General market update: October 2025

We have seen decent returns across various asset classes over the last quarter, building on what has been a strong year in general for stock markets, notwithstanding the Trump Tariffs ‘blip’ in early April, which spooked markets for a short while until the President rowed back on his initial hardline position. Equity markets overall have shown their ability to climb the “wall of worry” despite complex geopolitical tensions, trade policy developments and monetary policy uncertainty.

Equities – Japan leads the way

Japanese equities continued their strong run, returning over 20% in the last quarter, making it the top-performing region in 2025.

** 15th October 2025 – Sources: Yahoo Finance (see references at the bottom of the article).

UK stocks also delivered a positive return (+5.4% over the quarter) despite a mixed economic backdrop. The Bank of England (BoE) cut interest rates in August, but voting was much closer than expected, with the bank’s Governor Andrew Bailey concluding “it was a finely balanced decision.” It’s fair to say that further rate cuts are expected, but it’s a question of how quickly and by how much more. It therefore remains to be seen what the pace of future interest rate cuts will be.

Looking more broadly, there were positive returns generated by Europe (+5.8% over the quarter), and the US continues to touch new highs, with a 6.8% boost to US equities over the same period. Some commentators view US valuations as fairly expensive at these levels, especially given the fact that much of the growth has been driven by large tech stocks.

On a Year-to-Date basis, global equities have performed solidly. The effects of the tariff shocks earlier this year, for the moment at least, are a distant memory.

Tariffs

On the tariff front, there were a couple of developments. 

In late July, the EU & US agreed to a 15% tariff on most EU exports, which was higher than the previous average tariff but lower than the threatened 30% and includes some exemptions. The US and China extended their trade truce until November 10th, leading to a rally in Chinese equities. Conversely, the US imposed a crushing 50% tariff on Indian goods to punish the country for purchasing Russian oil.

More recently, on 10th October, we have seen the US President threaten to slap an extra 100% tariff on Chinese exports to the US. Based on past experience, this may prove to be ‘TACO’, a recently coined acronym for ‘Trump Always Chickens Out’. Unkind or not, there is some mileage in this, in that the President’s bargaining tactics often appear to be to go in heavy to then settle for something he had in mind all along.

The macro-economic environment has evolved over the year following the initial shock of tariffs.  US markets were briefly jolted down (and back!) by almost 20%, appears to be waning, and markets appear to be taking a less knee-jerk reaction to trade policy decisions made by President Trump.

Inflation, Government deficits and the Bond market.

While markets appear largely to be shrugging off tariff news, there are growing concerns that inflationary pressures are re-emerging at a time when the US economy is showing signs of slowing and the US government deficit levels continue to grow.

To add to this, political noise intensified after Trump’s contested firing of Federal Reserve (‘the Fed’) Governor Lisa Cook, fuelling debate on central bank independence. As a result, investors are demanding more compensation in higher interest rates for holding longer-dated US Treasuries, where the 30-year yield (or interest rate) that the US Government pays on this debt reached 5% in August. This is despite the Fed indicating a higher probability of future interest rate cuts. This has also led to growing demand for precious metals by both Central Banks and investors, resulting in the gold price hitting all-time highs.

Since the 5% peak, these 30-year yields had eased back somewhat to 4.6%, as of 15th October, which suggests inflationary fears in the US have calmed a little.

Increased interest in longer-term Government debt – as illustrated in the US – is still an issue, and it is becoming a global theme. 

Closer to home, as UK Chancellor Rachel Reeves mulls how to plug another potential £30bn ‘black hole’ in her November Budget. The cost of long-term UK Government borrowing also hit a 25+ year high as the ripple-effect spread, with the interest rate the UK pays on 30-year Gilts passing 5.5% in August. Like the US, this has eased slightly to 5.3% as of 15th October. The very small pullback suggests that ‘sticky’ inflation may be more of an issue for the UK compared to the US and other markets.

Summary

Despite various headwinds, returns across asset classes have been broadly positive so far this year, and it has been reassuring to see that diversification has helped investors.

However, looking forward, there are a few things to note. Valuations in the US remain elevated, and Trump’s tariff-related uncertainties could reappear even before their legality is addressed in the US Supreme Court in November.

As has been the case for some time, inflation, having ticked up a little, remains a concern. That said, the income yield generated from Bonds is still appealing, especially as other asset classes typically experience more heightened volatility in times of uncertainty.

While potential macroeconomic volatility and geopolitical uncertainty are issues to be mindful of, this can be mitigated to a degree by effective diversification. The ability to manage risk by adopting a broad-based approach will therefore continue to play an important role.

Legal & Medical Portfolio Positioning

By the end of Q3 2025, market sentiment had improved, prompting the Copia Risk Barometer to shift back into the Amber zone. This would ordinarily suggest that portfolios should return to their neutral equity range. 

However, following the June realignment, portfolios remain at the upper end of the Red range, which corresponds with the lower boundary of the Amber zone. It was therefore agreed to maintain equity allocations at this level – technically within the Amber zone, albeit at its lower edge – while making selective adjustments to seek upside opportunities within the existing equity exposure. 

For a reminder of the meaning of these ‘zones’, see here: Risk barometer – Copia Capital

For the reasons highlighted in the Equity commentary above regarding the elevated valuations in some US companies, we remain underweight in US stocks, and underweight in the technology sector in particular.

Whilst risk to the downside always remains, the portfolios are constructed to weather these risks whilst capturing the upside. Our portfolios continue to hold a good mix of different asset classes, taking a diversified approach to investing, to smooth the investment journey for investors.

• Equity holdings in the portfolios are designed to deliver long-term growth.
• Fixed income holdings focus on high-quality businesses that are close to maturity, which offer an attractive level of return and experience a lower level of risk.
• Alternatives such as infrastructure and commodities provide additional diversification benefits through the exposure to steady long-term cash flows, which reflect the effects of economic growth and inflation.

Remember, you can always speak to your financial adviser if you have any concerns or require further clarification.

This is not personal advice. If you are unsure of the suitability of any of your investments for your circumstances, please seek advice.

The value of your investments and any income they produce can fall as well as rise, so you could get back less than you invest. You should understand the risks of investing and that investing in funds isn’t right for everyone. You should only invest if the fund’s objectives are aligned with your own and there’s a specific need for the type of investment being made. You should understand the specific risks of a fund before you invest, and make sure any new investment forms part of a diversified portfolio.

Sources are embedded within this article and also shown below:

US Treasury yields investors look ahead to key inflation data
UK 30-year Gilt  
**Yahoo Finance FTSE 100 
** EURO STOXX 50 I (^STOXX50E) Historical Data – Yahoo Finance