Investors see healthy gains:
October has long been known as a challenging month in markets, mainly because it is the month that delivered some of history’s biggest crashes:
While October’s reputation for volatility is well known, the reality is that over the past 50 years, it actually tends to be one of the better months for equity returns. If we look at the US market, the average return in October is up just less than 1% which is stronger than September (usually negative) and not far off April or November — which are often the best months. (Source: Y Charts November 2025). Some investors think of October as the inflection point in the market year – the moment when we shake off the last of the summer glow and look ahead to the “Santa Rally.”
This year we saw a continuation of the cautious optimism that had begun to build in September, as global equities advanced on the back of easing inflation pressures, interest rate cuts, and another broadly positive corporate earnings season. Investor sentiment improved, but not without restraint – persistent geopolitical tensions, political uncertainty, and ongoing trade disputes kept volatility in play and reminded markets that the path forward remains uneven.
Source: Bloomberg
In the US, equities extended their winning streak, led once again by the technology-heavy Nasdaq, which climbed 6.7% in euro terms. The “Magnificent Seven” mega-cap stocks were at the forefront, delivering robust earnings that reassured investors about the resilience of U.S. corporate profitability. The broader S&P 500 followed suit, with a strong 4.3% gain.
Asian and emerging market equities also enjoyed a strong October, extending the positive momentum seen in recent month with gains of approximately 6%, reflecting a renewed sense of optimism across developing economies. China delivered modest gains, with the real growth coming from India and broader Emerging Asia – where markets were buoyed by a weaker U.S. dollar, positive trade talks between US and China, and an uptick in investor confidence.
Japan was another bright spot, with equities rallying strongly as the Nikkei reached a new record high. The appointment of Sanae Takaichi (known as “the Iron Lady” – yes, another one!) as Japan’s first female prime minister added a sense of political renewal and fuelled hopes for government stimulus packages and continued corporate reform. Japanese exporters were boosted by a weaker yen which enhances overseas earnings when converted back into local currency.
Within continental Europe, equities posted steadier gains, with gains of 2.2% over the month. Strength in autos and luxury goods provided much of the lift, helped by signs of improving demand from China and a modest pickup in global trade momentum. Political uncertainty held back French markets with their fifth prime ministerial appointment in two years. German economic growth was also underwhelming and inflation moving upwards caused some jitters.
In the UK, equity performance was mixed, with defensive sectors and energy names doing well while the continued weakness in the UK economy and stubbornly high inflation once again hitting domestically focused businesses.
Bond markets delivered broadly positive returns through the month, benefiting from interest rate cuts. Investors worried about government shutdown in the US as well as fears that future cuts may not be imminent.
Source: Bloomberg
In Europe, the main government bond markets posted modest gains as inflation continued to moderate, and growth concerns resurfaced. Bonds favour weaker economic news as this is more likely to lead to interest cuts in the future which boosts returns. UK gilts were the standout performers rallying 2.9% – their strongest monthly gain in almost two years.
Within corporate bond markets, returns were buoyed by positive company news and continued evidence of balance sheet strength.
As we approach year-end, the familiar themes continue to shape market sentiment: inflation continues to fall, global interest rates continuing downwards slowly, and the resilience of global growth amid persistent trade and geopolitical headwinds. October once again underscored how swiftly markets respond to encouraging economic news. We also saw that bouts of volatility are inevitable. At Fairstone, we remain committed to building well-diversified portfolios across regions and asset classes, working with the global leaders in fund management and investment research to deliver the very best client outcomes.
This publication was prepared by Bernard Walsh, Head of Investments for Fairstone Asset Management DAC trading as Fairstone & askpaul.
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Information as of the date of publication 10/11/2025
