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12th November 2025
Cappuccino Commentary
A relaxed read on the issues of the day
October Review
Global markets continued to rally in October. They extended gains over the three-month period despite some potential obstacles including the first US government shutdown since December 2018, uncertainties over inflation and tariffs, and worries about an AI stock bubble. Global equities posted gains of 5.5% over the month with strong results across both developed and emerging markets.
Within developed markets, Japan was the best performing region posting a gain of +6.7%. Sanae Takaichi became Japan’s first female prime minister, which was viewed as a market positive given her aims to pursue expansionary fiscal and monetary policies. The US was also a strong performer over the month with the S&P 500 returning 6.1%. This was on the back of strong corporate results, with over 80% of companies on the S&P 500 managing to report positive earnings surprises through the third quarter.
The rally was also heavily influenced by AI speculation which has been a dominant driver of economic activity both in the US and globally. This has particularly benefitted sectors in information technology (e.g. semiconductors, software, data centres) as well as utilities and energy companies that can help meet the future energy requirements for this technology. Throughout the month we did see a growing number of commentators and major institutions, including the Bank of England (BoE) and the International Monetary Fund (IMF), express concerns about an AI bubble and US tech-stock valuations (my colleague, Richard Warne wrote an article on this subject last week). The collapse of two regional US banks also raised alarm bells about the broader health of US private credit. In the end, October turned into a rather contradictory month where US markets posted positive returns despite an array of gloomy headlines.
The UK and Europe also provided solid results, returning 4.4% and 3.9% respectively. Asia and emerging markets finished the period on a particularly strong note although there was volatility along the way as Trump’s tariff threats in early October escalated to “massive increases” on Chinese goods and the potential cancellation of bilateral talks between the US and China. However, sentiment bounced back after both sides met and agreed a deal that would pause steeper US tariffs and limit China’s export controls on rare earths materials, a key component in the AI supply chain. This boosted markets like South Korea and Taiwan that are heavily reliant on these materials. As a result, the emerging markets indices rose 6.6% by the end of October.
Although returns across bond markets were once again subdued in comparison to equity markets, they were still positive providing a good ballast to portfolios. Rate cuts in the US and controlled inflation were major contributors. The US government shutdown could have stoked concerns, but these were generally overlooked by markets. In the UK, softer than expected inflation data in October coupled with expectations of further rate cuts helped boost Gilts over the month.
One ounce of Gold went past $4,000 for the first time as investors continued to seek out the safe haven asset. Towards the end of the month, gold did go through it’s biggest sell-off for twelve years, but that wasn’t enough to stop it entering November at $4,022 per ounce.
A strong period all round – it is not often we see the central bank cutting interest rates when the economy is not in recession, which is the scenario we’re in with the US. However, this could add fuel to the fire and provide tailwinds for markets later on. It appears the thought of mid-term elections next year, is front and central in Trump’s mind and he is looking to drive the US economy and the stock market to gain support. The risks are that this could contribute to inflation, especially twinned with the impact of the tariffs. So far markets have favoured the positives over the negatives. These are factors we continue to monitor, while looking to take advantage of select opportunities.
Please note:
For regulated financial advisers and investment professionals only. Copia does not provide financial advice, and the contents of this document should not be taken as such. The value of investments can increase and decrease, past performance and historical data cannot guarantee future success, and any references to individual stocks or asset classes are made purely for illustrative purposes.
The performance of each asset class is represented by certain Exchange Traded Funds and Passive Funds available to UK investors and expressed in GBP terms selected by Copia Capital Management to represent that asset class, as reported at last UK market close before the end of the calendar month. Reference to a particular asset class does not represent a recommendation to seek exposure to that asset class. This information is included for comparison purposes for the period stated but is not an indicator of potential maximum loss for other periods or in the future.