US Economy: Weekly Commentary – October 13, 2025

US Market Review

U.S. Treasury yields declined last week and equities fell broadly, while the dollar strengthened. Oil dropped amid oversupply concerns, gold surpassed $4,000 per ounce, and Bitcoin fell 8.9%.

U.S. Treasury yields declined last week, led by the long end of the curve. For the first time in nearly three decades, central banks now hold more gold than U.S. Treasuries, signalling a structural shift away from dollar-denominated assets toward tangible, safe-haven stores of value. Rising geopolitical tensions and economic uncertainty have bolstered demand for gold, driving prices above $4,000 per ounce in October 2025.

Equity markets retreated broadly. Micro- and small-cap stocks declined 1.65% and 3.25%, respectively, while large-cap stocks fell 2.45%. The “Magnificent 7” slipped 2.55%, led by Tesla, which dropped more than 6%. Among sectors, only Utilities posted gains, rising 1.45%, while all other sectors ended lower, with Energy leading the decline at over 4%. The VIX climbed back above the 20 level for the first time since early August, signalling increased market volatility.

The U.S. dollar strengthened 0.85% against the euro. WTI crude oil declined 4.05% amid concerns over weakening global energy demand, driven by renewed U.S.-China trade tensions, increased production from OPEC and other major producers, and easing geopolitical risks in the Middle East, all of which point to an oversupplied market. Gold rose 3.16%, surpassing $4,000 per ounce, underscoring concerns about the stability of the traditional financial system and signalling that developed nations may be losing credibility as reliable stewards of capital. Bitcoin fell 8.90% over the past week.

US Market Views Synopsis

US tariffs remain a key policy and revenue tool. Consumer sentiment is stable, and inflation expectations stay elevated, reflecting ongoing concerns over prices, jobs, and economic conditions.

US tariffs continue to play a central role in President Trump’s foreign policy and fiscal strategy, despite reduced media attention. Recently, the administration introduced a new package of tariffs under Section 232, targeting heavy trucks (25%), kitchen cabinets and bathroom vanities (50%), and pharmaceuticals (100%) on national security grounds. These measures also act as a precaution in anticipation of the Supreme Court’s ruling on bilateral tariffs expected on 5 November. On the other hand, progress by the European Union under the joint trade framework led to a retroactive reduction in US tariffs on European automobiles from 27.5% to 15%. The effective US tariff rate currently stands at approximately 10% but is expected to rise toward 20%, consolidating tariffs as both a geopolitical tool and a source of revenue. Consumer sentiment has remained stable at 55, reflecting a neutral outlook amid persistent concerns over prices and jobs. Year-ahead inflation expectations declined slightly to 4.6%, while long-term expectations remained steady at 3.7%, indicating continued elevated inflation pressures.

New Tariffs

US tariffs remain a key Trump policy tool and fiscal source. New measures were introduced. Partial EU reductions were agreed. Effective rates are expected to rise toward 20%.

US tariffs remain a central component of President Trump’s foreign policy strategy and a key contributor to public revenues, despite their diminished visibility in recent headlines. In recent weeks, the administration has reiterated its reliance on tariffs as a policy instrument, announcing a new package at the end of September that imposes duties of 25% on heavy trucks, 50% on kitchen cabinets and bathroom vanities, and 100% on pharmaceuticals, under Section 232 on national security grounds. Although the justification may appear limited, these measures function as a precautionary framework should the US Supreme Court overturn the government’s bilateral tariffs in its forthcoming ruling on 5 November. On a more constructive note, Washington has formally recognised the European Union’s progress under the joint trade framework, triggering a retroactive reduction in US tariffs on European automobiles from 27.5% to 15%. Collectively, these developments highlight the continued evolution of global trade dynamics and suggest that the broader economic implications of US tariff policy will unfold gradually. At present, the effective tariff rate stands at approximately 10%, though it is expected to converge toward 20% over time, a level likely to persist throughout President Trump’s term, consolidating tariffs as both a geopolitical instrument and a source of fiscal support.

We expect that inflationary pressures could intensify in the coming months, indicating that the period of elevated inflation is not yet over.

Consumer Sentiment

Consumer sentiment held at 55, with gains and declines balancing to leave the outlook neutral. Concerns over prices and jobs persist, the government shutdown impact is minimal, and inflation expectations remain elevated.

Consumer sentiment remained largely stable this month, registering 55 index points and showing negligible change from September. Modest improvements in assessments of current personal finances and expectations for year-ahead business conditions were offset by declines in anticipated future personal finances and evaluations of current buying conditions for durable goods, resulting in a broadly neutral outlook on the economy. Consumers continue to be primarily concerned with high prices and softening labour market prospects, with little expectation of near-term improvement. Survey responses also indicate that the ongoing federal government shutdown has had minimal impact on economic perceptions. Year-ahead inflation expectations declined slightly from 4.7% to 4.6%, while long-term expectations remained steady at 3.7%, placing both measures roughly midway between last year’s readings and the peaks observed earlier this year following initial tariff announcements.

We expect consumer sentiment to remain steady, while inflation expectations are likely to stay elevated at least through this year, reflecting ongoing concerns over prices and job prospects.