October Market Update 2025

Posted by Bedrock on 3rd November 2025

October Market Update 03.11.2025

 
“In investing, what is comfortable is rarely profitable.” 

— Robert Arnott

Summary

• Global equities posted a seventh straight monthly gain in October, led by US tech and a surging NIKKEI.
• AI remains the dominant market driver, but concerns over valuations and concentration are rising.
• The US government shutdown continues to drag on and shows little sign of abating. The longer it lasts, the greater the impact it will have on US economic growth and sentiment.
• Political volatility in France and Japan adds to global market complexity.
• Despite its rally, the outlook for gold remains strong amid elevated geopolitical risk, inflation concerns, and central bank demand.

October was yet another solid month for financial assets…

The risk-on mood continued to prevail in a busy October as investor sentiment was buoyed by an easing of US-China trade tensions, a well telegraphed Fed cut, robust economic data, and a solid start to earnings season (particularly for big tech companies). Global equity indices clocked their seventh consecutive monthly gain, with all major regions posting positive results; in local currency terms, the S&P 500 and the STOXX 600 both rose over +2%, while the NIKKEI surged +17%. Meanwhile, bond yields drifted downwards and gold continued on its historic run, breaching the $4,000/oz mark.

The market rally continues to be concentrated in a narrow selection of tech companies

US equity market gains remained concentrated in a familiar handful of tech companies. Alphabet (+16%) and Amazon (+11%) both rose double digits as they delivered revenue beats off the back of surging demand for their cloud services, while Apple (+6%) rallied after better-than-expected iPhone sales. More pureplay AI names also saw substantial increases as the frenzy of AI-linked investment continued unabated, adding further fuel to the central narrative that has driven markets higher this year. OpenAI’s restructuring saw Microsoft take a 27% stake in the new for-profit entity in exchange for commitments to purchase $250bn of cloud services, Meta announced a $30bn bond issuance to fund its AI growth, and AMD struck a deal to supply chips to OpenAI (which sent AMD’s share price up over 30% on the day). At the center of all things AI is Nvidia, which has remarkably seen its share price double from the April lows and became the first company to hit a $5tn market cap! For context, the UK’s GDP in 2024 was ‘just’ $3.6tn… While sentiment is clearly bullish, these developments have served to exacerbate worries about extreme valuations and the sustainability of current AI capex. Nvidia’s CEO Jensen Huang – somewhat unsurprisingly – believes that we are not entering a bubble but a “virtuous cycle”, where investment improves the quality of AI, which encourages further adoption, which in turn fuels more investment… Only time will tell whether the current exuberance is justified or not, but we suggest that investors ensure their portfolios are suitably diversified regardless of what they believe. Equity performance was significantly less upbeat outside of these high octane tech companies and the equal-weighted S&P 500 index was actually down for the month. The banking sector was particularly weak, as Zions Bancorp and Western Alliance Bancorp – two relatively minor banks in the grand scheme of things – announced they had been exposed to fraudulent loans, which revived fears about instability in regional banks. Ultimately, this seems to be a relatively idiosyncratic story with little risk of contagion, but it does highlight that the market’s sensitivity to negative surprises.

“Only time will tell whether the current exuberance is justified or not, but we suggest that investors ensure their portfolios are suitably diversified regardless of what they believe.”

The ongoing US government shutdown is showing few signs of abating

Another overhang over non-AI linked, and more domestically focused, stocks has been the US government shutdown, which has now been ongoing since October 1^st when a highly partisan Congress first failed to pass a bill funding government services. Little progress has been made towards a resolution in the intervening month; the Trump administration has refused to make any concessions on healthcare (namely, reversing Medicaid cuts and extending Affordable Care Act subsidies) and the Dems have blocked 13 consecutive votes to re-open the government in response. Now at 34 days long, the shutdown is just one day shy of the record set during Trump’s last presidency and it looks well set to surpass this, with Polymarket odds of it extending past November 16^th at over 50%. However, public and political pressure to end the shutdown are intensifying, as hundreds of thousands of federal workers are missing paychecks, critical programs like SNAP (Supplemental Nutritional Assistance Program) and WIC (Special Supplemental Nutrition Program for Women, Infants, and Children) that support millions of low income Americans are running out of funding, and airport delays are worsening due to a shortage of air traffic controllers, who are having to work without pay. This is costly to both the economy – Deutsche Bank estimate that each week of a full government shutdown shaves c.0.2% off quarterly annualised GDP – and Trump’s popularity, no matter how much he tries to pin the blame on the other side. The President’s suggestion to end the stalemate by scrapping the 60 vote threshold needed to pass legislation (i.e., remove the need for Democrat support) has not been met with much enthusiasm, but it is likely that the urgency to come to an agreement picks up in the coming days as funding issues become more immediate. Until a resolution is reached, this will likely remain an overhang over domestic sentiment. The shutdown is also having the additional quirk of disrupting the usual flow of economic data, as government agencies responsible for collecting data on inflation, jobs, spending, and investment are suspended. With markets and policymakers highly focused on every data reading, this is only adding to the general feeling of unease.

“Deutsche Bank estimate that each week of a full government shutdown shaves c.0.2% off quarterly annualised GDP – and Trump’s popularity, no matter how much he tries to pin the blame on the other side.”

Political drama continues to unfold across the world

The US has not been the only country with politics making headlines. The parliamentary drama has continued to unfold in France, as new PM Sebastien Lecornu resigned and was subsequently re-appointed by Macron within the span of a week in early October. Lecornu has been given the unenviable task of passing a deficit reducing budget through a highly fragmented parliament (the difficulty of this task being the catalyst for his initial resignation), but he has managed to make more progress on his second attempt than his predecessors, narrowly surviving a no confidence vote by promising to delay Macron’s hard fought pension reforms until the next presidential election in 2027 in a major concession to the left. Concerns about the direction of the deficit remain elevated – as evidenced by Fitch and Moody’s downgrading the country’s credit rating – but we did see French bond spreads narrow modestly following the vote. Meanwhile in Japan, Sanae Takaichi unexpectedly won the LDP’s presidential election in early October and successfully formed a new governing coalition, securing her bid for Prime Minister. With a policy mix expected to favour fiscal expansion, Takaichi’s victory has catalysed a massive rally in Japanese equities, giving the NIKKEI its best month since 1990.

US-China trade tensions flared up and then receded over the month

US-China trade tensions looked to be flaring up again mid-month, as Trump aired the possibility of imposing an additional 100% tariff on Chinese goods alongside export controls on software. However, markets breathed a sigh of relief following what Trump described as a “12 out of 10” meeting with Xi in South Korea; China agreed to suspend export controls on rare earths and resume purchases of US soybeans, while the US committed to reducing its tariffs on Chinese goods linked to the production of fentanyl precursors (so called “fentanyl tariffs”) from 20% to 10% and implementing on a 1 year pause on the expanded blacklist of companies blocked from buying US technology goods.

We remain cautious about the outlook

With elevated political uncertainty, fragile trade truces, an increasingly narrow equity market, extreme valuations, and the ever-present threat of inflation, markets remain posed on a razor’s edge. We enter the final stretch of 2025 with the same defensive mindset that we have held for some time. We are cautiously constructive on risk assets given the solid fundamental backdrop, but we are also aware of the uncommonly good run we have had in recent times and are inclined towards diversifiers given the potential for the central driver of portfolio performance – which has undoubtedly been the AI trade – to lose momentum. We continue to like gold as a strategic allocation despite its incredible rally this year; we believe that the long-term drivers – namely elevated geopolitical risk, sustained central bank demand, and concerns about the currency debasement – remain firmly in tact.

“We continue to like gold as a strategic allocation despite its incredible rally this year; we believe that the long-term drivers – namely elevated geopolitical risk, sustained central bank demand, and concerns about the currency debasement – remain firmly in tact.”

If you have any questions about the themes discussed in this article, please do not hesitate to get in contact with us: info@bedrockgroup.ch