Daily Newsletter 10/30/25
Today financial markets are reacting strongly to a rare combination of global headlines and central bank policy moves.
Trump–Xi Meeting
U.S. President Donald Trump and Chinese President Xi Jinping have agreed to a temporary truce in their ongoing trade war, resulting in reduced tariffs and a suspension of rare earth export restrictions. We believe that although there is a truce for now, much uncertainty remains. The details of the meeting and how much of it will be implemented, as well as how many promises will be kept, is not clear. The trade war between the two biggest economies may slow down, but expectations for it to disappear are not realistic. The agreement falls short of a comprehensive deal, and key issues remain unresolved, so the truce is viewed as a tactical pause in the broader conflict. The next couple of days will reveal more about the implementation and outcomes of this agreement.
FOMC Decision
Yesterday, the Federal Open Market Committee (FOMC) cut its benchmark interest rate by 0.25%, moving the target range down to 3.75%–4%. This was the Fed’s second rate cut of the year, reflecting ongoing economic caution amid inflation risks and labor market softness. Chair Jerome Powell emphasized that future rate cuts depend on incoming data and that the move aims to balance growth and inflation concerns. Although we had a cut as expected, Powell’s speech indicated nothing about future rate cuts is for sure. There is significant disagreement among FOMC members, with concerns over the impact of tariffs on inflation and the softening labor market. The labor market is not really weak; the unemployment rate stands at a low 4.3% by long-run standards. However, hiring and firing activity is minimal, suggesting an equilibrium state, which can be interpreted both positively and negatively. Additionally, harsher immigration rules have affected labor supply, and there is growing concern about significant AI-related layoffs.
Our approach remains fundamentally cautious: we prefer to adopt a ‘wait and see’ stance, closely monitoring market developments before making any new moves. While markets have temporarily stabilized amid optimistic U.S.–China trade negotiations, with indications that China may delay implementing rare earth export restrictions, we expect more clarity to emerge by the end of the week. Given the current environment, we plan to proceed deliberately, exploiting opportunities only through carefully calibrated tactical positions. The recent earnings reports reinforce our belief that, despite the inherent uncertainties, profit opportunities are still present—though we favor a slower, more cautious approach during these volatile times.
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