The week ended with a new rally in the U.S. indices, as uncertainty and caution toward “risk” temporarily subsided, and investor sentiment strengthened. The main American stock market indices confirmed for us the positive momentum we have been emphasizing, reaching historic highs, with clear support from better than expected corporate results and the latest positive “signals” on inflation, which we had highlighted in our previous article.
At the same time, investors are preparing for the next phase, which includes important corporate earnings and announcements, as well as “big tech” disclosures, and, of course, the Federal Reserve’s decision on Wednesday. As we have mentioned several times, we expect that in one of the last two meetings of 2025 we will see a 50-basis-point rate cut.
The Dow Jones Industrial Average set a new record high, surpassing 48,000 points, while the S&P 500 is moving toward 7,000, and the Nasdaq Composite above 26,000, as their momentum continues.
The past week proved to be the strongest for the S&P since August, while the Dow recorded its largest rise since June.
Essentially, the markets drew strength from four main “fuels”:
• Lower-than-expected inflation.
• Strong corporate earnings in key sectors and large companies whose valuations had remained at low levels, as we had pointed out in previous articles.
• Expectations for rate cuts by the Fed, with probabilities above 95 % for a 0.25 % cut at each meeting until the end of the year. We still expect the surprise 50 bps cut I mentioned earlier to occur in one of the two.
• A euphoric sentiment linked to a reduction in risk premium (“risk-on”).
Third-quarter earnings stood out: about 87 % of S&P 500 companies beat estimates, and average profitability is expected to rise by approximately 10.4 % year-on-year, according to analyses presented by Reuters.
Among the companies that stood out:
• Ford Motor Company: a jump of roughly 12 % after a profitable quarter.
• General Motors: up about 14.9 % thanks to an upgraded guidance.
• Alphabet Inc.: gains of around 2.7 % following a contract with Anthropic (~1 million AI chips).
The widespread corporate success shows that, despite geopolitical and monetary “scarecrows,” the market focuses on real financial results, and also on the hidden opportunities that still number in the thousands on the American board.
At the same time, some economic reports (labor cost, PMI, consumer confidence) remain weak amid the ongoing federal government shutdown, which has already lasted a month. Yet, in our view, this cloud will soon be lifted, giving new prospects for the continuation of the upward momentum, at least until January 20, 2026, when the first year of President Trump’s term concludes, and which will likely be considered the best first year of a presidency for the stock market.
The current backdrop serves as a “golden opportunity” for interest-rate-sensitive equities (technology, real estate): when borrowing costs fall, the present value of future earnings increases, and this should soon be reflected in the valuations of companies with solid fundamentals.
The picture remains positive, and the market’s upward return shows that investors “look forward, not backward,” following the philosophy that “indices never reward the present, only the future.”
With indices at record highs, tolerance toward disappointing results or weak guidance will be minimal.
Sectors such as automotive, AI infrastructure, and companies with strong fundamentals remain at the forefront.
For now, safe-haven assets like gold are losing ground (risk funding is shifting toward equities).
This week, the main catalysts will be the earnings of the Big Tech companies and the Fed’s decision and Powell’s speech, and these will mark or determine the next major market move. With the Fed announcing rate cuts and technology giants reporting results, the market will find new directions: positive guidance → continuation of the “risk-on” phase.
In addition, U.S.- China trade and the progress of geopolitical negotiations will influence the appetite for globally exposed equities, where we do not expect any negative developments. The continuation of economic data (retail, trade balance, PMI) will determine whether the positive momentum for stocks will remain as strong as we expect throughout the fourth quarter.
Also, the upward momentum remains strong, although short-term, for oil and natural gas.
As for the EUR/USD exchange rate, I consider a move toward 1.1100 - 1.1300 by year end very likely, with lower levels possibly appearing early next year.
Regarding the BDI, technically, failure to break above the 2,070-point level may bring a correction toward 1,770 points, before resuming the upward path we have been anticipating and emphasizing.
Overall, the market has sent, and continues to send, a strong message:
It is ready for the next wave of growth that we have described in all our articles since the beginning of the year, especially for the United States.
And you, as investors, must be ready as well.
As I have repeated many times: stock markets operate pre-emptively, and that is why cooperation with an investment advisor is the right and imperative choice for the next three years. It is not a “luxury”; it is an absolute necessity for building the proper strategy around your investment capital.
by Kotsiakis George
