Weekly Market Update: October 20, 2025
The trade tensions between the United States and China have recently ratcheted up. The latest twist in the ongoing negotiations between the world’s two largest economies came from China, which severely tightened export restrictions on critical rare earth minerals that are used to produce consumer electronics products, including EV batteries, and for military applications. That move brought a harsh response from the U.S., with the Trump Administration threatening an additional 100% tariff to the duties already in place on goods from China. The new tariffs would take place on November 1st, but President Trump has already walked back a bit on his threat, as the negotiation of a trade deal remains highly fluid. However, this uncertain global trade environment rattled investors, with the equity markets selling off sharply on the recent news.
The prospect of additional tariffs on Chinese goods would likely raise costs for U.S. consumers, who are starting to show some signs of spending fatigue on discretionary items. On point, the University of Michigan’s preliminary October Consumer Sentiment Index reading dipped, falling to a five-month low, as Americans expressed concerns about a weakening labor market and persistent inflation. The report also indicated that consumers’ five-year outlook for their household finances fell to the lowest level in over a decade. This sentiment is not ideal with the holiday shopping season approaching. (Please note that the release of the September Consumer Price Index report from the Bureau of Labor Statistics has been pushed back to October 24th due to the federal government shutdown.)
Third-quarter earnings season is heating up. The consensus forecast is estimating high-single-digit profit growth for the S&P 500 companies. The big money center banks, including JPMorgan Chase and Goldman Sachs, kicked off the reporting season with strong results, driven by gains in investment banking, trading, and wealth management. Given the recent pickup in global trade anxiety, an encouraging earnings season will likely be needed to justify elevated stock valuations.
Conclusion: Equities hit a bit of a speed bump recently, with the aforementioned trade tensions prompting some profit taking. However, with the “don’t fight the Fed” and artificial intelligence trades still in place, investors should maintain a diversified portfolio led by high-quality stocks and cash-equivalent securities.
Source: ValueLine.com
