With US markets now close to record levels, the positive outlook is largely reflected in valuations, leaving limited room for disappointment.
October’s tone was one of cautious optimism, with markets balancing solid earnings against upcoming central bank decisions and policy noise. Equities continued to push higher, driven by enthusiasm for AI-related companies, though regional trends began to diverge more meaningfully as we saw differing policy and cyclical strengths pull through.
UK
- UK equities (FTSE All-Share) rose +3.7% over the month, outperforming most developed peers and benefitting from a boost to overseas earnings with a depreciating pound.
- The annual inflation rate in the UK persisted at 3.8% in September, lower than expected but underpinned by wage growth and higher import costs from ongoing trade frictions.
- Official figures estimate UK GDP increased by just 0.1% in August, matching expectations but hampered by higher taxes, rates and soft oversees activity.
- Positively, UK services activity expanded more than expected in October, a number of firms noted “resilient customer demand” with lower borrowing costs positively impacting sentiment.
- Data from the Office for National Statistics (ONS) shows the government borrowed £99.8 billion between April and September 2025. A challenge for the upcoming Budget.
- Average house prices rose by 2.4% year-on-year in October, a slight rise on the 2.2% annual growth recorded in September, according to Nationwide, the UK’s largest building society.
Global
- US stocks hit their longest monthly winning streak in four years, pushed higher by positive sentiment around AI/tech names. The NASDAQ finished the month up +4.8% in USD terms.
- US gains were also supported by Q3 earnings: 320 companies (71% of market capitalisation) had reported by month end, with 82% having beaten consensus earnings expectations.
- Softer inflation gave the Federal Reserve (Fed) the confidence to deliver another 0.25% cut, bringing their target range to 3.75-4.00%.
- Japan’s TOPIX led performance in local currency terms as Sanae Takaichi became Japan’s first female Prime Minister, the market viewing her expansionary policies positively.
- In emerging markets, the overwhelming victory of President Javier Milei’s party in the Argentinian election propelled the MSCI Argentina Index to a remarkable +64% gain for the month.
- US-China trade tensions briefly rattled the market ahead of President Donald Trump’s trip to Asia, but rebounded quickly.
Fixed interest
- UK Gilts were a standout performer among developed bond markets in the month. The 10-year yield fell roughly 30bps, supported by a dovish shift from Governor Andrew Bailey.
- Emerging market debt outperformed in October (+2.2%), supported by a combination of higher real yields and a weaker dollar.
- In credit markets, global high yield (+0.2%) outperformed investment grade (-0.1%) over the month, as higher starting yields were sufficient to offset widening spreads in both markets.
Other
- Commodities posted a +2.9% gain over the month, though performance was mixed. Industrial (+4.8%) and precious metals (+3.5%) led the charge.
- Oil prices dropped to their lowest point since 2021, even dipping below levels seen during the trade war earlier this year. Brent crude ended the month at $65.
- In currency markets, the pound depreciated 2.2% against the US dollar and 0.5% versus the euro but gained 1.9% against the Japanese yen.
Against this backdrop, we continue to emphasise diversification beyond highly concentrated US markets, seeking regions and asset classes with more balanced risk-reward, while maintaining portfolio protection should inflation pressures from tariffs finally emerge.
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This article is for general information purposes only and does not constitute financial advice or a personal recommendation. Past performance is not a reliable indicator of future results. Investments can rise or fall in value, and you may receive less than you originally invested. Tax treatment depends on individual circumstances and may change in the future.
