Market Commentary 10/30/25

Markets Rise, Consumers Hesitate

Diverging Sentiments in a Mixed Economic Landscape

Recent data reinforces a growing divergence between consumer optimism toward financial markets and their caution toward the broader economy. Surveys show that nearly 60% of consumers expect the stock market to climb over the next year, even as the University of Michigan’s Consumer Expectations Index hovers near its lowest levels since the pandemic and the 2008 financial crisis.

Historically, these measures have moved in tandem; when consumers feel good about their economic prospects, they tend to feel confident about markets. The current gap, however, suggests a deeper disconnect between financial markets and real economic sentiment.

Market Momentum Remains Strong

Equities continue to demonstrate resilience. The S&P 500 has reached over 20 record highs since late May, propelled by solid corporate earnings and continuous enthusiasm surrounding artificial intelligence. Capital investment in AI infrastructure, spanning data centers, semiconductors, and cloud services, has become a significant driver of both productivity expectations and earnings growth. Additionally, a more stable geopolitical environment and easing trade tensions have calmed investor nerves.

The Federal Reserve’s September rate cut also bolstered investor sentiment. The move signaled confidence that inflation is largely contained while providing reassurance that policymakers are ready to support growth if needed. This “soft landing” narrative, where inflation cools without a sharp economic downturn, has strengthened belief in a sustainable expansion, helping to push valuations higher even as fundamentals normalize.

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