Weekly Commentary (10/6/25) – Markets Climb Amid Blind Spots and Policy Risk

Markets again pushed higher last week despite rising uncertainty around fiscal policy, trade, and labor trends.
For the week, the DJIA added 1.11%, the S&P 500 rose 1.11%, and the Nasdaq climbed 1.33%. The Russell 2000 was strongest among U.S. indices, up 1.78%. Internationally, MSCI EAFE gained 2.70% and MSCI EM jumped 3.67%. The Bloomberg Aggregate posted a 0.46% gain as bond yields drifted lower; notably, the 10-Year Treasury yield fell 7 bps to 4.13%. In commodities, gold surged 2.77% to $3,880.80/oz, while oil retreated 4.84% to $60.88.
Last week’s news flow underscored a mounting “unknown” premium. A federal government shutdown is now in play—an avoidable and potentially damaging standoff. Tariff discussions have also shifted beyond levels and retaliation to a constitutional question: can a president impose sweeping tariffs unilaterally without fresh congressional authority? That legal ambiguity injects policy risk just as growth and inflation remain finely balanced. Labor signals were soft—ADP showed a private-payroll decline of 32,000 in September—and the shutdown complicates matters by delaying data and muddying the labor picture. 
The Fed now operates in a data fog. Tariff-driven inflation pressures remain unclear; some of the more aggressive inflation fears may have been overstated. Yet weaker labor metrics and policy uncertainty make premature easing risky. Markets are pricing in cuts, but front-end yields are not plunging enough to reliably “force” lower long rates. The central bank must navigate whether to stay steady, cut cautiously, or risk a reversal if inflation reaccelerates.
Meanwhile, investors are being drawn to high yields and have continued to invest in riskier public and private corporate debt this year, even as high-yield spreads to Treasuries hover around their tightest levels since mid-2007. However, despite still-elevated rates keeping yields enticing, investors should consider the quality of companies backing this debt. This asymmetric risk-taking behavior could be another signal that markets are showing signs of unbridled enthusiasm and less than appropriate assessments of risk.
At the same time, equity valuations appear stretched, and commentary from some corners now flags the possibility of a correction. With macro risks elevated—trade, shutdown, labor softness—the path for further upside feels narrower. Internally, breadth and momentum are showing signs of fatigue even as headline indices push onward.
This week, attention will focus on the delayed Fed minutes, speeches from regional and national Fed officials, and any trickle of previously postponed data (trade balance, jobless claims, inventory metrics). In the absence of full employment readings, sentiment indicators and corporate earnings take on extra weight in guiding market direction.
We continue to resist market-timing impulses. Long-term outcomes are driven by policy discipline and asset allocation; we are moving equity exposures that drifted above targets back toward strategic weights. 
“What the wise do in the beginning, fools do in the end.” — Warren Buffett