1. Global growth & policy environment

• Global economic conditions remain complex going into Q4 2025: growth has shown unexpected resilience even as inflation, trade frictions and policy uncertainty persist.
• In the US, mixed signals: consumer/business sentiment softens, labour market shows signs of strain, yet investment and tech remain robust.
• Monetary policy: The Federal Reserve (Fed) is keeping a tightrope while markets expect cuts, the Fed emphasises inflation risks, diminishing the “rate cut is assured” narrative.
• Allocation-tilts: For October, asset manager views show equities upgraded to overweight, fixed income/bonds downgraded, and alternatives (incl. gold/precious metals) held as hedges.

Key themes

• Tech / AI remains a dominant driver of equity gains, especially in US/EM.
• Bond yields remain elevated; fixed income carry is low, making bonds less attractive relative to equities.
• Commodities (especially energy/oil) see supply-side pressures; gold remains elevated amid macro/geopolitical risk.

2. Equities

Performance snapshot October 2025

• In the US: S&P 500 up ~2.3% in October, Nasdaq Composite up ~4.7%, Dow Jones Industrial Average up ~2.5%.
• Markets ended the month on a strong note, aided by solid earnings (notably from major tech/AI firms) and optimism on trade/tension reduction.

Drivers & risks

• Upside: Resilient earnings, AI / tech adoption, improving U.S.–China trade dialogue.
• Risks: Elevated valuations (particularly U.S. tech), rate-cut uncertainty, concentration risk (top stocks form large share of indices).

Outlook

• Given the allocation commentary: equities remain the preferred risk asset for now; still, returns may rely more on earnings growth than valuation rerating.
• Regions: EM and Japan (via corporate reform/AI) cited as interesting areas.

3. Fixed Income

Market context

• Yields remain relatively high and credit spreads tight meaning returns for bonds are muted.
• Allocation view: Bonds downgraded to underweight in October, given persistent inflation risks and limited upside in yields.

Key metrics & insights

• The 10-year U.S. Treasury yield had declined during the month but remained at elevated levels relative to previous years, limiting the duration premium.
• Corporate bond spreads (e.g., U.S. investment grade) are near historical lows — reducing the margin of safety.

Outlook

• Fixed income is likely to serve a diversifier / hedge role rather than major return generator.
• Selectivity is important: Emerging markets local-currency debt, short-dated bonds may have better risk-reward.

4. Gold & Commodities

Gold

• Gold reached fresh highs amid safe-haven demand and inflation/monetary policy uncertainty.
• Despite the strong recent run, gold remains a hedge within portfolios given its low correlation with equities/bonds.

Crude Oil & Energy

• For crude oil (e.g., West Texas Intermediate or WTI), October saw bullish impulses: supply discipline from OPEC+, geopolitical risks, but tempered by demand concerns.
• The allocation commentary sees commodities as beneficial in inflation/real-asset hedges, though valuation in commodity super-cycles is a longer-term view.

5. Asset Allocation Implications & Strategy

Portfolio take-aways for Q4

• Risk assets (equities) remain favoured, but with caution: rely more on earnings growth than valuation expansion.
• Fixed income: lower conviction for strong returns focus on short duration, higher-quality, or select EM local debt.
• Gold/Alternatives: position as tail-risk hedge and real-asset inflation buffer.
• Commodities/Energy: Given supply constraints/geopolitics, these are a useful tactical tilt but subject to demand softness risk.

Key scenarios to monitor

• If the Fed cuts sooner than expected → risk assets get a boost.
• If inflation proves sticky and rates remain higher for longer → fixed income suffers, bonds repricing.
• If geopolitical or trade stresses increase → safe havens (gold) and energy may outperform.
• If growth falters (especially in China/EM) → equity returns could weaken, and commodities may stall.

6. Outlook & Risks

Positive catalysts ahead

• Strong earnings in tech/AI continuing into Q4 (especially after surprise results in October).
• Easing trade tensions and stabilising supply chains.
• A shift from rate-hike fear to rate-cut expectation, supporting valuation multiples.

Key risks

• Valuation stretch in equities (especially concentrated tech) increases downside risk.
• Sticky inflation or hawkish central bank commentary could derail bond markets and risk assets.
• Demand slump in major economies (US/China) could hurt commodities and earnings.
• Geopolitical shocks or supply chain disruptions—while could benefit energy/gold, harm global growth.