At GSI, this is the season of questions: “Have we hit peak rates?” “What now for bonds?” “Is AI still investable—or overbought?” These are the right questions—and October’s market data offers some helpful answers.
October 2025 – A Market Cooling but Not Collapsing
- UK CPI:
Inflation fell to 3.2%, the lowest since February 2022, continuing a steady downtrend from last year’s highs. Services inflation remains elevated, but energy and goods prices have softened. - Bank of England Base Rate:
4.00%, following two 25bps cuts over the summer.
The BoE is adopting a “wait and see” stance with markets now pricing in one further cut in Q1 2026. - FTSE 100:
Ranged between 7,500–7,650 through October. Domestic cyclicals outperformed, while rate-sensitive real estate and utilities lagged. - US & Global Equities:
The S&P 500 is trading near record highs, supported by resilient earnings and continued AI investment hype, especially in tech infrastructure stocks like Nvidia and Western Digital.
Investment Style Rotation: From Caution to Conviction?
After nearly two years of high-rate, low-growth investment thinking, we’re seeing a stylistic pivot. Here’s how the market winds are shifting:
From: Value and Low Volatility
The stalwart trades of 2023—banks, dividend payers, short-duration bonds—are now giving way.
To: Quality Growth and High Beta
Investors are gravitating back to companies with robust margins, structural tailwinds (e.g. AI, clean energy), and strong earnings visibility. Growth is back—but it’s selective.
This aligns well with GSI’s Compass portfolios, which continue to emphasise long-term balance across sectors and geographies. Our Atlas growth range has benefitted from quality stock exposure and global diversification, particularly into US and emerging markets.
A Western Digital Wake-Up Call
Remember Western Digital? It used to be a “boring” hard drive manufacturer. In Q3, its stock price rose 133% YoY, driven by AI-driven demand for data storage, margin improvement, and a revival of strategic optimism.
For investors, this is the lesson: the future is being built in the background. While the headlines obsess over a few household tech names, the infrastructure behind AI—chips, cloud servers, storage, energy—offers deep value and innovation opportunities.
This is the lens GSI uses when assessing exposure—not chasing hype, but seeking quality at a fair price.
Fixed Income: A Glimmer in Duration
We are seeing renewed interest in longer-dated bonds. With the BoE rate now at 4%, and further cuts expected, the opportunity cost of going long has dropped. As a result:
- UK Gilts have stabilised in price.
- EM Debt and High Yield Credit delivered strong returns in Q3.
- EMD up 9.75% YoY.
- High Yield up 7.39% YoY.
- GSI’s fixed income allocations have cautiously added duration, particularly in global credit and blended income portfolios.
How GSI Clients Are Thinking
We’ve noticed a few behavioural trends among clients this month:
- Reviewing Cash Positions: With savings rates falling again, clients holding excess cash are exploring new investment entries.
- Rebalancing for 2026: Many are looking to fine-tune allocations ahead of the new tax year and potential rate cuts.
- Asking the Right Questions: “Do I have too much in tech?”, “Is my portfolio still right for my goals?”, “Is it time to reintroduce bonds?” These are all excellent conversations—and ones we’re well prepared for.
Looking Ahead – The Case for Thoughtful Optimism
Despite global tensions—conflict in the Middle East, continued war in Ukraine, and a looming US election—markets appear steady. Why?
- Inflation, while still above target, is moving in the right direction.
- Earnings have been better than expected, especially in US and global equities.
- The narrative has shifted from panic to patience.
At GSI, we remain constructively positioned—balanced across styles, global in reach, and active in management.
A Word of Caution: The Crowded Trade Risk
US mega-cap tech remains a large part of global indices. The top 10 US stocks now represent over 32% of the S&P 500’s market cap. These firms—great though they may be—are now expensively priced and heavily held.
That’s why our portfolios retain allocations to:
- Value (especially outside the US)
- Small- and mid-cap equities
- Liquid alternatives and real assets
Because true diversification is what protects when consensus breaks.
Final Word: GSI’s Approach
As we move through foggy markets and look toward 2026, our guiding principles remain:
- Diversify intelligently.
- Position for resilience, not just returns.
- Adapt actively, but never reactively.
As always, your financial plan—not the latest market headline—should drive your investment decisions. If you’d like to review your current positioning or explore opportunities, your adviser is here to help.
Sources
- Bank of England – Monetary Policy Summary, 26 September 2025
- Office for National Statistics – CPI Update, September 2025
- SEI / MMAM Q3 2025 Investment Update
- Bloomberg Market Data – as of 28 October 2025
