October saw mixed results for global markets. Global equities rose 2.3%, while global bonds slipped 0.3%. Performance was underpinned by signs of easing trade tensions between the U.S. and China and another solid US corporate earnings season so far. However, some notable defaults sparked more credit fears, weighing on global bond markets.

In the U.S., trade tensions eased modestly due to U.S.-China trade talks, with a tentative deal pausing new tariffs and easing export controls on rare earths, key for AI supply chains. However, the U.S. government shutdown continues to weigh negatively on overall sentiment. Also, U.S. inflation surprised to the downside, giving the Fed room to cut rates by 25bps to 3.75–4.00%, but signaled a possible pause ahead. Chair Powell noted that a December cut was not a foregone conclusion. Markets pared back expectations of further easing, which weighed on equity and bond markets. Despite this, U.S. growth continued its outperformance of value by 3.2% during October, due to renewed AI enthusiasm and corporate dynamism. 

Asian equities continued their robust performance despite weak macro data. The MSCI Asia ex-Japan Index rose 4.5% in October. Trade developments between the U.S. and China also helped Korea (+23%) and Taiwan (+10%), whose semiconductor sectors are heavily reliant on rare earth minerals and are deeply integrated into global AI and electronics manufacturing. In China, the Chinese Communist Party announced its 15th Five-Year Plan, emphasizing increased economic independence and intentions to boost local consumption. Markets responded with cautious optimism, but the economic outlook remains little changed. 

Credit market unease intensified this month following high-profile bankruptcies at U.S. auto parts supplier First Brands and car dealership Tricolor. While some banks faced losses, the impact was not widespread. However, these events heightened concerns among leveraged loan and private credit investors, given the surge in lending activity in recent years. Although these bankruptcies seem to be isolated incidents driven by fraud rather than broader systemic issues, they underscore the importance of due diligence to ensure high-quality investments.