By Paul Levin, CFP®, ChFC®, RICP®
Stocks extended their rally last week as investors weighed persistent inflation, a fresh 2.8% Social Security COLA announcement, and expectations for another Federal Reserve rate cut. Confidence remains supported by strong corporate earnings and ongoing consumer spending, even as inflation holds above the Fed’s 2% target. With both stocks and bonds trending higher, markets continue to reflect optimism heading into the final months of 2025.
Here’s what retirees and investors need to know this week.
Market Wrap – Stocks Continue to Climb
Equity markets pushed higher again last week as investor optimism held firm.
- Dow Jones Industrial Average: +2.14%
- S&P 500: +2.10%
- Nasdaq Composite: +2.44%
- Russell 2000: +2.69%
- Foreign Stocks: +0.60%
- Emerging Markets: +1.71%
Bond prices edged higher as well. The Bloomberg U.S. Aggregate Bond Index rose 0.08% for the week and is now up 7.31% year-to-date. The 10-Year U.S. Treasury yield ended the week at 4.00%, steady near that key psychological level. The 10-Year Treasury began 2025 yielding 4.57%.
Social Security COLA for 2026
Roughly 75 million Americans receiving Social Security and Supplemental Security Income (SSI) benefits will see a 2.8% cost-of-living adjustment (COLA) starting in January. Over the past decade, the average annual increase has been 3.1%.
While any increase is welcome, retirees know that their living costs often differ from those of the general population. The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) — a measure that doesn’t fully reflect the expenses most retirees face, such as healthcare and housing.
There has been discussion in Washington about revising the inflation gauge used for Social Security benefits, but meaningful progress has been limited. A more retiree-focused measure would better align benefit increases with the realities of senior living expenses.
Inflation: Still Stubbornly Above Target
The Consumer Price Index (CPI) rose 3.0% year-over-year, with core inflation (excluding food and energy) up 0.2% last month. Inflation continues to run above the Federal Reserve’s 2% target, and that target remains difficult to achieve in a robust spending environment.
Given current economic activity and consumer resilience, it’s unlikely inflation will fall substantially unless the economy slows meaningfully — something few forecasters currently expect. The Federal Reserve meets this week and is widely expected to cut rates another 0.25%, with attention already turning to its final meeting of the year on December 10.
Among many affluent retirees, the sentiment seems to be: “Yes, prices are high — but we’ve earned the right to enjoy life.” That confidence, supported by strong markets, continues to fuel spending, which in turn keeps prices elevated.
As long as consumers remain willing to spend freely, there is little incentive for companies to reduce pricing pressure.
Corporate Earnings – The Engine of Market Strength
A frequent question I hear is: “With all the uncertainty in the world, why are markets still going higher?”
The short answer: profits.
Strong corporate earnings remain the dominant force behind the market’s continued rise. Lower borrowing costs — supported by a dovish Federal Reserve — improve profitability. Additionally, productivity growth is accelerating as artificial intelligence and automation help companies do more with less.
Many analysts are now projecting double-digit earnings growth for 2026. If realized, this may provide continued support for equity markets.
That said, it’s wise to remain grounded. Market risks often emerge from unexpected corners. Historically, recessions have followed periods when the Fed raised rates too aggressively during an overheated economy. Today, we’re in the opposite position — rates are falling amid expansion — but that doesn’t mean complacency is warranted.
Focus on maintaining a well-diversified, income-aligned portfolio designed around your individual goals and time horizon.1
Final Thoughts
Despite persistent inflation and an evolving rate environment, rising profits and investor confidence continue to drive markets upward. Retirees should remain focused on long-term planning, staying disciplined through short-term fluctuations.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
All market data sourced from The Wall Street Journal, October 24, 2025.
1There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
