Market Update – October 27, 2025

Financial Markets

It was another week of limited economic data and new equity market highs, as many government-produced reports remained on hold. The delayed Consumer Price Index was released despite the government shutdown, given its importance for this week’s Federal Reserve meeting and the 2026 Social Security cost-of-living adjustment. As of Friday, October 24th, the Nasdaq Composite led major indexes with a 2.3% gain, followed by the Dow Jones Industrial Average up 2.2%, and the S&P 500 rising 1.9% for the week.

Market News

September CPI

After being delayed due to the government shutdown, September’s CPI was released, coming in slightly better than expected. The report carried added importance as it provided the final data point needed to determine next year’s Social Security cost-of-living adjustment, prompting agencies to prioritize its release while most other economic data, including the Producer Price Index and retail sales, remain on hold.

Annual inflation picked up slightly from August, to 3% in September, while core inflation, which excludes food and energy, eased to 3%. On a monthly basis, headline prices rose 0.3% and core prices increased a relatively tame 0.2%.

By category, grocery prices were up 2.7% year over year, and energy costs rose 2.8%, led by increases in fuel oil prices at 4.1%, electricity at 5.1%, and utility gas service at 11.7% YoY. Energy commodity prices declined 0.4% from a year ago but rose 3.8% in the month of September. Shelter costs increased a more moderate 3.6%, showing continued improvement, while vehicle prices rose 0.8% for new and 5.1% for used cars.

Overall, with the recent inflation data coming in slightly below consensus, the report was viewed as a positive development, reinforcing expectations that the Federal Reserve has room to continue easing policy this week and in the months ahead.

Source: Bureau of Labor Statistics

Social Security COLA for 2026

With last week’s release of the Consumer Price Index, officials were able to finalize the cost-of-living adjustment for Social Security payments in 2026. The adjustment will be 2.8%, up from this year’s 2.5% increase.

COLAs have remained relatively elevated over the past five years as inflation has proven sticky. The annual calculation is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), an adjusted version of the headline CPI, measuring price changes during the third quarter compared with the same period a year earlier.

Historical COLA adjustments:

Source: Social Security Administration

Expectations for This Week’s Federal Reserve Meeting

 The Federal Reserve will hold its second-to-last policy meeting of the year this week. As of October 27th, futures markets are pricing in a 96.7% probability of another quarter-point rate cut this week, with a 93.9% likelihood of an additional 25-basis-point cut in mid-December. Markets assign just a 0.1% probability, roughly one in a thousand odds, of no further rate cuts by year-end, underscoring investors’ confidence that the Federal Reserve will continue to lower rates.

With inflation appearing contained at a stable 3% and expectations building for further precautionary easing, this environment could provide the catalyst for the S&P 500 to potentially break above 7,000 before year-end, particularly if underlying fundamentals and economic data remain supportive.

Source: CME Group FedWatch, as of 10/27/25

Existing Home Sales

Existing home sales totaled an annualized pace of 4.06 million units in September, up 1.5% from the prior month and 4.1% from a year ago. The number of homes for sale rose 14% year over year to 1.55 million, marking the highest inventory level in more than five years.

Supply continued to trend higher, reaching 4.6 months’ worth of homes on the market, rising from last year’s supply of 4.2 months’ worth. Consistent with the more moderate housing inflation seen in September’s Consumer Price Index report, the median existing home price increased 2.1% from a year ago to $415,200. Strength was concentrated in the upper end of the market and was supported by falling mortgage rates.

Source: National Association of Realtors

Apple All Time Highs. After trailing many of its mega-cap tech peers for much of the year, Apple reached new all-time highs last week following reports of strong iPhone 17 sales. Robust early demand for the company’s latest iPhone model helped reassure investors that consumer spending remains resilient despite lingering tariff and economic concerns.

Earlier in the year, Apple’s performance was muted amid worries about slowing growth and saturation in the consumer tech market, however the stock’s recent momentum marks a meaningful improvement. The news from the tech giant also provided reassurance that a recession or pullback in discretionary spending have yet to materialize, at least in its industry.

Given Apple’s substantial market capitalization, its rebound contributed notably to the broader indexes’ gains last week. Shares rose nearly 4.2% for the week on the positive sales outlook.

Summary

Equity markets rallied last week, with indexes reaching new highs as investors reacted positively to contained inflation data and growing expectations for additional rate cuts. Economic releases were limited due to the government shutdown, but the Consumer Price Index provided reassurance that price pressures remain under control and allowed officials to finalize the Social Security cost-of-living adjustment at 2.8% for 2026. Stable inflation, expectations for additional rate cuts, renewed strength from mega-cap tech stocks including Apple, and a resilient housing market with rising existing home sales support a broad risk-on tone across markets as we head into the upcoming week.

We appreciate your continued trust.

Thank you,

Joseph M. Maas,
CFA, CFP®, ChFC, CLU®, MSFS, CCIM, CVA, ABAR, CM&AA

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