Market Performance
October was a month of sharp reversals. Shares in the large US technology companies fell, while most other parts of the market held up or recovered.
Over the month to 4 November, Australian shares gained around 1.7%, winning back some of September’s loss. The market is still down around 1.8% over three months, and its gain of almost 4.7% over the past year is only just ahead of inflation, which has risen to 4.3%.
Global shares fell around 1.8% in US dollar terms, but the headline hides a big shift underneath. The AI-driven technology leaders dropped sharply: the Nasdaq 100 fell around 8.5%, and the global momentum index, which holds recent winners, fell more than 12%.
The average US company did much better. The equal-weighted S&P 500 rose by almost 6%, while the standard S&P 500, which is dominated by the largest technology names, fell by 1%. Across global markets, value shares gained almost 4% while growth shares lost more than 5%.
Regional results varied widely. Europe (up ~4%) and the UK (up ~3%) did well, but Asian markets with large technology and chip-making sectors suffered. Japan’s Nikkei retreated by 11% and South Korea’s KOSPI fell almost 19%, pulling emerging markets down close to 10%.
The Australian dollar firmed against the US dollar, so investors without currency protection (known as “hedging”) lost slightly more than hedged investors, around 2.4% compared with roughly 1.8%.
Bonds recovered as yields eased from the highs reached in September. The broad Australian bond market gained 1.4%, global bonds (hedged to Australian dollars) near 2.1% and US government bonds around 2.6%. Floating rate corporate bonds added a smaller 0.4%, because their payments adjust with interest rates, so they gain less when yields fall.
Interest rate sensitive assets also rebounded after a weak September: global listed property gained 7%, Australian property shares close to 8% and global infrastructure almost 7%. Gold fell ~2% over the month in US dollars, but has recovered in the past few days.
Market Drivers
Three forces drove markets in October: a sell-off in AI-related technology shares, a spike and then a slump in oil linked to the conflict with Iran, and the US midterm elections. Central banks, meanwhile, stayed focused on inflation.
Technology shares came under pressure through the month on worries that the huge sums being spent on artificial intelligence (AI) are not yet earning enough to justify share prices. Those concerns intensified in the final week after disappointing results from several large US technology companies, and the Nasdaq fell by almost 3% on 30 October. The US technology sector had its biggest monthly fall since March 2025, although the Dow Jones Industrial Average, which is less technology heavy, finished the month higher.
Oil swung sharply. Attacks on ships in and around the Strait of Hormuz reached their highest monthly count since the conflict began in February, and traffic through the Strait remained significantly below pre-war levels. Brent crude gained almost 14% in October, nearing US$118 a barrel, a six-month high. In early November it reversed, falling by ~20% in three days to US$95 as diplomacy gathered pace, including talks between Iran and Qatari mediators, raising hopes of an end to the war and a reopening of the Strait.
Higher fuel costs have kept inflation elevated, at 3.7% in the US and 4.3% in Australia.
Central banks held firm. The US Federal Reserve left rates at 3.75% to 4.00% on 28 October, but two of its twelve voting members wanted another increase, and Chair Kevin Warsh gave no guidance on what happens next, keeping a December increase firmly in play.
The European Central Bank and the Bank of Japan also held rates, with the Bank of Japan flagging December as a live meeting.
The Reserve Bank of Australia was the exception. After inflation for September came in at 4.3%, it raised the cash rate by 0.25% to 4.85% on 3 November, the highest level since 2008 and its fifth increase this year. The vote was split 6 to 3, and Governor Michele Bullock indicated the Board is likely to wait for more data before deciding its next move.
The US midterm elections on 3 November produced a clear result, with the Democrats winning control of both the Senate and the House of Representatives. Markets took it in their stride. US shares rose (the S&P 500 gained around 1.6% on 4 November), bond yields fell and the US dollar slipped to a five-week low. The weaker dollar and lower yields helped gold jump more than 3% in a day, back above US$4,000 an ounce.
Key Data & Events Summary
Global shares: down around 1.8% in US dollar terms (similar for hedged investors) and around 2.4% unhedged, with the gap driven by a slightly stronger Australian dollar
US technology: Nasdaq 100 down around 8.5%, while the equal-weighted S&P 500 rose around 5.8% and the S&P 500 fell around 1.0%
Other regions: Europe up around 3.9%, UK up around 3.2%, Japan down around 11%, emerging markets down around 10%
Bonds: Australian bonds up around 1.4%, global bonds (hedged) up around 2.1%, floating rate corporate bonds up around 0.4%
Property and infrastructure: global listed property up around 7%, Australian property shares up around 8%, global infrastructure up around 7%
Gold: down around 2% over the month in US dollars to about US$4,060 an ounce
Bank of Japan: held rates at 1.25% (30 October), keeping a December increase open
Reserve Bank of Australia: raised the cash rate by 0.25% to 4.85% (3 November) in a 6 to 3 split decision, the highest level since 2008
Australian inflation: 4.3% over the year to September (released 28 October), up from 4.0% and slightly above forecasts of 4.2%; underlying inflation 3.6%
US inflation: 3.7% over the year to September (released 14 October), up from 3.4% and above forecasts of 3.6%
US jobs: 29,000 jobs added in September (released 2 October), well below the 90,000 expected, with unemployment rising to 4.2%
US midterm elections (3 November): Democrats won control of both the Senate and the House of Representatives
This update has been prepared by Innova Asset Management, the research and investment team behind Liberum Private. As always, if you'd like to discuss your portfolio or personal situation further, or if you have a question you'd like to kick around with Innova's co-founders Dan and Dinyar, please don't hesitate to reach out to us.