Market Update | Markets Hold Steady in the Dark

October proved a reminder of how fragile the policy and market narrative can become when fiscal turbulence (in this case, the federal shutdown) collides with monetary tightening. Many standard data releases were delayed or suspended, forcing both markets and central bankers to rely on fragmented signals. Nevertheless, the pieces we did see painted a picture of an economy gradually cooling, inflation persistent but not spiraling, and a labor market showing early signs of strain without a dramatic breakdown. Despite the lack of clarity and an uncertain outlook, markets leapt to new all-time highs during October, with the Dow Jones Industrial Average rising 2.6%, the S&P 500 gaining 2.3% and the NASDAQ soaring 4.7%. While international stocks continue to outperform U.S. stocks on the year, the MSCI EAFE only returned 1.2% during the month.

Equities began October with constructive momentum supported by resilient earnings, especially in growth and technology names, but gradually ceded ground as volatility rose and macro opacity persisted. By month’s end, major indices posted modest gains, buoyed by expectations of continued accommodation. In fixed income, yields mostly fell (with the steepest declines in the short-term maturities) as markets priced in incremental cuts and credit spreads compressed modestly, reflecting ongoing demand for yield in a lower-growth, cautious environment.

Headline inflation for September rose by 0.3% month over month and registered about 3.0% year over year, modestly below consensus estimates of roughly 0.4% monthly and 3.1% annually. Core inflation (excluding food and energy) increased 0.2% for the month, also landing around 3.0% on a 12-month basis, somewhat softer than forecasts. The slight miss relative to expectations suggests that inflation pressures may be stabilizing, but risks to upside remain, especially from components such as shelter, tariffs and input cost pass-through. Because many CPI inputs were imputed due to data disruptions, however, confidence in the underlying trend is muted. September’s Personal Consumption Expenditures (PCE), the Fed’s preferred inflation gauge, was not released as scheduled, adding to the murky picture caused by unavailable data.

On the labor front, the BLS’s official employment data releases were also postponed, so analysts leaned on private payroll surveys and regional indicators. The Chicago Fed put the unemployment rate around 4.3%, and anecdotal signals point to slowing hiring, especially in more cyclical or technology-sensitive sectors. Wages still appear sticky, and in the Fed’s Beige Book reports, many districts noted modest gains, increasing cost pressures and weakening hiring sentiment. Together, these signals suggest a labor market that is gradually softening, though not collapsing.

In recent weeks, a wave of high-profile layoffs across large corporations has sharpened concerns about the health of the labor market and whether structural change is accelerating the shift. Companies including Amazon (announcing tens of thousands of corporate and office cuts) and UPS (with reductions in both management and operations roles) have cited cost pressures, automation, AI restructuring and weaker demand as core drivers. In the media and entertainment sector, Paramount (post-merger restructuring) also announced significant downsizing. Many firms are citing tighter margins, the need to reallocate resources toward AI and efficiency improvements, and lower growth expectations in certain segments. These layoffs have ripple effects: for affected employees, severance and job searches become urgent; for prospective job seekers, competition could intensify in sectors trending toward contraction; and for the broader labor market, increased layoffs may foreshadow rising unemployment, weakening job tenure and downward pressure on wage growth. While not yet widespread enough to indicate mass disruption, these announced cuts increase downside risks to the Fed’s soft-landing path. Some analysts argue that the Fed’s awareness of this rising downside risk likely factored into the cumulative case for easing, especially given that the central bank has emphasized protecting labor market stability as part of its dual mandate.

Against this backdrop, the Federal Open Market Committee met October 28–29 and delivered a 25-basis point cut to bring the target range to 3.75%–4.00%. While expected by markets, the meeting exposed deeper divisions within the Committee and surprised some observers with the cautious tone of Chair Powell. The Fed acknowledged “uncertainty about the economic outlook remains elevated,” and announced that balance sheet runoff would end as of December 1. But Powell emphasized several times that a December rate cut is “far from” settled, noting that “there were strongly different views today” and that policy action will depend on evolving data. Dissenters included one member who preferred no change and another who advocated for a larger cut, highlighting internal tension between those prioritizing inflation risks and those more concerned about a deteriorating labor tone. Some investors expressed surprise at the Fed’s more reserved forward guidance, interpreting it as a warning that further easing is not guaranteed. Powell also flagged potential limitations of rate cuts in the current environment: he suggested parts of the labor market softening may reflect supply-side factors (e.g., declining participation or immigration) rather than pure demand weakness, meaning that lower rates may not fully counteract the downside pressures. Powell said the Fed will need to proceed carefully until it has a clearer view of the economy, noting "if you’re driving in the fog, you slow down." This nuanced positioning increases the burden on upcoming economic releases and reinforces the idea that December policy remains highly contingent.

Looking ahead, the resumption of full, reliable economic data is paramount. The return of official CPI, PCE, payrolls, retail sales and industrial production numbers will test whether inflation is indeed decelerating and whether the labor market is cooling in a sustainable way. A softer but orderly decline in inflation and wages could validate further easing, but upside surprises in price pressures or renewed resiliency in hiring may force a pause. The December Fed meeting now hinges on those data flows, and investors must treat it as a live decision rather than a foregone cut. Meanwhile, watch for announcements from corporate earnings calls, layoff trends, sector rotation and leading indicators (PMIs, purchasing managers, consumer spending). Given the rising risks and policy uncertainty, prudent investors should emphasize flexibility, quality exposure and guardrails in position sizing as 2025 transitions into a more discreet and data-driven phase.

Legal Update | IRS Releases 2026 Contribution and Catch-up Limits: Key Changes for Your Plan

The Internal Revenue Service (IRS) issued Notice 2025‑67 on November 13, 2025, providing key updates to the contribution limits, including the catch-up limits for calendar year 2026.

As you may be aware, the SECURE 2.0 Act made two major changes affecting catch-up contributions for retirement plans. First, SECURE 2.0 introduced a new increased catch-up “super catch-up” for individuals aged 60-63, allowing them to contribute a higher catch-up amount equal to the greater of $10,000 or 150% of the standard catch-up limit, indexed for inflation. The super catch-up provision went into effect beginning in 2025.  

Second, under SECURE 2.0, beginning in 2026 certain high paid individuals (HPI) — participants aged 50 or older who earned more than $145,000 (Roth catch-up threshold, as indexed for inflation) in FICA wages (W-2 Box 3 wages) in the prior year — must make all catch-up contributions on a Roth (after-tax) basis, eliminating the ability to make catch-up contributions on a pre-tax basis. The Roth catch-up requirement was originally scheduled to take effect in 2024; however, the IRS issued a two-year administrative delay, setting the new effective date for 2026. 

Below is a summary of some of the relevant changes for defined contribution plans — including the “super catch-up” limits and the Roth catch-up designation threshold — followed by key action items for employers and fiduciaries.

Summary of 2026 Limits

Effective for retirement plan contributions made in the calendar year 2026.

¹ This threshold was announced in Notice 2025-67. If the 2025 Box 3 W-2 wages are greater than $150,000, the HPI is subject to the Roth catch-up requirement for 2026.

Access the full list of 2026 COLAs affecting retirement plans.

Action Steps for Employers/Fiduciaries

• Update plan documents², election forms, payroll systems, participant communications and internal procedures to reflect the new 2026 limits.
• Confirm that your plan’s operational systems (payroll and record-keeping) can:
  
  
• Track participant age and elect-deferral limits including the increased catch-up amounts.
• Apply the correct catch-up limits (standard vs. super catch-up) for participants who will attain age 60-63 in 2026.

• If your plan offers a Roth catch-up contribution feature, ensure that participants whose prior-year wages exceed the $150,000 threshold are directed to make catch-up contributions as Roth. Review the rules regarding deemed Roth elections. 
• If the plan does not offer a Roth option, assess whether the plan’s eligibility or operational systems need to address the scenario where catch-up contributions may not be permissible for certain high-wage participants.
• Communicate to participants well in advance of the 2026 plan year about the changes. Indicate the new limits, age bands and the Roth catch-up requirement. Stress the importance of timely elections and accurate wage tracking.
• Coordinate with payroll and record-keeper to implement the look-back wages for the $150,000 threshold and ensure catch-up contributions for 2026 are treated correctly (pre-tax vs. Roth) beginning January 1, 2026.
• Review participant testing, nondiscrimination rules and top-heavy/415 limits in light of the increased limits and compensation thresholds.

² The deadline to amend plan documents for SECURE 2.0 is December 31, 2026