Resilient markets in spite of ongoing complexities in October 2025
Internationally, the U.S. government shutdown continued to inject volatility into both equity and fixed income markets, while SA remained stable
Introduction & Macro Overview
October 2025 was marked by ongoing complexity and cross-currents in the global investment landscape. The month began with markets still digesting the U.S. Federal Reserve’s September rate cut and the cautious, data-dependent stance communicated by policymakers. As October progressed, the Fed delivered another quarter-point rate cut, but officials emphasized that further easing was not guaranteed, reinforcing a sense of uncertainty about the future path of monetary policy. The persistent threat and eventual realization of a U.S. government shutdown continued to inject volatility into both equity and fixed income markets, disrupting the release of key economic data and raising concerns about the broader economic outlook.
Despite these headwinds, global equity markets demonstrated resilience. The S&P 500 and MSCI World indices posted further gains, supported by robust earnings from major technology companies and ongoing optimism surrounding artificial intelligence and cloud infrastructure. However, the debate over the sustainability of the AI-driven rally intensified, with some market participants warning of bubble-like conditions and others pointing to the sector’s strong fundamentals. The JSE continued its strong performance, benefiting from local factors and sector rotation as investors reassessed valuations and sought new market leaders beyond the dominant technology names.
Bond markets remained sensitive to shifting expectations for monetary policy. U.S. Treasury yields fluctuated throughout the month, with the 10-year yield ending October near 4.10%. The yield curve stayed relatively flat, reflecting uncertainty about the timing and scale of further rate cuts, as well as ongoing concerns about fiscal deficits and the supply of government bonds. Corporate bond issuance remained robust, as companies moved to secure funding ahead of potential market volatility.
Trade policy developments played a significant role in shaping market sentiment during October. A notable breakthrough occurred at the APEC summit in South Korea, where the United States and China reached a temporary truce. The U.S. agreed to reduce certain tariffs, particularly those related to Chinese imports, while China paused export controls on rare earth elements and resumed purchases of key U.S. agricultural products. This agreement provided a measure of relief to global markets, but underlying tensions and unresolved issues meant that trade policy remained a source of volatility. The European Union also considered new measures to secure critical raw materials, highlighting the ongoing complexity of global supply chains.
In South Africa, the economic environment remained stable through October. The South African Reserve Bank maintained its policy rate, reflecting a cautious approach in the face of well-contained inflation and a relatively stable rand. Local bonds continued to attract investor interest, with yields easing slightly as the outlook for inflation remained benign. The JSE extended its strong year-to-date performance, with sector rotation evident as investors looked beyond technology stocks for new opportunities. Improved weather conditions continued to support agricultural output, while mining and manufacturing maintained their momentum. However, structural challenges persisted, particularly in the formal non-agricultural sector, where employment continued to decline.
The inflation story in the US is still rearing its head as per the chart below. Current levels remain sticky above the Fed’s target of 2% and the market needs to see a continued move down to avoid an implied level closer to 3% being accepted. Adding to this dynamic is the Government shut down which will likely mean no October inflation level will be released in November leaving the market as well as the Fed flying a bit blind. The inflation story is something we are following very closely over the months ahead as it could be a further tailwind or a significant headwind to markets.
Asset Allocation
Our offshore asset allocation has seen a down weighting of equities as the team felt downside risk in the market was not being appropriately priced and that some risk should be taken off the table. While we agree with general market sentiment for further bullish upside we believe a lot of the good news has been priced in and momentum can change quickly. Portfolios are still exposed to the upside through direct holding and structured notes but we have introduced a greater hedge portion. Our Fixed Income allocation remains unchanged as we wait to see how inflation risks play out. Locally we remain with a ZAR hedge bias however we have recently been upweighting our SA exposure where appropriate. We also still think the SA bond market has a compelling offering. Overall, we have introduce a bit more caution as we think risks are being overlooked and it is critical that we seek to protect capital for clients. We can’t time markets but believe clients have benefitted from better than expected returns so are comfortable reducing risk.
Market Performance
October saw a good month for market. The S&P500 was up 2.27% for the month, while the MSCI World was up 1.94%. The JSE was up again producing 1.21% for September. As per the below chart the YTD performance for the S&P500 is up 16.3% (in USD) and the MSCI World is up 18.4% (in USD). Locally the JSE currently has a YTD performance of 29.9% (in ZAR).
Fixed Income
The fixed income landscape in October 2025 continued to reflect a delicate balance between opportunity and caution, shaped by evolving monetary policy, fiscal dynamics, and shifting investor sentiment. Following the U.S. Federal Reserve’s rate cut in September, the central bank delivered another quarter-point reduction in October. However, policymakers signaled a more guarded approach, emphasizing that future cuts would be highly data-dependent. This stance contributed to ongoing uncertainty in bond markets, with investors closely monitoring every economic release and central bank communication for clues about the path ahead.
U.S. Treasury yields remained volatile throughout the month, with the 10-year yield ending October near 4.10%. The yield curve stayed relatively flat, underscoring persistent doubts about the timing and magnitude of further easing. Fiscal concerns, including the impact of the U.S. government shutdown and debates over deficit spending, added another layer of complexity. Despite these uncertainties, corporate bond issuance remained robust as companies sought to lock in funding before any potential market turbulence. As outlined by the chart on the next page the market still anticipates a number of cuts through to May 2026.
Globally, central banks in major economies maintained a cautious tone. The European Central Bank and Bank of England held rates steady, with the latter facing renewed inflationary pressures. In emerging markets, policy responses varied, but the overall trend was one of prudence as authorities weighed the risks of inflation against the need to support growth.
In South Africa, the fixed income market benefited from a stable policy environment and a benign inflation outlook. The South African Reserve Bank kept its policy rate unchanged, reflecting confidence in the country’s inflation trajectory and the relative stability of the rand. Local bonds responded positively, with yields easing slightly as investors priced in a more accommodative stance. The SA 10-year government bond yield continued its gradual decline, reinforcing the attractiveness of local fixed income assets for both domestic and international investors.
Equities
The equities market in October 2025 continued to demonstrate remarkable resilience amid a backdrop of persistent macroeconomic uncertainty and shifting global dynamics. Building on the strong performance seen in September, global equity indices such as the S&P 500 and MSCI World posted further gains, buoyed by robust corporate earnings and ongoing optimism in the technology and artificial intelligence sectors. The JSE maintained its impressive year-to-date trajectory, supported by both local and global factors.
The US saw a stream of big company earnings which helped fill the void of economic data due to the Government Shutdown. The standout results came from Amazon and Google while Meta and Tesla disappointed amongst the Magnificent Seven. Generally, companies struck an upbeat tone however, the dominant theme remains AI and anything linked to the compute value chain.
Following their results on Thursday Amazon saw their share price jump nearly 10% after the cloud unit gave a very bullish sales outlook and eased the fears from the prior earnings cycle that they may be losing market share. While their actual growth rate may lag that of Google (34%) and Microsoft (40%) the size of their cloud unit is what dominates. To put it in perspective their $33bn cloud unit is more than double Google’s sitting at $15.16bn. The general sentiment on the street was this is a potential turning point for AWS as it is clear they aren’t losing market share as everybody tries to jump on the AI train.
At the forefront of the AI train is Nvidia which set another record in October as the first company to surpass $5 trillion in market capitalization. As outlined below their meteoric rise in value continues to gain momentum. All eyes will be on their results which is the last of the Magnificent Seven and are due to be released on the 19th of November.
Conclusion
In conclusion, while markets have shown remarkable resilience in the face of persistent uncertainty, the investment environment remains fraught with risks ranging from government shutdowns and shifting trade policies to sector-specific challenges and questions about the sustainability of recent rallies. Active management, proactive risk assessment, and ongoing dialogue with clients remain essential as we navigate the final quarter of 2025. The outlook is cautiously optimistic, but vigilance is warranted as new risks and opportunities continue to emerge.