Market insights, October 2025
Equity markets surged ahead in October, as AI optimism gained further momentum, and hints of a reconciliation between the world’s two largest economies also offered hope for smoother trading relations ahead.
This came despite some difficult politics in the US, growing chatter of a market bubble, and investor demand for safe-haven assets pushing gold and silver prices to record highs. In the end it was a case of ‘business-as-usual' for the equity market rally that began in 2022 as stocks shrugged off a degree of choppy conditions mid-month.
Sanctions, shutdowns and Sanae
In the US, a prolonged government shutdown, as well as the widespread ‘No Kings’ protests, highlighted some of the domestic challenges at play.
In its penultimate meeting of the year, the US Federal Reserve opted to cut rates by 25 basis points, reducing the fed funds range to 3.75% to 4%. Amid signs that tariffs haven’t stoked prices as initially feared, the central bank felt it had room to make its second cut of the year.
On the global stage, Trump’s successful mediation in the Israel-Hamas conflict brought a welcome, albeit fragile, reprieve to a catastrophic two-year war. His efforts to shore up Argentinian leader, Javier Milei, also paid off. In the run-up to the country’s mid-term elections, investors had been so nervous about Argentina’s ability to re-pay bond investors, that the US intervened with a $40 billion (USD) loan commitment[1]. In the end, Milei’s win was comprehensive and gives him licence to pursue his reform agenda.
In parallel, Trump’s inability to bring the Russia-Ukraine war to an end saw him run out of patience with President Putin. In a sharp escalation, the White House announced imminent sanctions on Russia’s two largest oil companies, Rosneft and Lukoil. Crude oil prices rose in anticipation of falling global supply.
In other news, Japan elected its first ever female Prime Minister, Sanae Takaichi. Known for being a hardline conservative, she becomes the country’s 104th Prime Minister[2]. Her win triggered a rally for Japanese stocks, with investors in the so-called ‘Takaichi-trade’ riding a wave of optimism for political stability and structural reform.
Maple grief
In one of the final acts of the month, the US increased trade tariffs on Canada by 10% and cancelled planned trade talks[3].The move undid recent progress by Canadian Prime Minister Carney to rebuild neighbourly relations in the aftermath of the Trudeau era, where political fireworks flew as Trump’s cordiality blew hot and cold.
The latest spat followed a decision by the Ontario government to air an anti-tariff TV advert during a baseball game. Trump was incensed by the critique, as well as the ad’s use of a voice-over from former US President Ronald Reagan.
The flare up was an acute reminder that trade conditions with the world’s biggest economy are vulnerable to the temperament of one man.
US-China relief
Conversely, a potential thawing of frosty relations betweenthe US and China suggested that Trump was close to securing his most coveted trade deal so far.
Ahead of the first meeting since 2019 between Trump and Xi Jinping, the White House suggested that a framework for future trade agreements had been agreed between the two economic superpowers.
The positive news boosted stock markets in the US, Japan, and South Korea.
Inflation’s sharp teeth
In NZ, we saw the news that annual inflation had risen to 3%[4].The uptick was attributed to higher electricity prices and council rates, amongst other things. Although the development was widely anticipated, and is not expected to last long, NZ’s above-target inflation lays the path to another OCR cut before the end of the year.
Over in the UK, the most-recent inflation data highlighted how price pressures continue to bite down on the economy. Confirmation that inflation had held steady at 3.8% in September[5] triggered a gilt (UK government bond) rally. Investors were betting on the Bank of England having little choice but to cut its base rate when it reconvenes on 6 November.
All eyes will soon turn to the forthcoming Autumn Budget in which Chancellor Rachel Reeves is widely expected to launch another round of punishing tax rises to plug a £30 billion hole in public finances.
At a corporate level
One of the biggest stories of the month saw widespread disruption breakout around the world, thanks to IT problems at Amazon’s AWS – a global leader in cloud computing services.
A host of household names, including Starbucks and ChatGPT, reported significant connectivity issues. The event served as a reminder of the reliance on technology in today’s corporate world, as well as the vulnerability of companies to IT glitches.
Later in the month, Amazon announced 14,000 job losses[6] as part of its latest restructuring drive. Some commentators pinned the blame on AI and warned that it was a sign of things to come as more companies move to automate roles.
Meanwhile US trade tariffs, coupled with Republican energy policies, came home to bite Tesla. The Mag-7 stock reported a Q3 adjusted net income (US $1.8 billion) that fell short of analyst expectations. Tesla blamed tariffs for adding in excess of US $400 million to costs in both its core car and battery energy storage businesses[7].
The car maker’s profits also took a hit from its recent inability to sell emissions credits, thanks to a US government policy change that reduces the incentive for polluting competitors to buy the Tesla’s credits.
Gold’s AU-ra wanes
At an asset class level, rising investor appetite for portfolio protection propelled the price of gold, and silver, higher in October.
Murmurings of an imminent AI-linked stock market correction have been a major driving force behind the popularity of precious metals, as well as inflation concerns related to fiscal sustainability for many governments.
At some stage, investor exuberance always moderates, and so it transpired in the final week of October when the price of gold dipped over 6% in one session, falling back below the $4,000 mark (per troy ounce)[8].
Part of that depreciation was attributed to falling demand from India - the world’s second biggest consumer - in the aftermath of Diwali. However, most of it can be seen as a healthy correction of a market that was running hot.
Gold prices remain high by historical standards but for now, a dose of reality appears to have kicked in amongst buyers, arguably overdue given this year’s significant rally.
Final thoughts
In October, talk of a potential market correction continued to run parallel with robust equity markets, especially in the US where AI fever still holds significant sway.
For those investors with diversified holdings and a long-term perspective, there is no need to panic about what may or may not happen in stock markets in the near term. Corrections are a normal part of an investment journey, and while the larger ones can feel unsettling, it’s important to stay in the market and capture the eventual bounce back.
Improved trade relations between the US and China should bode well for the broader global economy. As should falling interest rates – the path to lower rates may be a bit longer than many people had envisaged, but central banks in key economies are ultimately now heading down it. The latest corporate earnings season in the US is also shaping up to be another good one.
The key message? Stay invested and let diversification to doits job. By participating in markets and accepting a degree of risk in the process, you have an excellent chance to grow your wealth over the long term.
[1]Source: https://www.nbcnews.com/business/economy/us-support-argentina-hit-40-billion-rcna237852
[2]Source: https://www.msn.com/en-ca/news/other/who-is-sanae-takaichi-japan-s-iron-lady-takes-over-as-first-woman-prime-minister/ar-AA1NPXVB?ocid=BingNewsSerp
[3]Source: https://www.msn.com/en-us/money/markets/trump-sets-10-hike-in-tariffs-on-canada-after-ad-airs-during-world-series/ar-AA1PbMjQ?ocid=BingNewsSerp
[4]Source: https://www.newstalkzb.co.nz/news/business/inflation-hits-3-as-consumers-suffer-largest-power-price-spike-since-1989/
[5]Source: https://www.bbc.co.uk/news/live/cvgv1071417t
[6]Source: https://www.ft.com/content/106a0ea2-5f76-47c3-b1d6-c6b425b556fc
[7]Source: https://www.ft.com/content/8476bce8-fa5c-4476-bfff-e7cc742a105a
[8]Source: https://www.reuters.com/world/china/gold-dips-stronger-dollar-us-china-trade-deal-hopes-2025-10-27/
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