Trust Investment Management
October delivered a seasonal mix of tricks and treats for investors, as markets showed surprising resilience amid geopolitical tensions and shifting monetary policy. Equities pushed higher despite elevated volatility driven by ongoing U.S.–China tensions. Emerging Markets led the rally, climbing 4.18% in October and pushing year-to-date returns to a remarkable 32.86%. Strong corporate earnings and renewed investor optimism fueled the surge.
U.S. Large-Cap Stocks gained 2.34%, bringing 2025 returns to 17.52%. The advance was supported by upbeat earnings, another Federal Reserve rate cut, and continued enthusiasm around AI-related companies. However, the rapid rise in valuations has sparked debate about whether an AI bubble is forming.
Fixed Income posted mixed results. Domestic bonds delivered positive returns, benefiting from easing inflation concerns and declining yields. Conversely, international bonds lagged, as currency headwinds from a strengthening U.S. dollar offset local market gains, resulting in negative returns for unhedged investors.
As anticipated, the Federal Reserve lowered interest rates by 25 basis points in October. Although investors largely expected another cut in December, their confidence was shaken by Fed Chair Jerome Powell’s remarks, suggesting that further rate reductions are far from a “foregone conclusion.” His comments rippled through financial markets, causing the implied probability of a December rate cut to drop to 68%, according to the CME Group’s FedWatch Tool.
The International Monetary Fund (IMF) recently released an updated World Economic Outlook, modestly raising its near-term global growth forecast while cautioning that risks remain skewed to the downside. As markets digest this outlook, investors will be closely monitoring inflation trends and labor market data to gauge the durability of the current bull market.
Concerns around elevated valuations and narrow market leadership continue to build, suggesting that volatility may increase in the months ahead. While a market pullback would not be unexpected, historical patterns reinforce the value of maintaining a long-term investment perspective, which is often the most effective path through periods of uncertainty.
