US Economy: Weekly Commentary – November 03, 2025

US Market Review

Bonds saw lower yields. U.S. equities were mixed. The euro weakened. Oil prices fell. Gold and bitcoin declined. Markets reacted to global trends, investor sentiment, and economic data.

Bonds were broadly well received during the month, ending with lower yields across the curve despite some selling pressure following the FOMC meeting. Long-term bonds outperformed, although yields declined by only 7 basis points overall. Meanwhile, China and Japan continue to accelerate their diversification away from U.S. Treasuries. China’s share of foreign Treasury holdings has dropped to a 22-year low of 8%, while Japan’s stands at 13%, near a record low, even as European investors have increased their Treasury purchases.

U.S. equity markets closed the week mixed. Micro- and small-cap stocks declined by 1.40% and 1.30%, respectively, while large caps advanced 0.71%. The “Magnificent 7” rose 3.19%, driven by strong earnings results, and have contributed nearly half of the S&P 500’s 15% year-to-date gain. Nvidia became the first company in history to reach a $5 trillion market capitalisation. Sector performance was led by technology (+2.42%) and consumer discretionary (+0.95%), while energy and industrials ended the week little changed. The remaining sectors finished lower, led by real estate, which fell more than 4%.

The U.S. dollar appreciated 0.77% against the euro. WTI crude oil declined 0.91% as expectations that the Federal Reserve may pause its rate cuts, coupled with rising global supply, geopolitical tensions in Venezuela, and weak Chinese economic data, weighed on demand prospects. Initial optimism surrounding progress in U.S.-China trade talks faded after OPEC+ signalled intentions to increase output, while U.S. production continued to rise. A stronger dollar and signs of slower manufacturing activity in China added further downward pressure. Investors now turn their attention to the upcoming OPEC+ meeting, where a potential production increase could further depress prices. Meanwhile, gold fell 2.74% for the week, and bitcoin declined 0.80%.

US Market Views Synopsis

The Fed cut rates 25 bps to 3.75–4%. It paused balance sheet runoff and signalled cautious, data-driven policy. US consumer confidence fell, reflecting weak demand, job concerns, and affordability pressures.

The Federal Reserve reduced the federal funds target range by 25 basis points to 3.75–4%, while Chair Powell emphasised that a December rate cut is not assured amid persistent inflation, a moderating labour market, and trade- and tariff-related uncertainties. Beginning December 1, the Fed will halt balance sheet shrinkage, reinvesting maturing Treasury securities and replacing maturing agency mortgage-backed securities with Treasury bills to manage reserves flexibly without abruptly disrupting MBS runoff. The Committee described the economy as expanding moderately, with rising downside risks to employment and inflation remaining elevated. Markets continue to price in aggressive easing, though expectations for cuts have moderated following Powell’s remarks. In parallel, US consumer confidence fell to 94.6 in October, reflecting weak expectations, limited job prospects, and affordability pressures. The present situation component rose slightly, but the expectations measure fell to 71.5, implying subdued spending growth of around 1–1.5%. Confidence remains particularly low among younger and lower-income households, signalling continued caution and supporting the Fed’s measured, data-driven policy stance.

Interest Rate Decision

The Fed cut rates 25 bps to 3.75–4%, halted balance sheet shrinkage, emphasised data-driven policy, and signalled December easing is uncertain amid inflation and labour market concerns.

The Federal Reserve reduced the federal funds target range by 25 basis points to 3.75–4%, while Chair Powell emphasised that a December rate cut is not guaranteed, reflecting persistent inflationary pressures alongside a moderation in job gains and ongoing trade- and tariff-related uncertainties. Beginning December 1, the Fed will halt balance sheet shrinkage, reinvesting maturing Treasury securities and replacing maturing agency mortgage-backed securities with Treasury bills, enabling active reserve management without abruptly interrupting the gradual MBS runoff—a strategy consistent with prior liquidity adjustments and designed to maintain flexibility. The Committee characterised the economy as expanding at a moderate pace, with downside risks to employment rising and inflation remaining somewhat elevated, underscoring the delicate balance between its dual mandates. Despite this, markets continue to price in aggressive easing, with approximately 85 basis points of additional cuts—down toward a 3% federal funds rate—anticipated by the end of 2026, compared with 100 basis points prior to Powell’s remarks, reflecting expectations of a rapidly cooling labour market. Financial conditions, including lower yields, dollar weakness, and improved corporate liquidity, may support economic activity, but persistent tariff-driven price pressures or potential asset market corrections could necessitate more decisive policy action. Overall, the Fed is maintaining a cautious, data-driven stance, carefully balancing inflation control, labour market stability, and liquidity management while preserving flexibility for future adjustments.

We remain uncertain whether the Fed will implement another rate cut this year, as inflation stays elevated while the labour market continues to show signs of weakness.

Consumer sentiment

US consumer confidence fell to 94.6 in October, with weak expectations, limited job prospects, and affordability pressures signalling subdued spending and cautious household sentiment.

US consumer confidence declined in October, remaining near pandemic-era levels and signalling subdued spending growth in the months ahead. The Conference Board’s Consumer Confidence Index fell 1.0 point to 94.6 from a revised 95.6 in September, slightly above the 93.4 consensus estimate. The present situation component rose 1.8 points to 129.3, likely supported by stronger equity markets and falling gasoline prices, while the expectations component dropped 2.9 points to 71.5, a key indicator historically correlated with consumer spending, suggesting annualized growth of only 1–1.5%, well below post-pandemic norms. Confidence remains 14% below December 2024 levels and is particularly depressed among younger and lower-income households, reflecting ongoing concerns over job and income prospects. Job availability continues to be perceived as limited, pointing to potential upside risks for unemployment, while house prices recorded a modest 0.2% monthly increase after five months of decline, constrained by elevated mortgage rates and affordability pressures. Overall, the data reflect continued caution among US households, consistent with restrained spending growth and supportive of a modest Federal Reserve policy adjustment.

We anticipate that consumer confidence will remain subdued, driven by softening demand, ongoing labour market weakness, and persistently elevated prices.