Tame Inflation, Strong Earnings, and a Fed Cutting Cycle. Will Equities Rally into Year-End?

Despite the US government shutdown and hawkish commentary at the October FOMC meeting, equities were largely up for the month amid a strong start to the Q3 earnings season, lower than expected inflation, optimism regarding a US-China trade deal, and additional easing in monetary policy. The rally was centered around mega-cap technology as US growth and US large-caps led gains (+3.4% and +2.4%, respectively), while US small-caps and US mid-caps were down (-0.9% and -0.5%, respectively). Bonds mostly fared well as munis rose 1.2%, 7-10 year US Treasuries gained 0.7%, and the US Aggregate Bond Index increased 0.7%. Aside from crude oil (-1.6%), commodities produced positive returns as silver was up 3.9%, gold rose 3.6%, and broad-based commodities increased 2.7%.