MARKET COMMENTARY

Below are the economic and market highlights for the week: 

1. The Federal Reserve’s Beige Book indicated overall economic growth remained largely unchanged since its previous report on September 3rd. Consumer spending showed signs of weakening, though robust demand for luxury goods and travel among higher-income households persisted. Most of the Fed’s 12 districts reported stable economic conditions, accompanied by modest wage growth. Meanwhile, tariff-related input costs continued to ripple through the economy, with many districts noting price increases across various sectors.

2. The NFIB Small Business Optimism Index fell 2.0 points in September, dropping from 100.8 in August to 98.8. That was its first monthly decline in three months, though it remained above the 52-year historical average of 98. Meanwhile, the Uncertainty Index surged 7 points to 100. That was its fourth-highest reading in over five decades. Persistent supply chain disruptions, inflationary pressures, inventory issues, concerns about future business conditions, and labor market challenges all contributed to the decline in sentiment. On the employment front, 32% of small businesses reported unfilled job openings, unchanged from August. Among the 58% of owners who were hiring or attempting to hire, 88% continued to struggle finding qualified candidates.

3. In a year marked by a bruising trade war and high financing costs, the federal government managed to lower the U.S. budget deficit by $41 billion to $1.78 trillion. While still on the high end historically, the red ink would have been worse had it not been for a surge in customs duties and a September surplus of $198 billion that also set a record for the month. Tariff collections were $202 billion, up 142% from 2024. September saw $30 billion in tariff payments alone, up 295% from the same period a year ago. The dip in the budget shortfall will bring the ratio of deficit to gross domestic product to 5.90%. The measure has not been below 6% since 2022. The absurdity of it all is that it is Washington’s stated goal to reign that annual shortfall to “just” 3%, hoping that GDP growth will outpace the deficit spending and keep the overall debt to GDP in an acceptable range. The movement in gold recently indicates that there are a few investors betting against that happening.   

Earnings Trump All

It was a roller coaster week for Wall Street, soaring on a strong start to the Q3 earnings season to then dropping on China trade and government shutdown tensions. The government shutdown once again delayed major releases on CPI and retail sales, leading investors to focus their attention on other headlines. Big banks JPMorgan, Goldman Sachs, and Bank of America kicked off the Q3 earnings season, topping analyst estimates on strong investment banking and trading revenue. They also noted the consumer remains healthy despite the weak labor market and persistent inflation. Thursday’s session, however, rattled investors on worries about loose lending practices in the regional banking sector following the recent bankruptcies of two auto industry-related companies. Regional banks Zions and Western Alliance fanned those concerns during the trading session. Zions dropped 13% after taking a sizable charge on bad loans while Western Alliance fell 11% after alleging a borrower had committed fraud. On Friday, both stocks rebounded as Wall Street analysts defended the banks and traders bet any bad credit bets were one-offs and not part of a bigger crisis. Despite the skittishness surrounding regional banks, the message from various companies and banking executives is that overall credit quality in the financial sector remains healthy. Traders also kept a close eye on the renewed U.S.-China trade fight. Following last week’s curbing of rare earth exports to the U.S., China announced it would tighten its grip on global shipping. In response, the White House reiterated its 100% tariff on Chinese goods effective November 1 or sooner depending on negotiations. The Trump administration also floated this week a cooking oil embargo on China in response to China’s U.S. soybean boycott. Despite the trade barbs, both countries appear to be open to negotiations. Unfortunately, the same can’t be said of the U.S. government shutdown. Congress remains deadlocked on a funding deal with a third week of closure on tap.

Despite the lack of major economic releases due to the shutdown, new regional banking concerns, and a flareup in U.S.-China trade tensions, the start of the Q3 earnings season helped to keep the S&P 500 in the green for the week. Q3 earnings are expected to increase a strong 9.30% year-to-date. Although still early in the reporting season, of the 58 companies in the S&P 500 that have reported earnings to date, 86.20% have reported above analyst expectations. This compares favorably to the long-term average of 67% and the prior four quarter average of 77%. While the tariffs, the shutdown, the labor market, and rising delinquencies provide reason for caution, the strong start to earnings season and the picture being painted by executives on conference calls and interviews is that of an economy that is continuing to hum along. Investors had to contend with a few new curve balls this week but the S&P 500 still delivered, managing to tack on another 1.70% for the week bringing its 2025 tally to 13.30% YTD. 

The Week Ahead

Key reports include CPI, S&P Flash PMIs, and existing home sales.

Nobel Prize Winners Announced 

Every year, six prizes are awarded to individuals or groups for outstanding contributions to humanity across fields including physics, chemistry, physiology or medicine, literature, peace, and economic sciences. The winners of the Nobel prizes are known as laureates, and they receive a diploma, a medal, and a cash award worth roughly $1.2 million. The word “laureate” refers to laurel wreaths, which were awarded to victors in Ancient Greece as a sign of honor. Notable Nobel laureates include scientists Albert Einstein and Marie Curie, author Ernest Hemingway, and inspirational leaders such as Nelson Mandela, Martin Luther King Jr., and Mother Teresa. The Nobel Prizes are widely regarded as the most prestigious awards given for intellectual achievement in the world. 

The Nobel Prize was created by a wealthy Swedish chemist, engineer, and entrepreneur who is most known for inventing dynamite and other powerful explosives. In his will, Alfred Nobel dictated that the bulk of his estate should be used to fund “prizes to those who, during the preceding year, have conferred the greatest benefit to humankind.” Alfred was a true renaissance man and also wrote poetry and drama and could speak Russian, French, English, and German by the age of 17. The five original prize categories reflect the interests closest to his heart. The sixth award in Economic Sciences was established later — in 1968 — but is included with the original five Nobel Prizes.

Nobel made most of his fortune developing weapons technologies used in modern warfare. Later in life, he befriended Austrian peace activist Bertha von Suttner who went on to become the first woman to win the peace prize in 1905. Many believe it was her influence that made Alfred Nobel include an award for that category. Nobel passed away in 1896 but it took until 1901, following a legal battle over his will, before the first prizes were awarded.

Who Awards the Prizes?

The Royal Swedish Academy of Sciences awards the prizes for chemistry and physics, the Swedish Academy for literature, Sweden’s Karolinska Institute medical university for physiology or medicine, and the Norwegian parliament for peace. These organizations were chosen by Nobel. In 1968, when Sweden’s central bank was celebrating its 300th anniversary, it established the Prize in Economic Sciences in Memory of Alfred Nobel with a donation to the Nobel Foundation. The prize is awarded by the Royal Swedish Academy of Sciences, according to the same principles as the other prizes. Winners in each category are announced in October with prizes awarded on December 10th which is the anniversary of the death of Alfred Nobel. Below are this year’s laureates.

Medicine

The prize for medicine was awarded to three scientists for their work on the immune system. Mary E. Brunkow, Fred Ramsdell, and Dr. Shimon Sakaguchi uncovered a key pathway the body uses to keep the immune system in check, viewed as critical to understanding autoimmune diseases such as Type 1 diabetes, rheumatoid arthritis and lupus. In separate projects, the three laureates identified the importance of what are now called regulatory T cells. Scientists are using those findings in a variety of ways: to discover better treatments for autoimmune diseases, to improve organ transplant success, and to enhance the body’s own fight against cancer, among others.

Peace

The peace award goes to a person or organization that has done the most “for fraternity between the nations and the abolition or reduction of standing armies and the formation and spreading of peace congresses.” There were 338 candidates for the Nobel Peace Prize this year — 244 individuals and 94 organizations. María Corina Machado, a long-time Venezuelan politician and opposition figure, has been honored with this year’s award in recognition of her leadership of the democracy movement in Venezuela for the past 25 years. As an interesting sidenote, officials are investigating suspicious online betting for the peace category. Bookies around the world take online bets on who will receive this prestigious award. Hours before the announcement, bets for Machado spiked, suggesting a rare leak from the secretive committee that awards the prize.

Chemistry

Three prominent chemists won this year’s chemistry Nobel prize for their work developing metal-organic frameworks (MOFs) – supramolecular constructions with large pores through which gases and other chemicals can diffuse and adsorb. In slightly simpler terms, they have developed new molecular structures that can trap vast quantities of gas inside, laying the groundwork to potentially suck greenhouse gases out of the atmosphere or harvest moisture from desert environments. The committee that selected the winners observed that these discoveries may contribute to solving some of humankind’s greatest challenges, from pollution to water scarcity.

Physics

Three scientists won the Nobel Prize in physics for research on the strange behavior of subatomic particles called quantum tunneling that enabled the ultra-sensitive measurements achieved by MRI machines and laid the groundwork for better cellphones and faster computers. The laureates are John Clarke, Michel H. Devoret, and John M. Martinis. Each of the winners work at different universities in the U.S. These researchers took the seeming contradictions of the subatomic world — where light can be both a wave and a particle and parts of atoms can tunnel through seemingly impenetrable barriers — and applied them in the more traditional physics of digital devices. The results of their findings are just starting to appear in advanced technology and could pave the way for the development of supercharged computing.

Literature

The winner of the Nobel in literature for 2025 is 71-year-old Hungarian writer László Krasznahorkai. He is known for postmodern and apocalyptic novels and novellas. Krasznahorkai’s first novel, Santantango, published in 1985, explores themes of life and death and despair in a dilapidated and impoverished Hungarian village. The book was made into a seven-hour movie in 1994. Another book, The Melancholy of Resistance, is about a strange, ghostly circus appearing in a small town with a giant, dead stuffed whale. Krasznahorkai’s work is described as dystopian, melancholic, dark, and gloomy but very original and written in a completely unique style.

Economic Sciences

The economic sciences award was given to three scholars — Joel Mokyr of Northwestern University, Phillippe Aghion of the London School of Economics, and Peter Howitt of Brown University. Mokyr was cited “for having identified the prerequisites for sustained growth through technological progress,” while Aghion and Howitt were honored for “the theory of sustained growth through creative destruction.” The laureates’ research explains the relationship between technological progress and sustained economic growth to support humankind. This award has been given 57 times to 99 laureates between 1969 and 2025.

As stipulated in Nobel’s will, the Nobel Prizes in Physics, Chemistry, Physiology or Medicine and Literature are awarded in Stockholm, Sweden, while the Nobel Peace Prize is awarded in Oslo, Norway. The economic sciences award is also given in Stockholm. The events have a strict dress code: gentlemen are required to wear white tie and tails, while ladies should be dressed in an evening gown. The official website notes that wearing your country’s national costume is an alternative to white tie and tails or evening gown. Ordinary citizens are welcome to plan watch parties as the event is generally live streamed. Perhaps watchers will make it a theme party and follow the dress guidelines.