Weekly Macro Report, November 2 2025

1. Economic Growth & Outlook

Through October 2025, the S&P 500 is up 17.5% year-to-date, signaling persistent investor optimism. US GDP expanded 3.8% annualized in Q2 2025, reversing Q1’s decline, with the latest forecasts suggesting continued but slower growth. The Federal Reserve’s October 2025 cut lowered the fed funds rate to 3.75-4.00%, reflecting measured concern over inflation and labor market risks. Fed funds futures currently imply further modest rate reductions, indicating expectations for continued moderate economic support despite still-elevated price pressures.

2. Labor Market

The U.S. labor market in October 2025 shows a stable but slightly elevated unemployment rate forecast of 4.35%, up from 4.34% the prior month, with layoffs steady at 2.09% and a hiring rate for unemployed workers modestly declining to 45.18%. Initial jobless claims trended lower in September, reaching 218,000, signaling steady labor demand. Payroll growth has been minimal recently, with August adding only 22,000 jobs. These indicators suggest the Fed may maintain current rates, as the labor market neither overheats nor significantly slackens.

3. Interest Rates

As of October 31, 2025, the 10-year Treasury yield climbed to 4.11% amid renewed Fed hawkishness, signaling higher costs for government borrowing and filtering into the wider rate environment. Investment-grade corporate bond yields averaged 5.77% in early September, reflecting stable risk premiums and suggesting businesses face persistent financing expenses. The 20-year Treasury yield, often a mortgage market benchmark, stands at 4.65%, pressuring household budgets and keeping home purchase affordability constrained for buyers entering the market at quarter end.

4. Yield Spreads

As of October 31, 2025, the US yield curve remains slightly positive with the 10-Year Treasury yield at 4.08% and a 10-year minus 3-month spread near 5 basis points, signaling moderate economic growth expectations. The 10-Year TIPS real yield held steady around 1.79%, indicating moderate inflation-adjusted returns consistent with steady growth. US credit spreads tightened, with high yield spreads near 2.8%, reflecting strong investor risk appetite amid contained credit risk concerns.

5. Inflation Dynamics

As of September 2025, U.S. headline CPI rose 3.0% YoY, driven chiefly by shelter (+3.6%), energy (+2.8%), and food (+3.1%) components. Core CPI slowed slightly to 3.0%, with shelter remaining the largest core driver. August PPI, which typically leads CPI, decelerated to 2.6% YoY, down from 3.1% in July, signaling moderate producer price pressures. The 10-year breakeven inflation rate, reflecting market inflation expectations embedded in TIPS, remains stable around 2.3%, indicating a contained long-term inflation outlook relative to some global peers.

6. Money Supply

The M2 money supply grew 3.9% year-over-year in January 2025, with September 2025 levels reaching $22.2 trillion. The annual CPI inflation rate was 3.0% for the 12 months ending September 2025. M2 growth exceeds CPI inflation, suggesting liquidity is expanding faster than price pressures, with the main driver being sustained demand for money market funds and deposits.

7. Consumer Sentiment

University of Michigan Consumer Sentiment declined to 53.6 in October 2025, down 1.5 points from September, marking a five-month low; the gap between Current Conditions (58.6) and Expectations (50.3) widened slightly to 8.3 points, reflecting persistent consumer caution about the future. Meanwhile, the US yield curve remains flat, with a 10-year/3-month Treasury spread of just 0.22 percentage points on October 31, 2025—consistent with modest growth projections and a lingering, though not dominant, caution among bond investors, mirroring the household view of modest but guarded prospects ahead.