Markets Weekly Outlook: US-China Trade Deal, Fed Hawkish Cut, and Government Shutdown Impact

This analysis is based on the Seeking Alpha report [1] published on November 1, 2025, which highlighted significant market developments including US-China trade progress, Federal Reserve policy decisions, and ongoing government shutdown impacts.

The week ending October 31, 2025, was characterized by several interconnected market-moving events that collectively shaped global market sentiment. The US-China trade truce agreement reached on October 30, 2025, represents a significant de-escalation of geopolitical tensions [2]. Under this one-year agreement, China committed to substantial soybean purchases and suspended rare earth export controls, while the U.S. reduced tariffs by 10 percentage points and suspended a shipbuilding investigation [2]. This development helped alleviate market fears of a “new cold war” scenario and provided stability for global supply chains.

Simultaneously, the Federal Reserve delivered a “hawkish cut” on October 29, 2025, reducing rates by 25 bps to 3.75%-4.00% while emphasizing that further easing is “not a foregone conclusion” [3]. This cautious stance supported the US dollar to two-month highs and tempered market expectations for continued monetary policy accommodation [1].

The technology sector demonstrated remarkable resilience, with the Magnificent 7 companies reporting collective Q3 earnings growth of 26.7% on 17.6% higher revenue [4]. Amazon surged 12% pre-market on strong earnings driven by AI demand, while Alphabet gained 2.5% as Google Cloud revenue increased 33.5% and their AI app Gemini reached 650 million users [4].

However, the continuing US government shutdown, now approaching record duration with furloughs extended to late November, introduces significant uncertainty regarding economic data quality and fiscal policy implementation [5].

The convergence of these events reveals several critical market dynamics. First, the trade agreement’s timing coincides with strong corporate earnings, creating a supportive environment for risk assets despite monetary policy uncertainty. Second, the Fed’s hawkish guidance suggests that markets may need to adjust expectations for the pace of future rate cuts, potentially creating headwinds for rate-sensitive sectors.

Third, the government shutdown’s persistence raises concerns about the reliability of upcoming economic data releases, which could complicate investment decision-making. The shutdown’s impact on federal workers and government services may begin to manifest in consumer spending patterns and economic growth metrics [5].

Fourth, the technology sector’s outperformance, particularly in AI-related businesses, suggests sustained investor confidence in digital transformation trends despite broader macroeconomic uncertainties.

• Government Shutdown Impact
  : The prolonged shutdown may significantly affect economic data quality, consumer confidence, and fiscal policy implementation [5]. Historical patterns suggest extended shutdowns typically lead to reduced government spending and slower economic growth.
• Fed Policy Uncertainty
  : The divided FOMC and Powell’s hawkish guidance suggest potential market volatility around future rate decisions [3]. This development raises concerns about policy consistency that warrant careful consideration.
• Trade Deal Implementation Risk
  : While the agreement is positive, questions about enforcement and specific terms could create future market disruptions [2].

• Trade-Sensitive Sectors
  : Agriculture, technology, and manufacturing companies may benefit from the trade truce’s stabilization of US-China relations.
• Technology Leadership
  : Strong AI-driven earnings from major tech companies suggest continued investment opportunities in digital transformation and cloud computing.
• Currency Markets
  : The Fed’s hawkish stance combined with trade de-escalation may create favorable conditions for currency trading strategies.

Market performance on October 31, 2025, reflected these mixed dynamics, with the S&P 500 closing at 6,840.19 (-0.50%), NASDAQ at 23,724.96 (-0.91%), and Dow Jones at 47,562.88 (-0.10%) [0]. Individual Magnificent 7 stocks showed varied performance, with Amazon leading at +9.58% following strong earnings, while Microsoft declined 1.51% and Apple fell 0.38% [0].

Key monitoring factors include progress in government shutdown resolution, Fed communications regarding December policy, actual implementation of trade deal provisions, sustainability of AI-driven tech growth, and the reliability of economic data during the shutdown period [0].

The current market environment requires careful balancing of positive trade and earnings developments against policy uncertainty and valuation concerns, with particular attention to how the government shutdown may affect economic data quality and fiscal policy timing.