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October 2025 Market Review

Hello and welcome to the October 2025 monthly market update. My name is David Aujla and I'm the lead portfolio manager for Invesco's Summit Multi-Asset fund ranges and its model portfolio service or MPS. Well, October saw another strong month for markets, particularly risk assets, as the so-called everything rally or more accurately almost everything rally continued. Strong earnings in many major markets, expectations for a Federal Reserve rate cut, and a brighter geopolitical outlook with President Trump and President XI agreeing a temporary truce of sorts helped to support market sentiments.

Earnings announcements were particularly strong amongst US technology stocks, especially those aligned to the AI theme or the so-called hyperscalers. They led the US market to a new all-time high towards the end of October. While US investors experienced a positive month in returns, the returns there did lag some other markets in local currency terms. It was actually those who were looking eastwards who saw the best tech-related performance in October. Japanese equities were the standout performers for the second month in a row, this time to a much greater magnitude, posting their biggest monthly gain seen in the last three decades. That meant double-digit or mid-double-digit returns for the month.

While strong corporate earnings amongst US tech firms and strong domestic Japanese earnings helped, so did expectations around Prime Minister Takaichi’s aggressive fiscal stimulus plans and a weaker yen, which further boosted sentiment for Japan's semiconductor and electronics stocks. Some emerging markets were also in on the action, benefiting from the positive sentiment around chips, with Korean equities up around 20% and Taiwanese equities up around 10%. But elsewhere in emerging markets, returns were more muted and in the mid-single digit territory, with the notable exception of Argentinian equities, not a huge part of most people's investment universe, which were up just over 60% for the month. Quite remarkable.

Closer to home, UK equities also performed well, but of course nowhere near that magnitude. Again, a meaningful driver were strong earnings. A few stocks across a range of industries, from retailers and banks to miners particularly stood out, the latter, of course, benefiting from rising commodity prices throughout the month of October. European equities were also positive but did lag the UK. Economic data and that improved trade sentiment, as I mentioned, were supportive, as was the ongoing policy stimulus, for example, Germany's infrastructure program and ongoing EU defense and energy spending initiatives.

On a global basis, in the equity world, large caps outperformed small caps. Growth as a style outperformed Value and the leading sectors were Technology, Consumer Discretionary, and Industrials, arguably reflecting the improved investor risk appetite. The laggard sector was real estate.

In the fixed income world, government bonds ended the month in positive territory in the US and Europe, but it was really the gilt market that was the standout performer. Ten-year yields fell markedly from around 4.7% to around 4.4% during the month. That was due to softer than anticipated inflation, but also partly due to better than expected wage growth. Around the world, almost all front-end yields are now lower than they were at the start of the year. But of course, persistent inflation in some economies does slightly undermine confidence in the diversification potential of bonds for some. Our view is that as part of a multi-asset portfolio, they are still important potential diversifiers.