Daily Newsletter 10/28/25
Today’s stock markets are rallying to new highs, buoyed by optimism about progress in U.S.–China trade relations, expectations for Federal Reserve rate cuts, and strong corporate earnings. Although the mood is upbeat, there are persistent sources of volatility and uncertainty, including current tariff disputes, threats to rare earth supply chains, the possibility of a U.S. government shutdown, unreliable official economic data due to the shutdown, high-profile meetings between President Trump and Chinese officials, and the much-anticipated FOMC decision later this week.
The most significant economic events today include a surge in major indexes such as the Dow, S&P 500, and Nasdaq, all of which have closed at record highs. In terms of data, durable goods orders were reported yesterday, and important releases like GDP and the FOMC statement are expected soon. The Federal Reserve is meeting this week, with most market participants anticipating a 0.25% interest rate cut. Meanwhile, President Trump is scheduled to meet with President Xi in China, aiming to resolve ongoing tariff disputes and solidify a truce in the trade war. The current earnings season has delivered results above expectations, especially for technology and financial companies, helping to drive market momentum.
Despite the current calm in markets, volatility remains a concern. The CBOE Volatility Index (VIX) dropped, indicating lower market anxiety. However, liquidity has been slightly below average, suggesting some hesitation among large investors as they await new data and policy updates. Trading volume is solid, although risk aversion could increase with the release of major economic data. Crude oil and gold prices have also displayed heightened volatility, echoing uncertainty in safe-haven assets.
Tariffs and trade tensions are still influential. China has moved forward with rare earth export restrictions to begin on December 1, posing challenges for U.S. industries dependent on these materials. In response, the U.S. is set to double tariffs on certain Chinese goods starting November 1, with today’s Trump–Xi summit seen as critical for outlining future trade policy. The actions and outcomes surrounding these meetings will be closely watched for clues on future market direction.
The ongoing government shutdown creates additional risk by threatening the release and reliability of key economic statistics. This lack of high-quality data can make it difficult for markets to assess real economic conditions and calibrate risk management strategies. Investors and analysts are forced to rely more on private and high-frequency sources until official reporting resumes.
Looking ahead, all eyes are on the FOMC meeting, especially after softer than expected inflation data has increased the likelihood of further interest rate cuts. The prospect of policy easing has emboldened bulls but increases the risk of policy surprises or long-term leadership changes at the Fed. Meanwhile, rare earth policy remains front and center. China’s export controls are expected to constrain supply for sectors like technology, defense, and automotive, making this a potential flashpoint for further volatility.
The current earnings season continues to act as an anchor for market sentiment. Reports from the largest banks, tech firms, and industrial leaders have consistently exceeded forecasts, resulting in broad-based rallies and robust gains for nearly all S&P sectors. The market’s Q3 performance stands out, with analysts predicting record profit growth both quarter-over-quarter and year-over-year.
The potential for rapid market moves persists as new information emerges from the Federal Reserve, Washington, and Beijing.
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