The stock market got fresh fuel during the last week of October in the form of positive earnings reports from large technology companies, which helped push stock indexes to a new all-time high.
Apple, Amazon, and Alphabet (Google) all posted revenues and profits that exceeded expectations and telegraphed solid outlooks for 2026. These three stocks combined make up 16% of the S&P 500 Index.
Thus far in 2025, the large company US stock index has closed at record levels on thirty six occasions – most recently on October 28.
The government shutdown, which persisted throughout the month and carried on into November, thus far seems to have had little impact on financial markets.
But the Federal Reserve’s decision to reduce interest rates has contributed to constructive market sentiment.
The Fed cut the Federal Funds Rate for the second time in 2025 on October 29, bringing the official target for short-term interest rates to a range of 3.75% – 4.0%.
Lower interest rates are generally viewed as supportive for stocks because when the Fed cuts rates, it often becomes less expensive for many companies to borrow money.
Cheaper loans can lead to increased investment in growth-related activities (like research, hiring, and expansion) which can boost company earnings in the future.
The Fed committee that determines interest rate policy meets again for the final time in 2025 next month.
Expectations are for another rate cut on December 10, which would bring the short-term interest rate target below 4% for the first time since 2022.
October was a positive month across the board for broad-based stock and bond market indexes, as the chart below shows.
Source: Moore Financial Advisors & Morningstar
And with ten months now behind us, 2025 is likely to be another strong year for financial market returns.
In fact, the last extended period of tough sledding for stocks happened more than three years ago. That bear market ended in October 2022, and stock returns have been stellar since then.
After three years of very strong returns, it’s natural to wonder: have stocks come too far, too fast? And, if so, is it time to sell risky stocks and move to the safety of cash before the tide turns and the next bear market arrives?
This type of inquiry centers around the idea of market timing: making buy or sell decisions based on predictions of future market movements.
If you can accurately predict what will happen tomorrow, making big moves with your money to “lock in gains” and “avoid losses” today is logical.
However, we’re unaware of anyone who can accurately and consistently predict what will happen in financial markets and to stock prices, especially over the near term.
Rather than trying to guess what will happen in financial markets tomorrow, or next week, or next month, taking a long-term approach to investing is a far better approach.
Building expectations for financial market returns, establishing asset allocation targets that support your financial plan, and ensuring that your portfolio reflects those targets are important elements of successful investing over the long term.
Attempting to “get ahead of the market” introduces the possibility of failing to capture future gains by not having enough stock market exposure, and falling short of the long-term returns required by your financial plan.
The well-regarded investor and author Peter Lynch has said: “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections.”
These words of investment wisdom are worth paying attention to, particularly during extended periods of strong stock market returns.
-RK