The AI-Driven All-Time Highs and Fed Rate Anticipation

The market hit new all-time highs this week, powered by strong corporate earnings and overwhelming confidence in imminent Federal Reserve rate cuts. The technology sector, driven by Artificial Intelligence (AI) infrastructure spending, remained the dominant source of equity strength and market concentration. Fixed income markets consolidated, with the 10-year Treasury yield anchored near 4.00% as investors priced in a high probability of a 25 basis point Fed cut this week to address a softening labor market. In contrast, the spectacular run in precious metals cooled, with gold and silver seeing a correction as safe-haven demand eased amid improving global sentiment.

Market Snapshot & Key Themes

This week saw U.S. equity markets continue their remarkable run, hitting fresh all-time highs as investors digested strong Q3 earnings, particularly from the technology sector, and prepared for the Federal Reserve’s pivotal meeting. The central theme remains the balancing act between sticky inflation, a softening labor market, and the massive technological tailwind provided by Artificial Intelligence.

Fixed Income and Interest Rates

The fixed income market remained focused on Fed rate cut expectations, with Treasury yields largely consolidating recent moves ahead of the FOMC meeting. The 10-year Treasury yield hovered near the psychologically important 4.00% mark for most of the week, after having briefly fallen below the threshold on cooler-than-expected inflation data released late last week. This stabilization reflected the market's high confidence in a near-term 25 bps rate cut, which is generally supportive of bond prices; however, most analysts believe that a sustained, sharp decline in yields may be limited given the current Federal Funds rate target and inflation remaining above the central bank's goal. Investment-grade and high-yield corporate bonds both posted solid gains for the week, outperforming similar-duration Treasuries as a benign inflation print fueled broader risk-on sentiment.

Investors Anticipating a Fed Rate Cut

The market has priced in near-certainty for an interest rate cut at this week's Federal Open Market Committee (FOMC) meeting (October 28-29). The consensus, strongly supported by bond futures traders, anticipates the Fed will lower the federal funds target rate by another 25 basis points (bps). This move is largely viewed as the Fed continuing to shift its focus toward supporting a weakening job market, despite inflation remaining above its long-term 2% target.²

• Underpinning the Cut: The case for a cut was solidified by recently released Consumer Price Index (CPI) data for September, which came in slightly cooler than expected (rising 3.0% year-over-year, slightly below forecasts)³. While this data was delayed, it provided just enough benign news on inflation to support the dovish outlook.
• The 2026 Outlook: Beyond the expected October and a highly probable December cut, investor focus will immediately shift to the tone of Fed Chair Powell's remarks. Markets will seek clues on the central bank's rate trajectory for 2026, as officials weigh the risks of cutting too quickly against the potential for a deeper slowdown in employment.

Tech Stocks Are Back in Charge: AI is the Dominant Market Theme

Technology stocks have overwhelmingly led the recent rally, reinforcing AI as the dominant market theme in equities. The sector has significantly outperformed, driven by a handful of mega-cap technology companies—often dubbed the "Magnificent Seven"—which continue to display robust earnings growth.⁴

• Earnings Fueling the Run: Strong Q3 earnings results, particularly from the "hyperscalers" and AI-related semiconductor and software companies, have been the primary catalyst. Even as depreciation costs from massive AI infrastructure investments begin to hit balance sheets, the resulting cloud revenue and forward-looking guidance are driving valuations higher.
• The AI Infrastructure Race: The AI theme is no longer purely conceptual; it is about tangible, massive-scale infrastructure investment. Recent headlines highlight landmark deals for compute capacity and diversified hardware partnerships, underscoring the intense race to own the physical and digital foundation for next-generation AI models. This secular trend provides a structural tailwind that is sustaining the equity market's narrow leadership.  Big AI players continue to invest in their own ecosystems, as we saw with Nvidia's $1billion investment in Nokia today.

Gold and Silver Are Declining After an Epic Run

The precious metals complex, specifically gold and silver, has entered a period of correction and consolidation after what many analysts describe as an "epic" or "exceptional" upward run over the past two months.⁵

• Safe-Haven Demand Retreats: The primary driver for the recent decline is a retreat in safe-haven demand. Optimism regarding a potential de-escalation of trade tensions (e.g., U.S.-China headlines) and softer inflation data have prompted investors to move capital out of defensive assets like gold and silver and back into higher-risk equities.
• Dollar Strength and Rate Cuts: A stronger U.S. Dollar, which generally makes dollar-denominated commodities more expensive for overseas buyers, has also pressured prices. Moving forward, the outlook for precious metals will be acutely sensitive to the Fed's commentary. While rate cuts are typically bullish for non-yielding gold, a stronger-than-expected signal of market stability from the Fed could lead to further short-term profit-taking. Despite the dip, many experts maintain a positive long-term outlook for silver, supported by its growing industrial demand in clean-tech applications like solar and EVs.

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Disclosures & Footnotes

Important Disclosures: This Weekly Market Monitor is for informational purposes only and does not constitute investment advice, a recommendation to buy or sell any security, or an offer to provide investment advisory services. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. Market data is subject to change.

Sources & Notes:

1. Ycharts, closing prices and returns as of 10/28/25.

2. CME FedWatch Tool; Morningstar. Market pricing for the October FOMC meeting and rate cut expectations.

3. U.S. Bureau of Labor Statistics; Financial Press. September 2025 CPI data release.

4. Sterling Capital Management; J.P. Morgan Asset Management. Q3 2025 Earnings Recap and sector performance.

5. India Today; Kedia Commodities. Commentary on Gold and Silver price action and outlook.

Researched and compiled with the assistance of Gemini 2.5.

This newsletter represents our opined general assessment of the market environment at a specific time and is not intended to be a forecast or guarantee of future performance or results. The opinions and statements expressed are intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any securities or investment strategies to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. This material may contain estimates and forward-looking statements, which may include forecasts and do not represent a guarantee of future performance. This information is not intended to be complete or exhaustive and no representations or warranties, either express or implied, are made regarding the accuracy or completeness of the information contained herein. The opinions expressed are as of October 28, 2025, and are subject to change without notice. Investing involves risks. Past performance is not a reliable indicator of current or future results, and index returns do not account for fees. It is not possible to invest directly in an index.

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