Macro Monday: October 20-24, 2025

RECAPPING LAST WEEK
U.S. equity indices managed to hold onto weekly gains despite macroeconomic headwinds, including the ongoing government shutdown, trade tensions with China, and rising concerns about private credit and regional bank loans. The S&P500 and Nasdaq Composite indices gained around 2%, while the Russell 2000 ended higher by 2.4%, declining slightly from a new record high reached midweek. All sectors posted positive performance, but financials lagged despite strong earnings reports from the large U.S. banks. Shares of Zions Bancorp tumbled after revealing losses tied to commercial and industrial loans, while Western Alliance sank after disclosing a lawsuit it had initiated regarding a business loan. Gold futures jumped over 7% to near $4,400 before pulling back on Friday after some positive signs emerged in U.S.-China trade relations. President Trump said that the proposed 100% tariffs on goods from China were not sustainable and confirmed that he would meet with Chinese President Xi Jinping in two weeks. Oil futures fell 1.7% while cryptocurrency prices remained under pressure for a second straight week. U.S. economic news was limited as the government shutdown extended into a third week, with no resolution in sight. As a result, Treasury yields briefly touched the lowest level since April as investors remained somewhat in the dark on the health of the U.S. economy. At a conference, Fed Chair Powell delivered prepared remarks noting that data available prior to the shutdown reflected economic activity on a modestly firmer trajectory than expected. He also said the outlook for inflation and employment does not appear to have changed since the last FOMC meeting, signaling that another quarter-point rate cut is likely later this month. With September’s official retail sales report delayed, the Chicago Fed Advanced Retail Trade Summary estimated a 0.5% advance, though higher prices likely impacted that rise. Regional manufacturing surveys showed mixed results, as activity increased modestly in New York state this month while the Philadelphia area slumped to the lowest level since April. The release of housing starts and permits was delayed, but the latest NAHB housing index reading jumped to 37 in October from 32 as future sales expectations topped the breakeven level of 50 on optimism for lower mortgage rates. Overseas, China’s exports rose 8.3% last month while shipments to non-U.S. ports grew nearly 15%. The limited impact from U.S. tariffs on overall trade may give China leverage in trade negotiations. Domestic consumption remained weak as China’s consumer and producer prices fell 0.3% and 2.3% YoY, respectively. Finally, the British economy expanded by just 0.1% in August, suggesting that Q3 GDP may decelerate from the lackluster 0.3% growth in Q2. UK employment has held up better than expected, however, and wage growth has cooled slightly.

THE WEEK AHEAD
Although the S&P500 and Nasdaq Composite indices clawed back roughly half of the prior week’s losses, and the Russell 2000 reached a new high, the volatility index’s elevated level suggests that investors remain on edge. Late last week VIX nearly touched 29 in the Thursday-into-Friday overnight session before settling close to 21—still indicating a healthy amount of fear given lofty equity values. This week, investors hope for progress on ending the shutdown and more clarity on trade issues, while keeping an eye on geopolitical events and the credit markets. In the U.S., the delayed September CPI report is scheduled for Friday—observers expect headline inflation to have increased 0.4% MoM and 3.1% YoY—an increase from 2.9% YoY the prior month. The other important economic releases will be the flash PMI surveys for the manufacturing and services sectors along with revised consumer sentiment and inflation expectations. Several earnings announcements have market-moving potential, with reports due from Netflix, Tesla, IBM, Texas Instruments, and Intel, among others. On the international agenda, China may set the early tone for the week with the release of GDP, industrial production, and retail sales figures on Sunday evening. In Japan, all eyes will be on the political process for election of the new prime minister, set for Tuesday, while the latest inflation update arrives Thursday. Finally, in Europe the focus will be on the flash PMI readings, plus UK CPI and retail sales.

CHART OF THE WEEK
Short-term dollar strength
U.S. regional banks were back in the news last week, reigniting concerns that last flared in 2023 when Silicon Valley bank failed after the Federal Reserve’s aggressive rate hikes smashed the book value of their bond holdings. Although the risks seem familiar, the reasons for the renewed concerns are different. The collapse of sub-prime auto lender Tricolor Holdings last month was the first sign of trouble in the credit markets. Then, investment bank Jeffries revealed exposure to losses related to the bankruptcy of auto parts maker First Brands. Last week’s news from regional banks Zions and Western Alliance sparked fears the credit markets may not be as healthy as previously thought. JP Morgan Chase CEO Jamie Dimon—whose bank had a $170 million charge off due to Tricolor’s downfall–commented “when you see one cockroach, there’s probably more.” So far this is not considered to be a systemic issue, but investor anxieties could mute risk appetite in the space. The KBW Nasdaq Bank Index (BKX) had already been losing momentum recently as bearish divergences in both the MACD and RSI indicators developed. Thus far, technical support in the $140 to $142 range has held. If a rebound fails to materialize from that area, a move down to the 200-day moving average near $136 may be in the offing.