Weekend Update, October 20th, 2025
The Beat Goes On
Index, Sector, and Asset Performance
Despite the headline-driven news last week surrounding a relatively obscure credit blow-up, all three major U.S. indexes ended the week positive. This morning the S&P 500 looks to trade higher, on strong Apple phone sales, earnings anticipation, and Friday’s delayed U.S. CPI report. U.S. and China trade talks are set to continue as Treasury Secretary Bessent and Vice Premier He Lifeng meet in Malaysia this week.
Even though the S&P 500 remains within 2-3% of ATH’s, sentiment is NOT excessive. Per Deutsche Bank, last week saw the largest drop in “professional” equity exposure since “Liberation Day”. This is not bearish behavior and is on par with historic volatility spikes in October. Additionally, retail sentiment is subdued as the wall of worry remains. The AAII Survey, the percentage of investors who call themselves bullish for the next six months dropped to 34% last week from 46% in the prior week.
The S&P 500 finished the week at 6664 in line with OHFG’s year-end 2025 forecast set in late 4q24. As previously noted, we now expect a year end S&P500 target of closer to 7000 and 7200 in mid-1q26, however the road to these levels over the next 5 months is expected to be choppier than in the last 6 months, post April 4th V-bottom.
Per Goldman Sachs 1-Week asset returns:
Through the end of September, market breadth has improved. At the end of the third quarter, the Mag 7 stocks were responsible for about 40% of the year-to-date S&P500 return. The remaining 496 stocks contributed about 60% of the YTD return. This is a shift from 2020-2025 where Mag 7 names drove the S&P 500.
US 10-year Treasury yield made a new low, closing at 3.97% last week. This is the first time it closed below 4% since April 4, when the yield closed at 3.99%.
Economic Indicators and Earnings Commentary
The Federal government is shutdown. The flow of U.S. data will be sparse. Friday’s CPI report will likely show consumer prices fell in September, but a sharper decline 12 months ago means the yearly rate will rise to +2.2%. Friday’s retail sales are expected to show a +1% rise in August.
Government shutdowns historically have not been issues for equity markets. The last 50 years, there have been 21 shutdowns. 3 months afterwards, the S&P 500 was up +3% on average, with a 67% hit rate. After 12 months, the S&P 500 was up 90% of the time, with an average return of +12% for all 21 shutdowns.
The Federal Reserve is likely to cut interest rates in October and again in December. The US two-year Treasury note yield remains about 50 basis points below the federal funds rate.
Earnings:
The Earnings reporting Tsunami is forthcoming per Goldman. Earnings growth should decelerate relative to last quarter due to smaller currency tailwinds, higher tariff payments, and one-time charges that boosted year/year growth in 2Q. That said, Wall Street analysts increased their Q3 earnings estimate for the S&P 500 during the quarter for the first time since post Covid 2021.
3Q earnings season kicked off last week, primarily within Financials and Banks. The largest banks highlighted strong capital markets activity and healthy consumer spending, while some regional bank reports raised concerns over lower end credit quality. The best earnings reaction came from American Express (AXP), up +7.3%, the world’s third-largest credit services stock.
14% of S&P 500 companies will report results this week. Notable reporters include: Netflix, Ge Aero, Philip Morris Int, Verizon, Texas Instruments, 3M, General Motors, Tesla, IBM, AT&T, Moodys, Intel, Honeywell, Newmont, Ford, Tractor Supply, Procter and Gamble, and HCA Health.
Commodities and Currencies
Oil and its products continue to be weak on slower global growth and oversupply. Oil sits at $57/bbl.
The US dollar has been rallying, not falling for about 7 weeks and sits near 99.
Gold hit new ATHs at $4,200/ounce.
Bitcoin and other cryptos look to be troughing near $108-110,000.
Oak Harvest Weekly Stock Talk
4q25 Outlook – “Let’s Get it Started” – V-Bottom, Month 7
Past performance is no guarantee of future results. Indexes are unmanaged and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. The preceding discussion is for informational purposes only. Investing involves risk and no reference to any security listed above should be considered a buy or sell recommendation. Advisory services are provided through Oak Harvest Investment Services, LLC, a registered investment adviser.
