MONTH-IN-REVIEW: OCTOBER 2025
QUICK TAKES
Stocks Continue Higher. U.S. stocks rose in October as earnings season kicked off with the S&P 500 rising 2.3%, the Nasdaq 100 rising 4.8%, and the Dow rising 2.6% on the month as earnings, continued AI deals, and a Fed rate cut overshadowed the government shutdown and trade tensions.
Inflation and Interest Rates. The 10Y treasury yield was down in October ending the month at just under 4.1%. CPI inflation for September came in below expectations at 3.0% while PCE inflation was delayed because of the government shutdown.
Government Shutdown. The U.S. government shutdown, which started in early October, has resulted in 750,000 furloughed federal employees, cutoffs in SNAP benefits, and delays in economic data releases. The CBO estimates that the shutdown has already cost the U.S. economy $18 billion.
Earnings Season. 317 companies in the S&P 500 reported earnings for Q3. 64% of the companies reported above-consensus EPS, but the median stock posing a positive earnings surprise only outperformed the S&P 500 index by 32 bps on the day following their report versus 98 bps historically.
ASSET CLASS PERFORMANCE
Large caps outperformed small caps in October. While U.S. stocks outperformed other developed markets, emerging market equities outperformed domestic equities. Stocks and U.S. bonds generally rose in October while international bonds and real estate fell during the month.
MARKETS & MACROECONOMICS
The Fed cuts rates and AI deals overshadow government shutdown. The government shutdown has reduced the availability of economic data including inflation data, payroll reports, and other data. Based on the ADP private payroll data, hiring by the U.S. private sector cut 32K jobs in September as leisure and hospitality, financial services, professional and other services shed jobs. Outside of services, natural resources/mining and construction cut a combined 9K positions while manufacturing added 2K jobs. While CPI inflation accelerated in September to 3.0% from 2.9%, the print still came in below economists’ forecasts of 3.1% core and headline inflation. The acceleration was driven primarily by energy and medical goods prices accelerating month-over-month. Consumer sentiment was relatively unchanged month-over-month as the U. of Michigan Consumer Sentiment Index fell slightly from 54.5 to 53.8 and the Conf. Board Consumer Confidence Index rose from 93.4 to 94.6 during the month. Consumer’s long-term inflation expectations increased month-overmonth based on the U. of Michigan survey from 3.7% to 3.9%. In manufacturing, the ISM Manufacturing PMI came in at 49.1 for September, marking the seventh consecutive month of contracting in manufacturing activity in the U.S. based on the index. The Federal Reserve cut interest rates at rates by their expected 25 bps at their meeting on October 29. Fed Chairman Powell indicated at the press conference following the announcement of the decision that the economy seemed to be on firmer footing than expected based on data prior to the shutdown as consumers continued to spend and business investment remaining strong, but the housing market continued to remain weaker. Powell attributed the slowdown in job creation to a decline in immigration as well as a decline in labor force participation in addition to lower labor demand. He also attributed the higher inflation readings since the start of the year to tariffs. Despite concerns about the labor market and the government shutdown, stocks continued to rise in October and treasuries fell slightly as the 10Y and 2Y fell by 7 bps and 3 bps respectively. The dollar index also rose after an initial decline at the beginning of the month as major U.S. technology companies continued to announced cloud computing and chip purchase deals related to their AI buildouts. The S&P 500 ended the month at 6,480.
BOTTOM LINE
The Fed continued to cut rates. Treasuries rose slightly and the dollar strengthened despite the government shutdown.
WHAT’S AHEAD
AI and circular financing among major U.S. technology companies. As high expectations around artificial intelligence’s ability to grow technology earnings and the broader economy have driven large and mega-cap technology shares higher, some commentators have raised concerns about the nature of various financing deals between the companies dominating the headlines. In late July, cloud services provider Oracle and OpenAI announced a deal under which Oracle agreed to invest in buildout of its AI infrastructure to give OpenAI access to 2 million chips owned by Oracle for a total of 4.5 gigawatts of compute. In late September, OpenAI and Nvidia announced an agreement under which Nvidia would invest up to $100 billion in OpenAI and OpenAI would buy 10 gigawatts of AI accelerators from Nvidia. Two days after its deal with Nvidia, neocloud firm, CoreWeave, announced that it was expanding its partnership with OpenAI to provide an additional $6.5 billion of data center capacity bringing their total commitment to the startup to $22.4 billion. Neocloud companies like CoreWeave, Nebius, Nscale, and others buy leading-edge chips to put into their own data centers and then rent out access to this compute to companies or organizations that need the capacity. CoreWeave also has an existing relationship with Microsoft, who was historically its largest customer. In early October, OpenAI announced a deal with AMD to buy six gigawatts of chips. Under this deal, OpenAI would also be able to purchase up to 160 million shares of AMD stock for $0.01 per share if the share price reached certain milestones. Less than a week later, OpenAI and Broadcom announced a deal for OpenAI to buy and deploy 10 gigawatts of Broadcom chips and networking equipment starting in the second half of 2026. This was followed by OpenAI signing a multi-year deal with Microsoft for $250 billion of cloud services. From the end of September through the end of October, Nvidia’s share price rose over 8%, Broadcom’s shares have risen over 12%, and AMD’s share price rose a whopping 58%. In the same time frame, the S&P 500 had rose just over 2% and technology stocks had risen just over 6%. Investor concerns have risen in recent weeks around OpenAI’s ability to meet these large financial commitments. OpenAI’s most recent financing deals, which included investments from Amazon and SoftBank valued the startup at $500 billion and its annual revenue is reportedly around $13 billion. OpenAI CEO Sam Altman recently indicated that the company will reach $100B in revenue by 2027. The company previously indicated that it plans to go public in 2027, although the company’s CFO Sarah Friar indicated more recently that the company is not yet working toward an IPO. All of this has raised concerns from investors and analysts around major U.S. technology names about the circular nature of the financing and purchase deals that OpenAI has agreed to. Most recently, more of the large cloud companies who have entered these deals have announced rounds of debt financing and bond sales. JP Morgan and MUFG announced that they are leading a $38 billion debt deal to finance Oracle’s data center construction related to their deal with OpenAI and SoftBank launched a $2.9B bond sale to finance its own AI and data center investments.
Despite the optimism around the AI trade remaining high and mega-cap technology companies remaining highly profitable, some concerns have arisen around the circular nature of financing deals between key players.
CONTINUED
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Source: Bloomberg. Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by the Prime Capital Investment Advisors. The performance of those funds June be substantially different than the performance of the broad asset classes and to proxy ETFs represented here. U.S. Bonds (iShares Core U.S. Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares U.S. Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by: 30% U.S. Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4% Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.