Frighteningly perfect growth
The past week turned out to be the best since August for the S&P 500 and NASDAQ Composite indexes, and the strongest since June for the blue-chip Dow Jones (DJIA-30). Everything looks too perfect — and that is becoming increasingly unsettling. Yet it would be unfair to say the growth is unfounded – last week positive news was pouring in from all directions.
Firstly, despite the shutdown and the resulting paralysis of the U.S. government, we finally got at least some inflation data – and it turned out slightly better than analysts had expected. Hurrah, hurrah, hurrah! This, of course, has further strengthened investors’ confidence that the Fed will once again cut rates next week – by another quarter of a percentage point.
Secondly, the earnings season. It is unfolding surprisingly briskly and perhaps a little too optimistically. By the end of last week, 143 companies from the S&P 500 had already published their quarterly reports, with 87% exceeding profit forecasts and 83% beating revenue expectations. Overall, third-quarter earnings growth for these companies stands at 10.4% year-on-year, compared to a forecast of 8.8%. Once again – three cheers! And investors are tossing their hats in jubilation.
So, looking at these figures, it is hardly surprising that all major U.S. indexes ended the week at their historic highs, breaking through psychologically important levels for investors: the Dow Jones closed at 47 000 points, the S&P 500 at 6800 points, and the NASDAQ Composite at 23 000 points.
The ITS family of indexes also tried to keep up with their American counterparts. However, only one managed to close at a record high – the ITS Shariah Index (ITSS), which gained 1.66% over the week. This is hardly surprising, given that its portfolio consists exclusively of securities issued by leading U.S. companies.
Meanwhile, the ITS World Index (ITSW) also rose by a comparable 1.36% over the week but fell just short of its all-time highs. The main headwind came from Chinese stocks, which, following the long autumn holidays earlier this month, have seen muted demand from investors. As a result, they continue to weigh down, or at least slow, the growth of both the leading Chinese indexes (notably the Shanghai Composite and Hong Kong’s Hang Seng) and the ITSW, which includes several major Chinese technology companies.
A similarly perfect picture of growth could be seen at the sector level as well. Eight out of eleven sectors ended the week confidently in positive territory. Energy stocks performed best, gaining an average of 2.72% – hardly surprising against the backdrop of a 7% rise in oil prices. More encouraging, however, was the renewed demand for leading technology stocks, which had taken a brief pause earlier but climbed by an average of 2.43% over the week. This may be explained by investors starting to pick up shares of companies from the “Magnificent Seven” ahead of their quarterly earnings reports, due out this week.
In short – everything is rising! And for now, that alone sets the tone for the market. The only worrying sign is how steep and seemingly relentless this rally has become. After all, can a two-day pause and a slight two-percent dip in the indexes really be called a correction? Hardly. It looks more like a brief breather. The only question is, how long can it last?
Market expectation for October 27, 2025
You don’t need a crystal ball to predict that the coming week will be exceptionally tense and packed with major economic events. The FOMC meeting alone is enough to keep everyone on edge! Naturally, all eyes will be on Wednesday and the press conference of Federal Reserve Chair Jerome Powell. The rate cut itself is a foregone conclusion – no one doubts the Fed will trim it again – but the real intrigue lies in the comments that will follow.
However, while the FOMC meeting is undoubtedly the main event of the week, it’s by no means the only one. There’s hope that investors will also be served a few “tasting sets” – third-quarter GDP data and inflation figures (PCE index). That said, nothing is guaranteed, as the government still appears to be on “holiday” and doesn’t seem in a hurry to get back to work this week.
What is certain, however, is that this week will bring a flood of quarterly earnings – something for every taste and preference. It will, in fact, be the pivotal week of the current reporting season. The mere fact that five members of the “Magnificent Seven” are reporting says it all. On Wednesday, after the markets close, we’ll see results from Microsoft (MSFT), Alphabet (GOOGL), and Meta Platforms (META), followed on Thursday, also after the closing bell, by Apple (AAPL) and Amazon (AMZN). These are, of course, the brightest stars of the week, but far from the only ones: nearly a hundred other S&P 500 companies are also set to report their third-quarter 2025 results in the coming days. By the end of this week, we’ll already be able to draw some interim conclusions about this earnings season – and let’s hope the results are no worse than those we saw a week earlier.
As for the mood on global stock markets after the weekend, optimism is clearly in the air. Investors are buoyed primarily by confidence that the Fed will once again cut rates by 0.25% following its Tuesday–Wednesday meeting. Adding to the upbeat tone was news that over the weekend, U.S. and Chinese negotiators in Kuala Lumpur (Malaysia) reached a preliminary trade agreement, paving the way for its formal signing by U.S. President Donald Trump and Chinese President Xi Jinping at the summit in South Korea later this week. U.S. Treasury Secretary Scott Bessent announced that both sides had agreed to postpone the introduction of new tariffs and suspend China’s planned restrictions on rare earth metal exports. “I think we’re going to make a deal with China,” President Trump told reporters on Sunday.
Against this backdrop, the share prices of Chinese companies traded in China and Hong Kong rose, as did futures on major U.S. indexes. Gains averaged around 1% – slightly higher in China and just below that level in the U.S.
Even stronger momentum was seen in Japan, where local stocks surged to new all-time highs. The Nikkei 225 index extended its record-breaking rally, climbing nearly 2% and surpassing the 50 000-point mark for the first time in history.
Investors remain optimistic, expecting that the new Prime Minister, Sanae Takaichi – known for her “soft” fiscal stance, will push for additional stimulus measures to support Japan’s recovering economy.
As we can see, everything looks overwhelmingly optimistic for now. Let’s just hope nothing spoils investors’ celebration of “eternal growth”, which is once again entering a new phase of record highs. Still, a bit of prudence never hurts – it’s worth buying a few puts (PUT options). Hedging investment portfolios is never a bad idea.