CIM Market Update November 2025

Shutdown, But Not Shaken

·  Global markets rose strongly in October despite political and trade uncertainty.

·  US–China tensions eased after leaders agreed on a one-year trade framework.

·  The Federal Reserve cut interest rates again and paused balance-sheet shrinking.

·  UK sovereign yields fell as bond markets rallied on dovish Bank of England signals.

·  Japanese and emerging Asian equities surged on improved trade sentiment and policy support.

·  In UK politics, Conservatives pledged to abolish stamp duty while Labour chose Lucy Powell as deputy leader.

Global markets delivered a strong performance in October, despite navigating a busy landscape of political, economic, and geopolitical developments. The month opened with the ongoing US government shutdown, which by late October was close to becoming the longest on record. The shutdown left several federal agencies operating with limited capacity, delaying key economic data releases and adding an element of uncertainty for investors.

At the same time, renewed tensions between the US and China resurfaced early in the month. Washington’s threat of 100% tariffs on a wide range of Chinese imports, combined with signals from Beijing that it could restrict exports of rare earth minerals, triggered the sharpest daily decline in global markets since April. Given China’s dominant position in both rare earth production and processing, the possibility of tighter controls raised concerns across technology, AI, and semiconductor supply chains.

However, markets recovered swiftly as the tone between the two countries softened. By the end of the month, Presidents Trump and Xi met to establish a one-year framework aimed at cooling tensions. Although not a formal trade agreement, the framework included partial tariff rollbacks and commitments to avoid escalation around rare earth export controls. This helped stabilise investor sentiment and reinforced the pattern seen several times this year: temporary trade-induced volatility followed by relatively rapid rebounds once diplomatic signals improved.

Monetary policy developments played an equally important role. The Federal Reserve cut interest rates by 0.25%, bringing the target range to 3.75 to 4.00%. This marked the second consecutive cut, driven by softening inflation, moderate evidence of tariff passthrough, and signs of cooling in the US labour market. While the rate decision was widely expected, Chair Jerome Powell struck a cautious tone, indicating that additional cuts were not guaranteed and that policymakers would assess the impact of recent moves before acting further. The Fed also confirmed that it will pause balance sheet reduction in December, offering additional liquidity support after three years of quantitative tightening.

Government bond markets responded favourably. UK gilt yields fell sharply, supported by dovish commentary from the Bank of England and improving inflation expectations. This decline in yields helped drive positive total returns for sovereign bonds more broadly. In equity markets, the UK also performed well, aided by resilient commodity prices and a softer sterling, which supported internationally exposed sectors.

Globally, several equity regions posted strong gains. Japanese markets were particularly notable, benefiting from renewed confidence in the country’s policy direction following the appointment of Sanae Takaichi as Japan’s first female prime minister. Her commitment to expansionary fiscal and monetary policy reinforced expectations of continued economic support. A weaker yen further boosted investor sentiment.

Emerging markets also enjoyed a strong month, with Korea and Taiwan leading the way as improved US–China dialogue eased concerns around semiconductor supply chains. These markets, heavily integrated into global technology manufacturing, responded positively to the prospect of reduced trade friction.

In the United States, equity markets advanced steadily. Strong third quarter earnings helped support performance, with more than 80% of reporting companies exceeding analyst expectations. This robust earnings season, combined with easing inflation and stabilising trade dynamics, helped lift the S&P 500 back towards previous highs.

European equities were more subdued by comparison, although the healthcare sector outperformed the broader regional benchmark. Investors responded favourably to greater clarity around the regulatory and pricing environment for major pharmaceutical companies, following recent policy announcements in the US.

Overall, October was a constructive month for both equities and government bonds. The combination of easing geopolitical tensions, softer inflation data, and supportive monetary policy contributed to broad gains across asset classes. However, with US equity valuations now back near historical highs, the margin for disappointment has narrowed. Economic conditions remain uneven across regions, and risks related to trade policy, inflation dynamics, and political developments may continue to influence market sentiment.

Against this backdrop, we maintain a balanced and diversified investment approach, emphasising exposure to a range of global markets and asset classes. We believe diversification remains essential at a time when the largest segments of global markets appear more fully valued. At the same time, we continue to monitor inflation pressures, particularly those linked to tariffs and supply chain adjustments, and maintain appropriate downside protections within portfolios.

 ws and monitor reactions, but for now, do have a good weekend.