Global Market Overview
Global equity markets extended their winning streak in October, supported by widespread optimism around the ongoing global monetary easing cycle, a resilient corporate earnings season, and easing inflationary pressures across major developed economies. The rally was broad but not uniform — led primarily by the United States and Japan, while China and parts of Europe showed more tempered gains as regional growth divergences widened.
In the United States, the Federal Reserve cut interest rates by a further 25 basis points, bringing the policy rate to a range of 3.75%–4%, marking the second consecutive reduction in as many meetings. Chair Jerome Powell acknowledged that inflation, currently at 3.0%, remains above target, but noted that downside risks to employment and business investment justify a continued easing bias. Notably, the Fed also confirmed that its quantitative tightening programme will conclude in December 2025 — a major inflection point in global liquidity conditions. The move effectively signals an end to one of the most aggressive tightening cycles in modern history, reinforcing investor expectations that policy rates in developed markets have peaked.
Despite the US government shutdown earlier in the month, market sentiment remained firm as earnings from key sectors — particularly technology, communication services, and financials — exceeded expectations. The S&P 500 advanced 2.27%, while the NASDAQ Composite surged 4.7%, fueled by robust quarterly results from semiconductor and cloud computing leaders. While mega-cap concentration remains elevated, investor appetite for artificial intelligence and automation themes continues to dominate global equity flows. The Dow Jones Industrial Average rose 2.51%, supported by industrial and energy names that benefited from easing input costs and resilient capital expenditure.
Inflation data released in mid-October reaffirmed that price pressures are easing steadily. Core CPI rose 0.2% month-on-month, while the headline rate slowed to 3.0% year-on-year, marginally below consensus forecasts. Energy prices ticked higher — with gasoline up 4.1% month-on-month — but shelter costs moderated, suggesting that the disinflation process remains intact.
Across the Atlantic, European markets gained modestly, buoyed by stable inflation and resilient services activity. The Eurozone’s GDP expanded by 0.2% in the third quarter, beating expectations and reflecting pockets of strength in France and Spain. Inflation edged up slightly to 2.2%, driven by higher service prices, while core inflation remained contained at 2.4%. The European Central Bank (ECB) opted to keep interest rates on hold at 2%, marking a third consecutive pause. President Christine Lagarde highlighted that the ECB was “in a good place” and that further policy moves would remain data-dependent, balancing still-firm services inflation against slowing manufacturing activity.
In the United Kingdom, the FTSE 100 advanced 3.92%, reaching an all-time high near 11,100 points. Inflation held steady at 3.8%, below the Bank of England’s forecast, as food inflation cooled to 4.5% and core inflation dipped to 3.5%. Weak economic activity, however, persisted — the UK manufacturing PMI fell to 46.2, marking its twelfth consecutive month of contraction, while services growth slowed to 50.8, barely above stagnation. The data reinforced expectations that the Bank of England will likely cut rates before the end of 2025.
In Asia, market dynamics were mixed. The Nikkei 225 surged 16.6%, supported by a weaker Yen, strong corporate earnings, and optimism around incoming Prime Minister Sanae Takaichi’s pro-growth fiscal agenda. The Bank of Japan maintained its benchmark rate at 0.5%, reiterating its commitment to policy support until wage growth is more entrenched. Inflation in Tokyo rose 2.8%, keeping pressure on the BOJ to normalise policy eventually, though most analysts now expect the first hike only in 2026.
Meanwhile, China’s economy delivered a mixed picture. GDP grew 4.8% year-on-year in the third quarter, ahead of expectations but slower than the prior quarter’s 5.2%. Industrial output climbed 6.5%, the fastest pace in three months, driven by high-tech manufacturing and infrastructure investment. Yet deflationary pressures persisted, with the CPI down 0.3% and PPI contracting 2.3%, highlighting weak domestic demand. The People’s Bank of China kept the 5-year loan prime rate steady at 3.5%, balancing the need for economic support with concerns over financial stability and ongoing trade tensions with the United States.
Elsewhere, India continued to shine within emerging markets. Its equity market rallied 4.9%, supported by robust earnings and foreign inflows. Structural reforms and manufacturing expansion remain the key tailwinds — with electronics and smartphone production rising exponentially over the past decade, and India’s demographic dividend reinforcing long-term growth potential.
Commodities were volatile. Gold oscillated around the USD 4,000/oz mark, ending the month 3.8% higher, while Brent crude oil slipped 2.9% as inventories rose. Industrial metals strengthened modestly, with iron ore up 2.6% and copper stabilising after earlier weakness. The US Dollar softened against a basket of major currencies, with the Euro and Yen strengthening, reflecting global capital rotation into higher-yielding emerging markets.
Overall, October confirmed that global monetary policy is shifting from restraint to support, while growth momentum remains intact. This environment favours equities, real assets, and selective emerging markets exposure, though investors must remain alert to valuation risks and geopolitical uncertainty.
South African Market Overview
On the local front, October marked another constructive month for South African assets, underpinned by macro stability, structural reform momentum, and global risk appetite. The FTSE/JSE All Share Index gained 1.2% month-on-month, extending its year-to-date rally to nearly 35%. The upward trajectory was driven by domestic-facing sectors, while resource stocks consolidated following a sustained multi-month advance.
Financials were the standout performers, with the Fini-15 Index surging 7.3%, buoyed by robust earnings and renewed confidence in South Africa’s financial system following its removal from the FATF grey list. Banks and insurers rallied sharply: Nedbank (+10.6%), Capitec (+10.3%), and Sanlam (+8.8%) each delivered strong returns, reflecting healthy balance sheets, improved margins, and stable funding conditions. The property sector also strengthened, with Growthpoint (+10.7%) benefitting from both lower yields and early signs of recovery in commercial activity.
Resource counters lagged, with the Resi-10 Index declining 5.5% as investors took profits. Impala Platinum (-15.5%), Valterra (-13.1%), and Harmony Gold (-7.5%) were among the weakest performers as profit-taking and metal-price volatility weighed on sentiment. Despite short-term weakness, gold prices ended higher for the month, underscoring their continued defensive appeal in a world of monetary debasement and fiscal expansion.
Inflation continued to trend favourably, with headline CPI at 3.4%, down from 4.4% a year earlier and averaging just 3.1% for 2025 to date. Food inflation, once a key concern, eased markedly as fruit, vegetable, and dairy prices fell, while transport inflation remained muted amid stable fuel costs. The Rand traded within a tight range of R17.20–R17.40/USD, supported by foreign inflows and declining US yields.
The S&P Global South Africa PMI improved slightly to 50.2, marking the fifth consecutive month of expansion. Output and new orders rose modestly, reflecting improving regional demand, while supply chains and delivery times continued to normalise. Input cost pressures remained muted, and output price inflation eased to a four-month low — a sign that business conditions are stabilising.
The removal of South Africa from the FATF grey list in late October represented a significant policy and credibility milestone. This long-awaited development, achieved after nearly two years of remediation efforts, was widely welcomed by investors and is expected to lower funding costs for local corporates, enhance banking-sector credibility, and gradually improve South Africa’s attractiveness to foreign capital. While not a panacea for the country’s structural challenges, it nonetheless strengthens the case for sustained inflows into South African bonds and equities in the quarters ahead.
In aggregate, the domestic market’s October performance reflected a healthy rotation from exporters and resource-linked counters to banks, insurers, and property — sectors that typically benefit from lower risk premiums and improving liquidity. With inflation trending toward the lower end of the SARB’s target band and policy credibility intact, South Africa remains well positioned to attract incremental capital inflows as global investors seek higher real yields in emerging markets.
Key Insights from Weekly Investment Team Meetings
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Global Monetary Easing: Central banks globally are entering a new phase of accommodation. The Fed’s second cut, coupled with the ECB’s continued pause, reinforces the long-term “Great Debasement Trade” narrative — a policy environment that supports real assets, equities, and commodities.
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Portfolio Structure: The barbell strategy remains in place — combining exposure to global technology and AI-linked growth stocks on one side and commodities, emerging market value, and SA resources on the other.
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South Africa’s Greylist Exit: The FATF removal was mostly priced in and does not warrant any short-term portfolio changes. It does, however, improve sentiment and could benefit the South African economy in the medium to long term.
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Commodity Outlook: Recent weakness in PGMs and gold miners was viewed as an opportunity to rebuild selective exposure; fundamentals remain intact amid constrained supply and resilient central bank demand.
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Emerging Market Focus: India continues to gain strategic attention as a long-term growth engine, offering diversification away from China’s maturing cycle.
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Risk Management: The team remains cautious on stretched US valuations and narrow market breadth but expects continued liquidity support to limit downside risk in Q4.
Portfolio Performance and Strategy
October reinforced the benefits of disciplined diversification. Offshore allocations to global technology, quality growth, and emerging market equities added meaningful performance, while domestic portfolios benefited from strong rebounds in banks and property. Bond holdings contributed positively as yields declined after the SARB reaffirmed its steady-policy stance and global investors continued to search for higher real yields in credible emerging markets.
Our portfolio strategy remains rooted in flexibility and valuation discipline. We continue to prefer short duration fixed income exposure over long bonds and maintain allocations to real assets and inflation hedges as part of the “Great Debasement Trade” thesis. Within equities, we maintain balanced exposure between global innovation themes and high quality South African value opportunities, ensuring adaptability should volatility re-emerge.
The Rand traded in a narrow range around R17.30/USD, supported by foreign inflows, improved perceptions of South Africa’s fiscal trajectory, and broader Dollar softness. Combined with contained inflation and credible monetary policy, this stability provides a constructive foundation for South African assets heading into 2026.
Conclusion
October was another encouraging month for investors as global and local markets benefited from supportive monetary conditions, resilient growth, and easing inflation. Globally, the shift toward monetary support continues to underpin risk appetite, while locally, South Africa’s regulatory progress and low inflation reinforce its appeal within emerging markets.
MitonOptimal portfolios remain selectively positioned to capture upside in both global and domestic markets, anchored by flexibility, diversification, and disciplined risk management. The combination of global liquidity tailwinds and South Africa’s improving macro narrative provides a fertile environment for balanced portfolio growth — yet vigilance remains essential as we enter the final stretch of 2025.
Source of all data: Morningstar, unless otherwise stated.
Jacques de Kock
Quantitative Analyst & Portfolio Manager
The content of this article is for information purposes only and does not constitute an offer or invitation to any person. The opinions expressed are subject to change and are not to be interpreted as investment advice. You should consult an adviser who will be able to provide appropriate advice that is based on your specific needs and circumstances. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable and given in good faith, but no representation is made as to their accuracy, completeness or correctness. MitonOptimal South Africa (Pty) Limited is an Authorised Financial Services Provider Licence No. 28160, regulated by the Financial Sector Conduct Authority (FSCA) – Registration No. 2005/032750/07.MitonOptimal Portfolio Management (Pty) Limited is an Authorised Financial Services Provider Licence No. 734, regulated by the FSCA – Registration No. 2000/000717/07.