The Month in a Minute
Investors nerves were tested in October, with the US government shutdown, the continuation of tariff tensions between the US and China, and concerns around an “AI bubble”.
Despite this, further rate cuts from the Federal Reserve brought a welcome boost as markets continued to push higher in spite of the background noise. This resulted in a strong month for both Wealthify Original and Ethical Plans, which all outperformed their benchmarks.
Earnings season is in full swing as markets continue climbing, striking a balance between caution and optimism.
October began on uneasy footing as tensions between the US and China resurfaced.
China’s commerce ministry announced tighter controls on rare earth exports, citing national security considerations. In response, President Trump introduced tariffs of 100% on Chinese imports. ”Sentiment improved mid-month, however, as trade tensions eased. A surprise visit by Trump to China, coupled with another US interest rate cut, helped markets recover - and by the end of October, markets were back to near record highs.
Still, there were reminders not to get complacent.
Federal Reserve Chair, Jerome Powell, warned of a slowdown in the labour market and signalled that another rate cut in December was far from certain. He also addressed the ongoing US government shutdown – now the longest on record – cautioning: “When you’re driving in the dark, slow down.”
Elsewhere, markets that were less exposed to US-China friction performed strongly. Japan posted its best monthly gain since 1994, supported by a surge in technology shares and favourable election results. South Korea’s Kospi Index also continued its standout year, becoming the world’s top-performing major stock market thanks to booming demand for semiconductors.
Another key factor this month was that corporate earnings also provided support.
The S&P 500 recorded its fourth consecutive quarter of double-digit earnings growth, pushing valuations to their highest level in more than five years. Still, some investors are questioning whether enthusiasm around AI-related deals could be putting upward pressure on valuations in the tech sector. Across the pond, in the UK and Europe, markets edged higher to new peaks. However, inflation in the UK remained stuck at 3.8%, while unemployment crept up, pointing to a softer growth outlook.
Looking ahead, attention is turning to the November Budget, with government borrowing at its highest level since 2020 – and upcoming policy decisions are likely to play a key role in shaping the economic outlook one for the months ahead.
With investing, your capital is at risk, so the value of your investments can go down as well as up, which means you could get back less than you initially invested.
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