Market review – October 2025

Global equities (company shares) and bonds rallied in October; the former driven by strong quarterly earnings and continued enthusiasm for technology stocks, while bond gains were notable at the long-end of the yield curve in the UK. The US Federal Reserve (Fed) cut interest rates by 25bps (0.25%) to the 3.75%-4% range, while the European Central Bank and Bank of Japan left interest rates unchanged.

Japan’s stockmarket surged following the election of Sanae Takaichi as Prime Minister, whose pro-growth stance was welcomed by investors. South Korea and Taiwan also outperformed, a reflection of the high weighting of technology stocks in both markets. In the US, artificial intelligence (AI) optimism continued to drive momentum, with Nvidia becoming the first company to reach a US$5 trillion market capitalisation.

However, whilst the S&P 500 Index (which tracks the 500 largest US stocks) rose, an equal-weighted S&P 500 Index (which gives each stock the same fixed weight of 0.20%) fell. This shows the “narrowness” of the market rally, meaning gains were mainly driven by a few large technology stocks rising on the back of AI-induced optimism. Markets elsewhere, including the UK, Europe and emerging markets also posted respectable gains.

Fixed income returns (returns from bonds or similar investments) were more measured, but still positive. In the UK, a better-than-expected inflation release and a softening labour market, led to an impressive rally in Gilts (UK government bonds). German Bunds (German government bonds) and US Treasuries (US government bonds) also logged gains.

After the US rate cut towards the end of October, Jerome Powell – the Chair of the Fed – said that a “further reduction in the policy rate at the December meeting is not a foregone conclusion, far from it”. The Fed’s more hawkish comments (“hawkish” is a term used when central banks focus on controlling inflation, often by keeping interest rates high) than expected provided support for the US-dollar, which was the top-performing G10 currency (the ten most heavily traded currencies in the world). Conversely, the Japanese yen was the worst-performing major currency, as investors dialed back the likelihood of rate hikes by the Bank of Japan.

Gold continued its rally for much of October, climbing well above US$4,000 per ounce, before falling back towards the end of the month, as some investors took profits. Copper prices rose again, driven by continued concerns over supply shortages. Oil declined, amid plentiful supply relative to global demand.