Weekly Investment Perspective

Markets delivered a strong performance last week, buoyed by upbeat corporate earnings and a modest improvement in economic sentiment, even as the government shutdown continued to cast a shadow over the data calendar. The S&P 500 rose 1.70%, the Dow gained 1.56%, and the Nasdaq led with a 2.14% advance. Small caps outperformed, with the Russell 2000 climbing 2.40%, marking a solid rebound from last week’s volatility.

The Q3 earnings season kicked off with a series of high-profile beats from major financial institutions. JPMorgan, Bank of America, Citigroup, and Wells Fargo all topped expectations, citing strong capital markets activity, healthy loan growth, and resilient consumer spending. Morgan Stanley and Goldman Sachs also posted solid results, with strength in equity and debt underwriting. Outside of financials, American Express surged nearly 10% on robust billed business and improved travel and entertainment spending, while Taiwan Semiconductor and ASML raised guidance on the back of strong AI-related demand.

Economic data was limited due to the ongoing government shutdown, but what did emerge was generally constructive. Initial jobless claims were estimated at 217,000, down from 235,000 the prior week, suggesting continued labor market stability. The October Empire State Manufacturing Survey surprised to the upside, with gains in new orders and employment. However, the Philadelphia Fed Manufacturing Index fell to its lowest level since April, highlighting ongoing regional softness.

Housing data offered a glimmer of optimism. The NAHB Housing Market Index rose to its highest level since May, with 38% of builders reporting price cuts to attract buyers. While affordability remains a challenge, lower mortgage rates are beginning to support sentiment.

The Federal Reserve remained in focus ahead of its upcoming policy meeting. Chair Powell reiterated that the outlook for inflation and employment has not changed significantly since September, while Governor Miran continued to advocate for a more aggressive rate-cutting stance. Markets are currently pricing in a 25 basis point cut at the October 29 FOMC meeting, with attention turning to the Fed’s forward guidance amid a growing data vacuum.

Despite the broader market rally, regional banks came under renewed pressure. Zions, Western Alliance, and Jefferies all faced sharp selloffs—down 13%, 9.4%, and 10.6%, respectively—after disclosing credit provisioning tied to troubled commercial loans. Zions reported a $50 million charge-off and a $60 million provision related to two loans it says involved borrower misrepresentation. Western Alliance is pursuing a $100 million recovery through litigation, while Jefferies faced scrutiny over its exposure to First Brands and Point Bonita.

Elsewhere, gold extended its winning streak, rising 5.3% for the week and pushing further into record territory. The U.S. dollar weakened, with the DXY index down 0.6%, while WTI crude oil fell 3.0%, marking its third consecutive weekly decline.

Looking ahead, the September Consumer Price Index (CPI) is scheduled for release on October 24, one of the few data points exempt from the shutdown due to Social Security requirements. Investors will also be watching for updates on existing home sales, global PMIs, and the final October reading of University of Michigan consumer sentiment. Despite the political noise and data delays, markets appear to be taking comfort in resilient corporate fundamentals and the prospect of further monetary easing. As always, we remain focused on long-term fundamentals and disciplined portfolio management.

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