The Markets – October 28, 2025

Stock markets celebrated, but bond markets were cautious.

Last week, the Consumer Price Index (CPI) showed that inflation for September was lower than economists had anticipated. Both headline and core inflation (the latter excludes volatile food and energy prices) rose 3.0 percent year over year.

“While the September figure is still a full percentage point above the Fed’s 2 [percent] target—and the highest level of inflation seen since January—it signals that the path of price growth is modest enough to allow for additional rate cuts,” reported Megan Leonhardt of Barron’s.

Investors had been concerned that a jump in inflation might cause the Federal Reserve (Fed) to stop lowering the federal funds rate. The better-than-expected inflation report gave markets confidence the Fed will continue to lower the fed funds rate this year.

Stock markets hit new records

Markets rose after the CPI was released. “The Dow Jones Industrial Average closed north of 47,000 for the first time on Friday…The Dow hit its second thousand-point milestone of 2025 after crossing the 46,000 threshold 31 trading days ago, according to Dow Jones Market Data. The S&P also notched its best week since Aug. 8,” reported Connor Smith of Barron’s.

United States Treasuries rallied following the inflation news, too, but retreated after S&P Global released the Flash US Composite PMI^® Output Index, reported Ye Xie of Bloomberg. The Index provides information about the state of U.S. manufacturing and services. A reading above 50 signals economic expansion, while a number below 50 suggests contraction.

In October, the preliminary composite reading was 54.8, a three-month high and well above September’s 53.9 reading. Indexes measuring activity in the manufacturing and services sectors both accelerated from September to October.

Faster growth is good news; however, bond investors recognized that it could affect the Fed’s rate-cut decisions. The Fed lowers the federal funds rate to stimulate the economy. If the business activity is growing, stimulus may be unnecessary.

Social Security benefits will be higher in 2026

CPI data was calculated, despite the government shutdown, because it is required to determine the cost-of-living increase for Social Security. In 2026, benefits will be 2.8 percent higher, the equivalent of about $56 per month on average, according to the Social Security Administration blog.

By the end of the week, major U.S. stock indexes were higher. Yields on many U.S. Treasuries with longer maturities moved higher over the week.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

RECORD-SETTING WEATHER. For more than a decade, the National Oceanic and Atmospheric Administration kept a database that tracked weather and climate-related events that caused more than one billion dollars of damage. When the government discontinued the database in May of this year, a non-profit organization continued the work, reported Lauren Rosenthal of Bloomberg.

From 1980 through June 2025, the U.S. experienced 417 severe weather events that cost a billion dollars or more. The total cost of all these events combined was about $3.1 trillion, according to the data. (In human terms, the cost was more than 17,000 deaths.)

Over the first six months of this year, there were 14 events that did more than $101 billion worth of damage. It was a new record. The weather events included:

These events are causing homeowners insurance costs to increase. “Extreme weather events such as hurricanes, wildfires, and floods are becoming more frequent and more destructive, causing more property losses than home insurance providers can afford to cover… Insured property losses caused by weather catastrophes now routinely approach $100 billion per year, according to data from the Insurance Information Institute,” reported Catriona Kendall of U.S. News & World Report.

WEEKLY FOCUS – THINK ABOUT IT

“A change in the weather is sufficient to recreate the world and ourselves.”

 –Marcel Proust, Novelist

Warm regards,

Daniel J. Murphy, CFP®
Murphy Wealth Management Group
60 Merritt Blvd., Suite 106
Fishkill, NY 12524

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