Investment Commentary - October 2025

October was a broadly positive month for markets, with developed market equities rising by +2.8% and government bonds also delivering gains in several regions. The month began with heightened geopolitical tensions, particularly around US–China trade relations, but sentiment improved markedly following late-stage negotiations that saw both sides agree to a one-year deal pausing steeper tariffs and easing export controls on rare earth minerals. Although no formal agreement was signed, the shift in tone helped markets recover from early volatility, including the largest one-day decline in US equities since April.

US inflation remained benign, with only moderate tariff pass-through and ongoing disinflation in services and rent. This gave the Federal Reserve confidence to deliver another 25bps rate cut, bringing the target range to 3.75–4.00%. However, Chair Powell signalled that further cuts were not guaranteed, prompting markets to reassess the path of future easing.

Equity markets responded positively to the steady macroeconomic backdrop. Growth stocks (+4.2%) outperformed value (+0.4%), supported by renewed enthusiasm for AI. Rate-sensitive sectors such as small caps (+0.2%) and listed real estate (-1.3%) lagged. Regionally, Japan’s Nikkei was the standout performer in local currency terms, returning 16.6%, buoyed by the appointment of Sanae Takaichi as Japan’s first female prime minister. Her commitment to expansionary fiscal and monetary policy — echoing “Abenomics” — was well received by markets, while a weaker Yen supported exporters. The MSCI Asia ex-Japan Index rose +4.5%, with Korea (+23%) and Taiwan (+10%) benefiting from trade optimism and strong semiconductor demand. In emerging markets, Argentinian stocks surged +64% following a decisive mid-term election win for President Milei’s party.

UK equities also had a strong month, with the FTSE All-Share up +3.7%. Falling Gilt yields and commodity strength supported domestic sectors, while a weaker Sterling boosted overseas earnings. The S&P 500 rose +2.3%, recovering from early declines thanks to trade progress and a robust earnings season. By month-end, 82% of reporting companies had beaten consensus expectations, with earnings coming in 6.4% above forecasts. Europe ex-UK underperformed, rising +2.1%, held back by political noise in France and limited exposure to commodities and AI-related tech.

Bond markets were mixed. The Bloomberg Global Aggregate Bond Index fell -0.3%, weighed down by credit and securitised segments. However, government bonds fared better. UK Gilts led developed markets (+2.9%), with 10-year yields falling 30bps following dovish signals from the Bank of England. Eurozone sovereigns also performed relatively well, with Italy (+1.2%) and Spain (+0.9%) benefiting from falling yields and tighter spreads. Japanese government bonds were the weakest, as markets priced in further policy normalisation and increased supply under Prime Minister Takaichi’s fiscal agenda.

Currency markets were relatively subdued in October, though the US Dollar strengthened modestly (+2.1%) against a basket of major currencies. Sterling softened over the month, boosting the value of overseas earnings for UK-listed companies, while the Yen continued to depreciate, supporting Japanese exporters.

Commodities had a mixed month overall. Industrial metals (+4.8%) and precious metals (+3.5%) led the gains, with gold and silver now up 52% and 69% year-to-date respectively. Energy was more mixed, with crude oil down approximately -2.5% over the month, reflecting softer demand expectations and elevated inventories.