UK
Cutting through the noise: despite continuing concerns over the possibility of an AI-fuelled stock market bubble, ongoing global trade tensions, and – closer to home – mounting speculation about possible measures in the UK government’s forthcoming Budget, UK equity markets ended October in positive territory. While the FTSE 250 Index climbed by 0.7%, the blue-chip FTSE 100 Index rose by 3.9% over the month and hit a new high, boosted by the impact of higher gold and oil prices alongside positive corporate earnings reports.
Stretched valuations: the Bank of England (BoE) warned that the risk of a “sharp market correction” has increased and that valuations appear stretched, particularly among technology firms focusing on AI. Elsewhere, the Financial Stability Board commented: “Valuations could now be at odds with the uncertain economic and geopolitical outlook, leaving markets susceptible to a disorderly adjustment.”
All eyes on the Budget: ahead of the Budget on 26 November, British Chambers of Commerce reported that UK businesses have become increasingly concerned over the possibility of tax increases and inflationary pressures. UK government borrowing rose to £20.2 billion in September – its highest September level since 2020 – driven higher by an increase in debt interest costs. The news triggered fresh speculation over possible strategies in the impending Budget.
Services sector stalls: the UK economy expanded by 0.1% during August. Activity in the manufacturing sector boosted growth; however, the services sector stagnated during the month. Meanwhile, growth in July was downgraded from no growth to a contraction of 0.1%. Nevertheless, the International Monetary Fund (IMF) expects the UK to deliver the second-fastest economic growth of any country in the G7 this year, outstripped only by the US. The annualised rate of inflation remained stable at 3.8% year on year in September; the IMF forecast UK inflation to average 3.4% this year and 2.5% next year – the highest rate among the G7 nations – and urged the BoE to be “very cautious in its easing trajectory.”
Consumer-driven profit warnings: a quarterly study from EY found sixty-four profit warnings from UK-listed companies in the third quarter. A record 47% were sparked by policy change or geopolitical uncertainty, while 19% cited weaker consumer confidence. Consumer-facing sectors saw an increase in profit warnings during the third quarter, and warnings in the media sector hit their highest level in two years.
Global
Complacency risks: speculation over the possibility that the US stock market is in an AI-fuelled bubble continued during October. The International Monetary Fund warned of market “complacency,” noting that concentration risk is now “substantially higher than during the dotcom bubble;” meanwhile, US AI technology company Nvidia became the first-ever company to achieve a market capitalisation of US$5 trillion. Global equity markets dipped in the middle of October amid concerns over bad and fraudulent loans in US regional banks, and the price of gold breached US$4,000 per ounce during the month.
Investors shrug off US shutdown: despite the unresolved US government shutdown, the Dow Jones Industrial Average Index rose by 2.5% over October. Stronger-than-expected third-quarter earnings announcements provided a boost for sentiment, with several leading technology companies – including Alphabet and Microsoft – posting robust results. Trade tensions between the US and China eased towards the end of the month following a meeting between Presidents Trump and Xi in South Korea.
Fed cuts again: having cut US interest rates in September, the Federal Reserve (Fed) continued to ease monetary policy, cutting the key federal funds rate by 0.25 percentage points to a range of 3.75% to 4% – its lowest level since November 2022. Looking ahead, however, Fed Chair Jerome Powell remained cautious, saying: “A further reduction in the policy rate at the December meeting is not a foregone conclusion – far from it. Policy is not on a preset course.”
ECB holds rates: the inflation outlook for the eurozone remains “broadly unchanged,” according to European Central Bank President Christine Lagarde, as central bank policymakers opted to leave the bloc’s interest rates unchanged. The eurozone’s annualised rate of inflation eased from 2.2% to 2.1% in October. The Dax Index rose by 0.3% over the month.
Japan hits new highs: Japan’s benchmark Nikkei 225 Index hit a new all-time high in October amid hopes that Sanae Takaichi, the country’s first female prime minister, will pursue a pro-business agenda. Over October as a whole, the Nikkei 225 Index surged by 16.6%.
Equity outflows: investors pulled £3.64 billion from equity funds during the third quarter of 2025 – the worst-ever three-month outflow. According to global funds network Calastone’s Fund Flow Index, every major equity sector experienced outflows apart from Europe; in comparison, bond and money market funds enjoyed inflows of £895 million.
As ever, if you have any questions regarding your investments, please do not hesitate to contact us by calling +44 (0) 7917 390 344 or emailing me at richardbrazier@culverfinancial.co.uk and we will be happy to talk to you.