WEEK IN PERSPECTIVE: Market recap 10-6 to 10-10

Last week, stock markets reversed early gains and finished with notable losses as trade tensions between the U.S. and China escalated, but optimism persists due to strong year-to-date returns and resilient sectors. Bonds rallied, pushing long-term yields to monthly lows as investors sought safety, with expectations of only one more Federal Reserve rate cut this year.

Stock Market Highlights:

- All major indexes closed lower for the week after a tariff threat dampened sentiment on Friday.

- The Dow fell 2.7%, the S&P 500 dropped 2.4%, and the Nasdaq was down 2.5%—their worst week in several months despite hitting record highs earlier.

- Tech shares led declines, but the Nasdaq still shows a year-to-date gain of over 15%, with the S&P 500 and Dow up nearly 12% and 7%, respectively, buoyed by ongoing investment in artificial intelligence and select sectors.

Bond Market Summary

- The 10-year Treasury yield dropped to 4.04%, its lowest since mid-September, reflecting a flight to quality as trade tensions and the government shutdown contributed to uncertainty.

- Bond prices jumped, with the rally strongest in long-dated maturities.

- The Fed is anticipated to cut rates once more this year, and the Treasury is shifting more deficit funding to short-term bills, reducing pressure on long-term yields.

Looking Forward

- Despite recent volatility, long-term returns remain robust and investors are optimistic for the upcoming earnings season, especially in sectors driving innovation.

- New corporate earnings, ongoing AI growth, and easing policy expectations may present fresh opportunities for gains in the weeks ahead.

A quick rebound remains possible as positive fundamentals persist beneath the surface, highlighting resilience in the face of global uncertainties.

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