U.S Overview
October reversed almost everything September did. The S&P 500 fell about 1%, the Nasdaq dropped 5.3% for its worst month since March 2025, and the Dow gained 1.7%. These indexes usually move together. The reason they did not is that a small number of very large technology companies fell while most other companies rose, and because the S&P 500 weights companies by market cap size, those few names pulled the whole index down with them. The equal-weighted version, which counts every company the same, rose 5%. That is the widest gap in favor of the average company since 2009. Only two of the eleven sectors in the S&P 500 fell: technology, down 8.2%, and communication services, down 9.9%. Energy led with a gain of 13.8%.
The Federal Reserve met on October 27th and 28th and left its benchmark rate unchanged following September’s increase. The vote was 10 to 2, and both dissenters, Cleveland Fed President Beth Hammack and Governor Lisa Cook, wanted a quarter-point increase rather than a pause. Chair Kevin Warsh said the labor market is in good shape despite that inflation has run above the Fed’s 2% target for close to six years. Consumer prices rose 3.7% over the twelve months through September.
International Overview
The United Kingdom was the strongest of the major markets in October. The FTSE All-Share gained about 1% and the broader European market outside the UK rose slightly. The European Central Bank held its deposit rate at 2.50% on October 29th. The same day, Christine Lagarde announced she will leave the ECB presidency nine months early.
Asia fared the worst in October. South Korea’s Kospi fell 16.2%, its seventh-largest monthly decline on record. Japan’s Nikkei 225 fell about 5% and Taiwan’s market fell about 6%. Samsung Electronics and SK Hynix both reported record quarterly results late in the month, and both jumped on the news before giving it all back within days. SK Hynix ended October down 20%. Investors were not questioning what these companies earned last quarter. They were questioning whether the customers buying their chips will keep spending at the same pace.
Emerging markets fell about 8% in October, led down by Asia for the reasons above, and Brazil fell 12% largely due to Presidential election results that markets feared may not be in the long term financial interest of the country.
What does this mean for you?
October separated the two portfolio families more than any month this year. Our Fossil Free portfolios returned between -0.08% and 0.71% for the month. Our Diversified portfolios returned between -0.48% and -2.21%. All three Fossil Free portfolios finished ahead of their Diversified counterparts, by 1.19 % to 2.13% the widest margin in their favor this year. Inside each family the pattern was the same: the more conservative the portfolio, the better the month, because bonds gained while stocks fell. Our Stable Value Portfolio returned 0.36% for the month and 2.68% year to date.
The bond market finally helped. The 10-year Treasury yield climbed above 5.35% on October 7, its highest level since 2002, then fell through the rest of the month to finish at 4.92%, down 37 basis points. Because bond prices rise as yields fall, that produced gains on bonds already held, and the longest maturities gained most. After three months of fixed income working against results, October reversed it. One caution belongs here: Treasury bonds returned 2.4% for the month while high-yield corporate bonds returned 0.3%, and corporate borrowing costs worldwide reached their highest level relative to government bonds in seventeen months.
Understanding the Headlines
Borrowing to Build AI: Much of this construction is paid for with borrowed money, and in October lenders started charging more. CoreWeave, a company that rents out computing power and carries about $50 billion of debt, saw the yield on its 2031 bonds rise above 16%. Insurance on that debt now implies roughly a 63% chance of default within five years, up from about 30% a year ago. Your bond holdings sit in broadly diversified government and corporate funds, where a borrower like this is a rounding error, not a position. It matters anyway, because worry in one corner of the credit market raises borrowing costs across the others.
Oil Keeps Rising While the Fighting Cools: Brent crude finished October near $113 a barrel, up 15% for the month and its fourth straight monthly gain. The confusing part is that oil was flowing again, with Gulf exports in mid-October above their pre-war average. Freight explains most of it. Shipping a barrel from the Gulf to Asia cost more than $37, several times the normal rate, because of insurance and the longer routes around the Strait of Hormuz, and global inventories remain more than 500 million barrels below pre-war levels. October also brought more attacks on commercial ships than any month since the war began. Energy led every sector again.
A developing political shift: Control of both houses of Congress changed hands on November 3, with news organizations projecting Democratic majorities in the House and the Senate. The lasting implications are not yet clear, but three questions will shape sentiment from here: whether the new Congress can press the war with Iran to an end, how far it goes in regulating artificial intelligence, and whether data center construction gets more difficult. Markets began pricing all three within a day. Oil fell almost 9% in a day and AI and data center shares fell while the rest of the market rallied. None of this is settled. No agreement with Iran has been signed, and most data center approvals rest with states rather than Congress. But if oil continues to decline , the energy gap that has separated the two portfolio families all year will get much smaller.
Thank you for your continued trust and support. It is our privilege to serve as stewards of your financial assets.
Sincerely,
The Faith Foundation Team
