Markets Face Early Sprint Forward — but Risks Remain

Date: October 23, 2025
Time: Mid-morning (Eastern)
Locations: U.S. & Canada

North American markets opened with modest gains this morning, showing signs of relief momentum but also continuing to wrestle with incoming geopolitical and trade risks. In the U.S., the S&P 500 is up around +0.4 %, the Nasdaq Composite up ~+0.6 %, while the Dow Jones Industrial Average is trading flat to slightly positive. In Canada, the S&P/TSX Composite futures are ticking higher thanks to early commodity strength. Reuters+2Morningstar+2

The early tone is hopeful: commodity-linked names are rallying, trade tropes appear temporarily easing, and the market is willing to bid for upside. But underlying risks (trade policy, credit, and small cap fragility) remain in play.

Key Market Drivers & Sentiment Shifts

Commodity Boost & Resource Rotation

One of the standout early drivers today: oil and metals have surged, supporting resource-heavy equities, especially in Canada. Oil jumped on the back of newly announced sanctions on Russian oil firms, while gold and base metals benefitted from supply-chain concerns. Reuters+1

In Canada, this has triggered a boost in resource and energy names, with TSX futures reflecting that early rebound. Reuters
Still, this move is uneven — not all commodity sectors are rising, and next week’s retail-sales data and global demand worries loom.

Policy & Trade Underpinnings

Trade and policy remain on the radar. In Canada, Prime Minister Mark Carney stated that Ottawa will not allow unfair U.S. access to Canadian markets if steel, aluminum and auto trade discussions collapse. Reuters
For investors, this raises the risk of renewed trade friction — something that tends to unsettle export-linked names and sentiment broadly.

Earnings Momentum vs Macro Blind Spots

The earnings season continues to underpin market optimism, with large-cap names reporting solid results. At the same time, macro data remains patchy (thanks partly to delays and reporting irregularities), which means corporate news is playing a heavier role than usual in driving moves. Morningstar

In this environment, big names are still likely to lead, but the question is whether broader participation (mid-caps, small-caps) can follow.

Sector Rotation & Market Dynamics

Technology & Growth

Growth and tech remain foundational to upside potential. With earnings still positive, large tech names are holding up nicely. But midsize names and speculative segments are still muted — the broader tape is not yet joining in full.

Resources, Energy & Materials

Resource and energy names are early beneficiaries today: the rally in oil and metals is lifting energy‐linked equities, especially in Canada. But caution persists: demand concerns, China soft-spots and supply risks all remain active.

Financials & Credit Signals

Financials are mixed. While credit stress appears to have weakened for the moment, banks and credit-sensitive names remain under watch. Any new headline around regional banks, debt or lending standards could rattle markets again.

Canada’s Market Angle

Because Canada is more exposed to resource, commodity and trade dynamics, the TSX is showing relative strength this morning as commodity prices firm. But inflation, rate outlooks and trade policy remain important watch-points. The statement from PM Carney about U.S. market access is also adding a geopolitical overlay to Canadian risk.

Small-Cap Stocks: Selective Recovery, Broad Caution

In the small-cap arena, the story remains cautious but with hints of opportunity.

Early Signs of Life

Some small-cap resource juniors and energy-related names are showing early strength, benefiting from stronger commodities.

A few small-tech names with strong balance sheets and clear catalysts are seeing meaningful interest.

The fact that large caps are leading means capital is available — the question is whether it flows down into smaller names.

Headwinds Remain

Liquidity is still thin in many small-cap names; bid/ask spreads are wider, and volatility higher.

Some small-cap names face funding/dilution risk or lack near-term catalysts. In this environment, those factors matter more.

Breadth remains narrow: if broad participation doesn’t pick up, small caps may lag again.

Strategy for Small Caps

For retail investors interested in small caps: this is a moment for selectivity not indiscriminate exposure. Prioritize names that combine:

Strong balance sheet or cash runway.

Clear upcoming catalyst (e.g., earnings, deal, regulatory move).

Relative outperformance versus peers (i.e., showing strength already).

Use this period of potential risk-on as a trader’s window, rather than full-scale buy-and-hold across the board.

Tactical Portfolio Recommendations

Given today’s environment — upside cues balanced by meaningful risks — here’s how we at SCN advise structuring exposure:

Core large-cap holdings: Remain overweight in high-quality growth names, tech, and companies with resilient earnings.

Cyclical/medium-cap exposure: Consider underweight or selective overweight in companies tied to commodity strength; rotate where fundamentals are strong.

Small-cap exposure: Keep moderate and focused. Avoid high-risk names without clear catalysts.

Diversify across geographies and sectors: Don’t lean too heavily on one region (especially those with trade risk).

Maintain dry powder: If a market pullback occurs, having cash to deploy into quality names is a tactical advantage.

Use risk management: In small caps and speculative names, tighter stops or defined exit criteria make sense.

What to Watch Forward

U.S. inflation and jobs data — will shape rate expectations and risk premium.

Global demand metrics — especially China’s data and commodity flows.

Trade and geopolitical developments — including U.S.-Canada, U.S.-China interactions.

Small-cap breadth — if small caps begin to outperform, it could mark a true risk‐on phase.

Funding/credit events — any surprise in regional banks or private credit markets could tip risk sentiment.

SCN Verdict

The October 23 session is offering a cautiously optimistic narrative — markets are willing to bid, especially in resource and large-cap names, but the broader backdrop remains textured with risk. For retail investors:

Stay proactive but defensive: you can participate, but don’t assume smooth sailing.

Be selective in smaller names: funnel capital where execution meets opportunity.

Stay alert to risk re‐emergence: trade policy, commodity softness, or credit jolts could derail momentum quickly.

We’ll keep tracking sector leadership, small-cap flow signals, and macro inflection points—SCN will flag standout names and caution lights as they emerge.

Stay nimble, stay informed, and remain strategic.