Market Commentary | October 2025
- Daniel Wildermuth
- Oct 1
- 3 min read
Markets Near Records, But Growth Slowing
U.S. stocks closed September near record highs, with the S&P 500, Nasdaq, and Dow all finishing the month just shy of all-time peaks despite the pending government shutdown. Big tech once again led the way, with Alphabet, Tesla, and even Seagate Technology helping to push markets higher. Confidence was further lifted mid-month when President Trump signed an executive order paving the way for majority ownership of TikTok’s U.S. operations to shift into American hands, a move that signaled at least a partial thaw in trade tensions with China.
Earnings season has also given investors reasons to cheer, though the drivers of those results are telling. Companies aren’t relying on booming demand to lift profits. Instead, many are cutting jobs, trimming costs, and leaning heavily on technology to increase productivity. Logistics company C.H. Robinson, for instance, reported stronger margins despite falling revenue, largely due to automation. Wall Street applauds these efficiency gains, but for households, the benefits are harder to see. Consumers are already feeling the strain and showing signs of pulling back, stretching supplies and becoming more cautious at the checkout.
The Federal Reserve added fuel to the market with its first rate cut in nine months, trimming by a quarter point. The decision was motivated by concerns about a weakening labor market and overall economic uncertainty. Fed Chair Jerome Powell made the risks clear, warning that “downside risk is now a reality.” Projections suggest most officials expect at least two more cuts before year-end, though not everyone on the committee agrees. For now, investors welcomed the move as another supportive tailwind for risk assets.
On the surface, the latest GDP revision added to the optimism, with second-quarter growth revised up to 3.8%. But a deeper look reveals trouble. Gross Output, a broader measure of total spending throughout the production chain, rose only 1.2%, and adjusted figures barely moved at all. More concerning was the 5.6% annualized drop in business investment, a classic leading indicator of future weakness. Consumers remain resilient, but when businesses start cutting back, hiring and overall growth follow.
The labor market has already started to reflect those pressures. The Bureau of Labor Statistics revised job creation down by more than 900,000 over the past year, bringing average monthly gains to just 75,000. Nearly every sector saw downgrades. Wages remain sluggish, and real household incomes barely budged last year. At the same time, corporate debt markets look stretched, with bond spreads at their tightest levels since the late 1990s. Investors are increasingly willing to accept more risk for less return, a dynamic that has often preceded trouble in past cycles.
Some market observers warn that the rally may be nearing exhaustion. Hedge fund manager Mark Spitznagel has argued that repeated government rescues have built up “dry tinder” in financial markets, making an eventual crash inevitable. Even he, however, expects one more surge before the fall, suggesting the S&P 500 could climb another 20% before reality sets in. History supports the idea that markets often run hardest in the final stretch before a downturn.
For now, markets remain remarkably resilient, supported by tech leadership, Fed policy, and cost-driven earnings. But beneath the surface, slowing job growth, weak business investment, and stretched valuations point to mounting vulnerabilities. The rally may still have room to run, but the foundation looks less solid than the headlines suggest.
Daniel Wildermuth
Portfolio Manager, Quartz Astra Strategies
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