Heavy week for 3Q25 EPS earnings. Polymarket shows expectations rising for "softer" Sept CPI reading.

Video: Sept Core CPI is reported this Friday.  The first govt “macro report” since the shutdown started, which means investors will put a lot of weight on this.  Polymarket sees 50% chance of headline CPI MoM of +0.4% and 39% of +0.3%.  The +0.3% would be softer than consensus and those odds are rising.

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Month to date, the S&P 500 is up +0.7% and is on track to be “Up-tober.” We continue to be constructive into year-end and expect the S&P 500 to reach at least 7,000 by year-end and that is the base case, with the possibility that we could see an even better 7,500.

• The primary rationale for a strong final 10 weeks of 2025 are as follows:
  – Corporate earnings strong = 3Q25 EPS season solid
  – Fed is dovish after a 9-month pause = Sept 1998 and 2024 = good YE rallies
  – AI visibility remains strong and getting stronger
  – 4Q positive seasonality
• As we look at the rest of the week, earnings is the focus as we are in the first “heavy week” of 3Q25 EPS. And so far, so good.
  – 60 of 500 reported so far
  – 83% beating expectations
  – median beat +6.2% = total 3Q25 EPS tracking to +14% YoY = great
• Both Netflix NFLX -0.19%  and Texas Instruments TXN -0.53%  reported after the close and both stocks are down after-hours. In our view, this is not thesis-changing, so we are not necessarily concerned about stocks selling off, short-term. The above arguments for a strong YE rally are intact. This is especially true given the substantial de-risking/VIX surge that happened on 10/10.
• As for Sept CPI reported Friday, equity investors will focus on this. This is the first govt economic data point since the shutdown started 3 weeks ago. So it is going to get a lot of focus:
  – Street is looking for headline CPI MoM +0.4% and Core CPI MoM +0.3%.
  – Polymarket headline CPI MoM odds are:
  – CPI +0.4% –> 50%
  – CPI +0.3% –> 39%
• The odds have risen in the past few weeks of +0.3% from 25% a few weeks ago to 39% now. So this suggests that markets see downside to the Core CPI reading this coming Friday. That would be a dovish development.
• This week, we will be receiving an important CPI release on Friday:
  – 10/23 Thu 10:00 AM ET: Sep Existing Home Sales 4me
  – 10/23 Thu 11:00 AM ET: Oct Kansas City Fed Manufacturing Survey
  – 10/24 Fri 8:30 AM ET: Sep Core CPI MoM 0.29%e
  – 10/24 Fri 9:45 AM ET: Oct P S&P Global Manufacturing PMI 51.9e
  – 10/24 Fri 9:45 AM ET: Oct P S&P Global Services PMI 53.5e
  – 10/24 Fri 10:00 AM ET: Oct F U. Mich. 1yr Inf Exp
  – 10/24 Fri 10:00 AM ET: Sep New Home Sales 710ke Delayed due to Shutdown

BOTTOM LINE: Still “most hated rally”

Seasonals remain favorable, and we see at least 5% upside into year-end which implies S&P 500 7,000. And this is arguably the base case, given that in 2025, the Fed only started cutting in September. This mirrors Sept 1998 and Sept 2024. In both instances, S&P 500 gained 13% in the 4th quarter. This still remains the “most hated” V-shaped stock rally. As for what we would buy

• MAG7 & Bitcoin & Ethereum
• Industrials
• Financials: Large-cap and regional banks
• Small-caps

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50 SMID Granny Shot Ideas: We performed our quarterly rebalance on 8/17. Full stock list here -> Click here

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Key Incoming Data October:

• 10/1 9:45 AM ET: Sep F S&P Global Manufacturing PMI Tame
• 10/1 10:00 AM ET: Sep ISM Manufacturing PMI Tame
• 10/2 10:00 AM ET: Aug F Durable Goods Orders MoM Delayed due to Shutdown
• 10/3 8:30 AM ET: Sep Non-farm Payrolls Delayed due to Shutdown
• 10/3 9:45 AM ET: Sep F S&P Global Services PMI Tame
• 10/3 10:00 AM ET: Sep ISM Services PMI Tame
• 10/7 8:30 AM ET: Aug Trade Balance Delayed due to Shutdown
• 10/7 9:00 AM ET: Sep F Manheim Used Vehicle Index Tame
• 10/7 11:00 AM ET: Sep NYFed 1yr Inf Exp Tame
• 10/8 2:00 PM ET: Sep FOMC Meeting Minutes Mixed
• 10/10 10:00 AM ET: Oct P U. Mich. 1yr Inf Exp Tame
• 10/14 6:00 AM ET: Sep Small Business Optimism Survey Tame
• 10/15 8:30 AM ET: Oct Empire Manufacturing Survey Tame
• 10/15 2:00 PM ET: Fed Releases Beige Book Mixed
• 10/16 8:30 AM ET: Oct Philly Fed Business Outlook Tame
• 10/16 8:30 AM ET: Sep Core PPI MoM Delayed due to Shutdown
• 10/16 8:30 AM ET: Sep Retail Sales Delayed due to Shutdown
• 10/16 10:00 AM ET: Oct NAHB Housing Market Index Tame
• 10/17 9:00 AM ET: Oct M Manheim Used Vehicle Index Tame
• 10/17 4:00 PM ET: Aug Net TIC Flows Delayed due to Shutdown
• 10/23 8:30 AM ET: Sep Chicago Fed Nat Activity Index Delayed due to Shutdown
• 10/23 10:00 AM ET: Sep Existing Home Sales
• 10/23 11:00 AM ET: Oct Kansas City Fed Manufacturing Survey
• 10/24 8:30 AM ET: Sep Core CPI MoM
• 10/24 9:45 AM ET: Oct P S&P Global Services PMI
• 10/24 9:45 AM ET: Oct P S&P Global Manufacturing PMI
• 10/24 10:00 AM ET: Oct F U. Mich. 1yr Inf Exp
• 10/24 10:00 AM ET: Sep New Home Sales
• 10/27 8:30 AM ET: Sep P Durable Goods Orders MoM
• 10/27 10:30 AM ET: Oct Dallas Fed Manuf. Activity Survey
• 10/28 9:00 AM ET: Aug S&P CS home price 20-City MoM
• 10/28 10:00 AM ET: Oct Conference Board Consumer Confidence
• 10/28 10:00 AM ET: Oct Richmond Fed Manufacturing Survey
• 10/29 2:00 PM ET: Oct FOMC Decision
• 10/30 8:30 AM ET: 3Q A GDP QoQ
• 10/31 8:30 AM ET: 3Q ECI QoQ
• 10/31 8:30 AM ET: Sep Core PCE MoM

Economic Data Performance Tracker 2025:

Economic Data Performance Tracker 2024:

Economic Data Performance Tracker 2023: