Executive Summary

  • The International Monetary Fund (IMF) upgraded its global growth forecast to 3.2% for 2025, but warned that the outlook remains fragile.
  • The Bank of England held its base rate at 4.0%, citing sticky inflation and the risk of a “bumpy landing”.
  • UK inflation remained steady at 3.8% in September, underscoring resistance to quicker easing.
  • The Federal Reserve remains expected to cut rates, but investors highlight risks from weak data and trade policy overhang.
  • Global equities mixed: U.S. buoyed by interest-rate expectations, UK & Europe supported by valuations, Asia and India stand out as growth engines.

Global Equities Context:

Equity markets moved unevenly in October. In the U.S., rate-cut expectations provided tailwinds but were tempered by sluggish economic data and policy uncertainty. UK and European stocks held up better thanks to relatively low valuations and a softer sterling/euro backdrop, which boosts exporter earnings. In Asia, Japan benefitted from corporate reforms and stable earnings, while India continued to stand out for its strong domestic demand and favourable demographics. Emerging markets overall saw selective strength, especially in commodity-linked names, but remain vulnerable to U.S. economic surprises and trade risk.

Tariffs, Trade-Policy & Central Bank Signals

The IMF’s latest report flagged the persistent risk that elevated tariffs and protectionist policy are still feeding through to investment and inflation, despite near-term growth resilience. The Fed continues to signal eventual easing, but the pace is likely to be gradual given labour-market fragility and the shadow of trade policy uncertainty. Meanwhile, U.S. corporate earnings are resilient but some CEOs are noting that tariff-driven input cost pressures and supply-chain disruptions are already denting margins.

UK holds its nerve amid inflation pressures

The Bank of England held its rate at 4.0% in October, after maintaining that level in September. Policymakers remain cautious given inflation stuck at 3.8% in September — unchanged from August. Food and housing costs remain key pressure points. BoE MPC member Alan Taylor warned of a “bumpy landing” ahead for the UK economy, citing trade policy shocks and softness in exports. The IMF forecast the UK will face the highest inflation among the G7 in 2025 and 2026 — further reinforcing BoE caution. Growth remains modest with the IMF projecting roughly 1.3% for 2025. With the Autumn Budget on the horizon, Chancellor Rachel Reeves faces a delicate trade-off between supporting growth and controlling inflation/fiscal risks.

Other Viewpoints

Cash

With base rate at 4.0% and no immediate cut, instant-access rates around 4.0–4.3% remain appealing. Fixed-term rates continue to drift lower. Given inflation persistence, locking in short-term (1–2 years) now may be prudent if rates begin to move downward.

Fixed Interests

UK gilt yields responded to the BoE’s still-tight stance; 10-year yields nudged higher, reflecting inflation risk and fiscal uncertainty. In the U.S., the Treasury yield curve remains under downward pressure as the market continues to price in at least one Fed cut later in the year. Credit spreads remain fairly tight, suggesting risk tolerance remains resilient.

Alternatives

Gold and silver maintained upward momentum — safe-haven flows remain relevant amid inflation and trade-policy jitters. Oil prices held steady amid supply disruptions and geopolitical tension. Copper continues to reflect tariff pressures and supply constraints — a reminder that inflation is only partially tamed despite central-bank activity.

UK Shares

The FTSE 100 remains supported by global revenue exposure and benefits from a weaker pound. Domestic-focused stocks and mid-caps, however, face headwinds from weak consumer demand and elevated inflation. On valuations, UK equities still trade at a discount to U.S. peers; for patient investors, that relative value may be increasingly attractive if inflation and rates begin to ease.

US Shares

The S&P 500 and Nasdaq remain near record levels, but investor caution is rising. The “Big 7” tech stocks continue to dominate, accounting for a high proportion of market capitalisation. While AI remains a structural tailwind, the mix of high valuations, trade/tariff risk and softer data introduces meaningful downside risk. We believe U.S. equities may continue to rise — but with lower margins of safety compared with other regions.

European Shares

European markets enjoyed relative strength as inflation decelerated and the euro remains undervalued. Export-oriented firms stand to benefit from global reflation and a weaker dollar. While corporate growth remains modest, the valuation support and currency tailwind make Europe a compelling alternative to the U.S. for global equity exposure.

Asian Shares

Japan continues to shine thanks to structural corporate reforms and improved earnings. China remains mixed; consumer strength is improving but manufacturing and export momentum remain weak. India remains the standout story: resilient domestic demand, under-penetrated markets and favourable demographics combine to deliver one of the highest growth potential profiles in global equities.

Emerging Markets

Emerging-market equities advanced modestly. Commodity-exporting nations benefited from higher prices and a weaker dollar. Latin-American flows improved, though Brazil remains a risk case given tariffs and political uncertainty. Asia-EMs remain targeted by foreign investors, but inflation and external-funding risks persist in some markets. Selectivity remains essential.

Highlights & Risks

Highlights:

  • Global growth forecast improved (IMF), but still modest — supports risk assets for now.
  • Rates in the U.K. held at 4.0%, providing some relief to fixed-income and gilt markets.
  • Safe-haven assets remain relevant: gold/silver and commodities tied to tariffs/supply constraints.
  • Valuation‐driven opportunities in UK/Europe and growth-driven potential in India/Asia.

Risks:

  • A court ruling or major policy shift on U.S. tariffs could instigate broad market repricing.
  • UK inflation remains high and disinflation process appears slow — exposes BoE and fiscal policy.
  • U.S. equity valuations remain stretched, especially in the tech/AI cluster — higher risk of correction.
  • Global manufacturing weakness, fading consumer momentum or trade disruption could drag earnings across regions