Many of the themes of the year continued into October, with President Trump pushing his trade war with China, and tech stocks and gold hitting new record highs. There were also some changes, with peace potentially breaking out in the middle east, central bankers pushing back on rate expectations and precious metals taking a downward turn. Overall, the macro news was positive, confirmed by the IMF (International Monetary Fund) raising their global growth forecast for 20251.

First the United States, where the economic confusion has been made worse by the continued government shutdown, which means that much of the headline economic data is not being published. Later than usual, the Bureau of Labor Statistics did manage to release the CPI (consumer price index) and the good news was that the rise in prices was slower than expected. There was no official data on the labour market, but there are alternative sources. The ADP jobs report2, although not always a reliable predictor of actual payroll numbers, did show that job growth appeared to be stabilising. Despite the lack of data, the Federal Reserve (‘Fed’) cut dollar rates to 4% as expected, but Chair Powell was more hawkish in his comments afterwards. He warned that another rate cut in December was “not a foregone conclusion, far from it”, despite rates markets pricing one in.

Figure 1: US job growth and consumer inflation

Source: Bloomberg, Bureau of Labor Statistics. Both inflation and job growth are 3 month rolling averages.

October was a positive month in Europe too. Eurozone inflation came in at 2.1%, and the preliminary estimate for the third quarter economic growth was 0.9%. Spain and France led the way, despite French failure to pass a new budget, although German growth flatlined again as the promised fiscal stimulus has yet to arrive. With inflation so close to the 2% target, and growth holding up, the ECB (European Central Bank) felt comfortable leaving euro rates at 2%. There was some relief in the United Kingdom, where inflation held at 3.8%, rather than rising as expected, raising hope that the BOE (Bank of England) can cut pound rates again soon. There was big news in Japan, where Sanae Takaishi became the country’s first female prime minister, and began her term with promises of policy stimulus and reform. However, the BOJ (Bank of Japan) is still resisting lifting the yen interest rate above 0.5%, despite inflation close to 3%. Lastly in China, where consumer prices are falling, the Trump-Xi summit brought a trade truce, and the communist party central committee published more plans to boost consumption and rebalance growth in the country.

Looking at markets, despite a bump from the Fed pushing back on interest rate expectations, bond yields still ended the month down from where they started, generating positive returns for global bond investors. There were brief concerns in credit markets when bankruptcies in the auto sector hit the October headlines, but with both First Brands (a parts maker) and Tricolor (a sub-prime lender) the cause seems to have been fraud and not an oncoming credit crisis. Credit spreads3 in public markets rose only slightly on the month. In currency markets, tougher talk from the Fed on US rates helped the dollar to appreciate versus the euro, pound and yen.

Figure 2: Silver price hits new record

Source: Bloomberg. Price is US dollars per troy ounce.

There was much more action in commodities in October. US attempts to sanction the purchase of Russian oil pushed the price of Brent crude back up over US$65 per barrel, while the calming in US-China trade tensions lifted copper prices past their previous all-time high, set last year. Gold powered above US$4,000 / oz for the first time ever, reaching US$4,350, while its precious partner, silver, grabbed the headlines by breaking above US$50 / oz. The previous record of US$49.45 had stood since 1980. Both gold and silver then fell back, by 9% and 14% respectively, yet still finished up on the month. Bitcoin, aka digital gold, was down on the month however, with a large unexplained drop happening around the time of Trump’s announcement of higher tariffs on China.

Moving to stock markets, October was another positive month. The US and Eurozone were neck and neck, with the UK ahead of both, but the stand-out market was Japan, up almost 8% on the prospect of stimulus from new Prime Minister Takaishi. At the sectoral level, technology was by far the strongest, while financials and consumer staples were the weakest, despite generally strong third quarter bank earnings. By the end of the month, we were more than halfway through the Q3 reporting season, and once again the results were well ahead of expectations in the US and Europe. The mega cap tech companies dominated the headlines again with their continued profit growth and their enormous investment commitments to AI (artificial intelligence). Their market size broke new records again, with Nvidia becoming the first ever US$5tn company and Apple becoming the second ever US$4tn company. Nvidia only became the first ever US$4tn company in July.

Lastly, there was a spate of enormous AI-related deals between tech companies, mostly centred around OpenAI, the maker of ChatGPT. Each time a company did a deal with OpenAI, no matter how fantastic the numbers, their stock price jumped sharply.

Figure 3: The OpenAI effect on Oracle and AMD

Source: Bloomberg. Based on price returns in US dollars.

1 The previous IMF growth forecast for 2025, set in July, was 3.0%. In October they revised it up to 3.2%.

2 The ADP Employment Report is a monthly, independent, high frequency measure of the private sector labour market in the United States.

3 The credit spread is the extra yield over the government bond yield that borrowers demand from issuers of lower credit quality.