Global Stock Market Performance of Selected Indexes Year-to-Date and Five-Year Returns (annualized) as of November 1, 2025 (Sources: Morningstar, Yahoo! Finance)
Country
Index
2023 24.23 21.50
2024 23.31 -12.44 19.50
2025 Nov. 1 YTD
United States
S&P 500
16.30 23.30 22.91 18.89 20.34
Mexico Canada
Morningstar Mexico PR Morningstar Canada PR
8.68 3.78
United Kingdom
FTSE 100
5.69
Germany
DAX
20.31 14.61 28.24
18.85 -1.52 19.22
France Japan
Morningstar France PR
9.74
Nikkei 225
31.37
Australia
Morningstar Australia PR
8.18
7.23
8.73
China
SSE Composite
-3.70
12.67
17.99
Interest Rates and the Federal Reserve The Federal Reserve is the key driver of short-term interest rates in the United States economy through its monetary policy, which is implemented primarily through targeting the federal (fed) funds rate. The fed funds rate is the overnight borrowing rate between banks, a very short-term interest rate that when changed, typically has a rippling effect throughout financial markets. Changes in the fed funds rate generally affect savings and borrowing rates, although the Federal Reserve’s monetary policy is not the only factor that influences savings and borrowing rates. The Federal Reserve influences the fed funds rate primarily by controlling the money supply in the United States. The amount of money circulating in the economy has an impact on interest rates and credit conditions - more money, lower interest rates; less money, higher interest rates. The fed funds rate is increased when the Federal Reserve decreases the money supply by selling Treasury securities (technically called Open Market Operations). The fed funds rate is decreased when the Federal Reserve increases the money supply by buying Treasury securities. Generally, the fed funds rate is lowered to increase economic growth and consequently employment, and raised to reduce inflationary pressures. The Federal Reserve sets the target for the fed funds rate at a level consistent with its dual mandate of achieving maximum employment and price stability. 2025 has been a challenging year for the Federal Reserve, as the uncertainties of the impact of tariffs on inflation contrasted with a softening labor market created a dichotomy for the direction of Federal Reserve policy. In September, in response to the softening labor market, the Federal Reserve implemented its first rate cut of the year, lowering the fed funds rate by 25 basis points to a target range of 4.00-4.25. Another 25-basis point cut occurred in late October, lowering the fed funds target range to 3.75-4.00. The CME FedWatch Tool provides insight as to what the financial markets expect for interest rates based on fed funds futures pricing. As of mid-November, the financial markets anticipated another rate cut when the Federal Reserve Open Market Committee meets in December, but the Federal Reserve has indicated another rate cut is not a foregone conclusion. Ultimately, the Federal Reserve will balance the dichotomy of a softening labor market with increased tariff inflation when setting the fed funds rate at a level consistent with its dual mandate. Changes in the fed funds rate have a rippling effect through financial markets, particularly short-term interest rates. The graph below shows the relationship between the effective federal funds rate (blue line) and three short-term interest rates: the bank prime rate (green line), the commercial bank rate on credit card plans (orange line) and the 3-Month Treasury Bill Yield (black line) from October 2016 through October 2025. The prime rate is the interest rate that U.S. commercial banks charge their most creditworthy customers for loans. The rate serves as a base rate for various types of loans, including personal loans, small business loans, and credit cards. Treasury bills are short- term securities with maturities ranging from 4 to 52 weeks and are used to help the federal government finance budget deficits.
10
Center for Business and Economic Insight
Made with FlippingBook Learn more on our blog