Market Commentary – October 7, 2025

Market Overview

Global equity markets started Q4 on a strong note, driven by ongoing momentum in technology and AI-related sectors. U.S. indices touched fresh all-time highs as investors positioned for additional rate cuts amid a softer labor market. Treasury yields declined across the curve, reflecting increased expectations of monetary easing. Gold prices continued their impressive run, while crude remained under pressure.

 

Macro Developments

Recent data points suggest a gradual cooling in labor market conditions, reinforcing expectations that central banks—particularly the U.S. Federal Reserve—will continue to cut rates into year-end. However, the ongoing government shutdown has delayed the release of key employment and trade reports, shifting investor attention to alternative indicators such as:

• Private-sector payrolls (ADP report)
• Job openings and turnover (JOLTs data)
• State-level unemployment claims

These indicators collectively point toward a softer but stable employment environment, consistent with a “no-hiring, no-firing” scenario.

 

Policy Outlook

Rate cuts initiated last month have eased policy tensions between inflation and employment objectives. With headline inflation showing signs of moderation and wage pressures cooling, policymakers have room to support growth. Markets are currently pricing in two additional quarter-point cuts by year-end, which we consider justified if labor softening persists.

Looking ahead, our base case assumes:

• Resilient household consumption supported by real income growth.
• Sustained investment in AI-driven infrastructure—data centers, automation, and digital transformation projects—bolstering productivity and corporate earnings.

We maintain a pro-growth bias while acknowledging potential risks from fiscal uncertainty and tariff-related volatility.

 

Asset Class Highlights

Equities

• Overweight U.S. equities: The technology and AI segments continue to lead earnings growth. Strong corporate balance sheets and margin resilience support valuations.
• Neutral Europe: Structural reforms and industrial policy could lift long-term growth, though short-term challenges remain.
• Overweight Japan: Corporate governance reforms and moderate inflation dynamics support equity gains.
• Neutral Emerging Markets: Valuations are attractive, but geopolitical risks and trade uncertainty warrant selectivity.

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Fixed Income

• Neutral Treasuries: Long-term yields may edge lower as policy easing continues.
• Overweight U.S. agency MBS and short-term IG credit: Attractive yields and improved carry opportunities.
• Underweight long-term corporate credit: Tight spreads limit potential upside.
• Selective opportunities in inflation-linked bonds: Particularly where real yields remain elevated.

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Commodities & Alternatives

• Gold: Strong performance amid declining yields and geopolitical risk appetite.
• Oil: Prices remain subdued due to sluggish demand and high inventories.
• Private markets: Infrastructure equity and private credit offer stable returns as banks retrench from traditional lending.

 

Week Ahead

Date	Key Event	Market Focus
Oct 7	U.S. trade data (pending due to shutdown)	Trade balance and tariff impact
Oct 10	University of Michigan Consumer Sentiment	Household confidence and spending
Oct 10–17	China Total Social Financing	Credit pulse and economic recovery indicators

 

Strategic View – 6 to 12 Months

Theme	Outlook	Commentary
U.S. Equities	Overweight	AI investment and monetary easing underpin earnings growth
Global Bonds	Neutral	Yields remain elevated; duration adds diversification
Gold	Overweight	Effective hedge against rate volatility and policy risk
Emerging Markets	Selective	Prefer India and economies aligned with digital growth megatrends
Private Credit / Infrastructure	Overweight	Attractive yield premium and secular capital deployment themes

 

Bottom Line

We maintain a risk-on stance supported by continued rate cuts, resilient consumption, and capital spending in next-generation technologies. However, vigilance is warranted as missing government data and tariff dynamics introduce short-term uncertainty.
We recommend maintaining diversified exposure with tactical tilts toward AI-driven equities, short-duration credit, and real assets.

 

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Content Disclosure: The information here is general and educational. It is not a substitute for professional advice and does not constitute a recommendation. Forecasts and opinions are subject to change.