall corporate profit growth. This strength in earnings has helped offset some of the macro gloom, suggesting that large, globally diversified firms continue to weather the higher-rate environment better than most.
What makes the rally even more interesting is that it has unfolded amid a partial information blackout. The first week of November would normally deliver a stream of crucial US economic reports, but the government shutdown that began on 1st October means key data releases have been delayed or potentially cancelled. Without those signals, markets are flying partly blind, relying more heavily on company earnings and anecdotal evidence than on hard economic data. It’s a strange limbo – monetary policy is shifting, but the scorecard for growth and inflation is still missing. That uncertainty might help explain the Fed’s caution: Powell can’t claim confidence in the outlook if the data itself isn’t there.
Away from Washington’s trick-or-treat politics, there was a notable thaw on the global trade front. The long-running tensions between the US and China showed tentative signs of easing as Presidents Trump and Xi announced an agreement to partially roll back tariffs imposed earlier this year. The total combined tariff rate on Chinese imports will fall from 57% to 47%, while the pact also extends to other trade issues including rare earth export controls, fentanyl trafficking and US soybean exports. The market reaction was modest, but the symbolism matters. For two economies still struggling to rebuild trust, any reduction in trade friction is a welcome treat - even if it doesn’t yet qualify as a full reconciliation.
Closer to home, UK assets are bracing for their own November surprises. The upcoming Autumn Budget is expected to feature plenty of fiscal fireworks as the new Chancellor seeks to balance prudence with populism. Talk of targeted tax incentives and modest spending relief has already begun to swirl, but markets remain sceptical about how any giveaways will be funded. Sterling, ever the realist, remains unconvinced. The pound has been steady but subdued, reflecting both global risk appetite and domestic fatigue. Investors have heard promises of ‘fiscal responsibility’ before – the challenge now is to deliver it without dousing what little economic spark remains.
Meanwhile, the rest of the world marches on. Diwali next week will light up Asia (and a fair chunk of London) in a timely reminder that optimism and celebration can still exist amid macro anxiety. COP30 climate discussions are gathering pace, and while much of the talk remains aspirational, the momentum behind green policy and investment continues to build. In markets, investors are still wrestling with whether the latest wave of AI enthusiasm can sustain itself through actual earnings or if it’s simply the financial equivalent of fireworks – dazzling, noisy, but ultimately short-lived.
Underneath it all, the theme of timing and tone runs deep. The Fed’s statement soothed but didn’t settle. Earnings reassured but didn’t resolve. The tariff news offered hope but not certainty. Markets, ever hungry for direction, must now navigate a stretch defined less by data and more by interpretation. This is the season when patience, not panic, pays. It’s tempting to chase every rally or fear every dip, but the wiser approach may be to wait, watch, and let the noise fade before making the next move.
So many questions remain unanswered. Will the market’s appetite for clarity grow, or will AI-driven momentum and flows keep pushing valuations higher regardless? Did Lily Allen’s legal team sign off her new album? Who actually enjoys eating parma violets?
