The Federal Reserve cut its target interest rate by 1/4 point on Wednesday, as expected, marking the second time this year the central bank has eased policy. Fed Chair Jerome Powell, in a press conference, raised doubts about a third cut at the next FOMC meeting in December. Treasury yields rose sharply in reaction, including the policy-sensitive 2-year yield, which jumped to 3.60%, a three-week high.
Global equities strategies are having a moment this year. Although US tech is still red hot and the investment darling, American shares overall are lagging the rest of the world on a year-to-date basis, according to a set of ETFs through Tuesday’s close (Oct. 28).
Technology stocks have increased to a record-high weight in the S&P 500 Index, surpassing the previous high set in 2000 at the peak of the dotcom bubble. “This suggests the tech sector is overvalued, which it may be at a 34% premium to the forward price-to-earnings (P/E) ratio of the S&P 500,” writes Jeff Buchbinder, chief equity strategist at LPL Financial.
As the government shutdown drags on, the data drought follows, which makes betting markets all the more useful for gauging sentiment on the macro outlook. Here’s a quick look at how bettors are pricing expectations for several indicators and scenarios, starting with guesstimates for US consumer inflation in October, a report that may or may not see the light of day via the usual channels in Washington. Although the current estimates are the main attraction, the history of how the bets have evolved is telling as well, providing a top-down guesstimate of where the crowd is headed.
Inflation in October? (CPI YoY)
President Trump and Japan’s Prime Minister Takaichi sign agreement to cooperate on rare earths to lessen dependence on China for the exports of these minerals. Ahead of the announcement, a US-listed ETF targeting stocks in Japan (EWJ) rallied, closing on Monday near a record high.
There are several risk factors that, in theory, could weigh on bond market sentiment. Tariffs, gradually rising inflation, elevated policy uncertainty in Washington, a government shutdown, and a deteriorating trend for federal finances, to name a few. But the US bond market is looking through these headwinds and instead focusing on one scenario: expectations for a slowing economy.
US consumer inflation ticked up to a 3.0% year-over-year rate in September, the highest rate since January. Core CPI held steady at 3.0%. “The immediate dangers from Trump 2.0 tariff policies have not yet fed through to inflation overall,” wrote Christopher Rupkey, chief economist at FwdBonds. “The market will likely hold their applause, however, as one reason inflation is held in check may be due to the economic slowdown seen in many labor market indicators.” Eric Gerster, chief investment officer at AlphaCore Wealth Advisory, said the CPI report “certainly clears the way for the Fed to cut rates next week as they were going to anyway. It certainly leads to a higher expectation of at least two more rate cuts by March.”
● Fixed: Why Personal Finance Is Broken and How to Make It Work for Everyone
John Y. Campbell and Tarun Ramadorai
Summary via publisher (Princeton U. Press)
We interact with the financial system every day, whether taking out or paying off loans, making insurance claims, or simply depositing money into our bank accounts. Fixed exposes how this system has been corrupted to serve the interests of financial services providers and their cleverest customers—at the expense of ordinary people. John Campbell and Tarun Ramadorai diagnose the ills of today’s personal finance markets in the United States and across the globe, looking at everything from short-term saving and borrowing to loans for education and housing, financial products for retirement, and insurance. They show how the system is “fixed” to benefit those who are wealthy and more educated while encouraging financial mistakes by those who are aren’t, making it difficult for regular consumers to make sound financial decisions and disadvantaging them in some of the most consequential economic transactions of their lives.
The case for low-risk equity investing: evidence from 2011-2025
Raul Leote de Carvalho (BNP Paribas), et al.
July 2025
This paper investigates the performance of equity low-risk strategies since 2011, highlighting their ability to deliver strong risk-adjusted returns across diverse market conditions. We introduce a composite risk score that extends beyond volatility and demonstrate its effectiveness through empirical analysis. The study compares portfolio constructions, examines sector-level effects, and evaluates exposures to Fama-French factors. Results confirm the persistence of the low-risk anomaly and the presence of alpha unexplained by traditional risk premia, supporting the case for including low-risk strategies in long-term equity portfolios.
Existing-home sales increased by 1.5% month-over-month in September, according to data from the National Association of Realtors. “As anticipated, falling mortgage rates are lifting home sales,” said NAR Chief Economist Dr. Lawrence Yun. “Improving housing affordability is also contributing to the increase in sales.” Mortgage rates have fallen to the lowest level in a year, below 6.2%.
