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.
- The US government shutdown remained unresolved
- Gold hit US$4,000 per oz
- Japan’s Nikkei 225 Index reached a new record
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 pulled £3.64 billion from equity funds during the third quarter of 2025”
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.
