WealthSelect Responsible Active monthly commentary - Review of October 2025

US equities rose 4.9%, reaching multiple record highs. The rally was fuelled by strong earnings, a US Federal Reserve (the Fed) rate cut, and enthusiasm for artificial intelligence (AI) related technology with the Magnificent Seven, up 4.5%, dominating gains. Meanwhile, trade tensions eased following the meeting of US President Trump and Chinese President XI in South Korea at the end of the month. Elsewhere, there are growing signs of a divergence between the market and the real economy which was further pressured during the month with a government shutdown. Despite robust consumer spending, third-party economic data (used in the absence of official data) showed job losses as well as manufacturing activity declining for the eighth straight month.

European equities posted modest gains in October ending the month up by 3.0%, with value stocks outperforming growth. However, political instability in France and limited exposure to commodities and AI weighed on performance. Inflation in the eurozone eased to 2.1%, but economic growth remains weak. Meanwhile, the European Central Bank (ECB) held rates steady, awaiting clearer signs of either stronger growth or an increase in inflation.

In the UK, equities rose by 3.7%. A dovish Bank of England stance and falling gilt yields boosted sectors that are most sensitive to interest rate movements. Meanwhile, commodity strength and weaker sterling supported mining and energy stocks, but manufacturing and retail lagged. Fiscal concerns persisted, with government borrowing at pandemic-era highs, raising expectations for tax hikes or spending cuts by the Chancellor in the upcoming budget.

Emerging markets outperformed developed markets in October, boosted by strong performance from Korea and Taiwan’s technology and industrial sectors. Overall, emerging markets were up by 6.8%. The demand for AI as well as new trade deals also drove returns. At a regional level, Argentina saw a remarkable rally, ending the month up by 63.6%, after the victory of President Javier Milei’s party in the Argentinian mid-term elections. Elsewhere, Hungary outperformed along with Chile, Poland, Thailand, and the United Arab Emirates, and India benefited from festive spending and trade optimism. China and several Middle Eastern markets underperformed due to weaker energy prices and currency pressures.

In October, global government bonds were up 0.8% as yields fell across major regions. Gilts outperformed, ending the month up by 2.9%, supported by a more dovish stance from the Governor of the Bank of England, and softer inflation. Credit markets were mixed, with high yield outperforming investment grade, though credit spreads widened.