October was another busy month for markets, with shares continuing to climb, central banks delivering more interest rate cuts, and currency and bond markets reacting to a steady flow of economic data. While political noise was loud in places, most major markets held firm — helped along by expectations of softer economic conditions and easier monetary policy ahead.

Share markets push higher

Global share markets saw a solid month. In the US, the S&P 500 rose 2.27% in October and is now up 16.30% year-to-date (17.52% if you include dividends). Strong corporate earnings supported the positive market sentiment, with the Dow Jones index also reaching fresh highs.

Market leadership, however, remains narrowly distributed. The “Magnificent Seven” tech-heavy companies once again did the heavy lifting, contributing roughly half of the year’s total market return. Combined, they’re forecast to grow by around 20% in 2025 - far outpacing the rest of the market which is forecast to end the year up a modest 8%. The Information Technology sector was the strongest performer in October (+6.20%), while Materials was the weakest (down 5.10%).

Across Asia, share markets benefitted from continuing improvements in trade sentiment. Japan was a standout performer, rising 16.6% in one month. Back here at home, the NZX 50 gained 1.9%, for once beating Australia’s ASX 200 which only rose 0.4% for the month.

Global and NZ bond markets react to central banks

Bond markets were relatively calm in October, but still saw meaningful moves as central banks continued cutting interest rates. In the US, the Federal Reserve (Fed) delivered another 25 basis point cut, lowering the federal funds rate to 3.75–4.00%. Despite this cut, Treasury yields moved higher as markets dwelled on the Fed’s message that future moves would be both cautious and data-dependent. This pushed the US dollar higher, and pushed down longer-dated bonds.

New Zealand bonds initially rallied after the RBNZ trimmed the Official Cash Rate (OCR), before seeing a reverse in all those gains as global bond yields lifted. NZ government bonds ended the month slightly weaker overall, and swap rates nudged higher. With inflation staying at the top of the RBNZ’s target band (3.0%) and growth still soft, markets are now pricing in at least one more interest rate cut in the coming months.

New Zealand: Inflation steady, rates cut again

New Zealand’s annual CPI inflation rose to 3.0% in Q3. While still at the top of the target band, the core inflation measures technically remain within 1-3%, broadly aligning with the RBNZ’s forecasts. Despite the mixed inflation picture, the RBNZ cut the OCR again in October to help support what has been a continued softening economy.

Mortgage rates moved lower across major banks ahead of the cut, while term deposit rates slipped - raising the possibility that some savers may look elsewhere for income. The NZ dollar wobbled throughout the month but finished roughly flat, at around USD 0.58.

Dr Anna Breman was appointed as the next Governor of the RBNZ - the first woman in NZ to hold the position. With a background spanning Swedbank, the World Bank and the Swedish Ministry of Finance, her appointment marks an important milestone and a fresh leadership direction for our central bank.

Australia: Better-than-expected growth

Australia surprised forecasters with a stronger-than-expected 0.6% rise in their Q2 GDP, supported mainly by resilient consumer spending and a lot of discount-driven retail activity. Severe weather events in Queensland held the numbers back from an even stronger result. Markets still expect more rate cuts from the Reserve Bank of Australia (RBA), although persistent consumer strength could influence how quickly they arrive.

U.S. economy: Rate cuts begin as data softens

The Fed cut rates in October for the first time since December 2024, following weaker employment data and downward revisions to earlier estimates. The decision passed 11–1, signalling broad agreement that the economy is losing momentum.

The Fed has been clear that future cuts will depend on economic data rather than a pre-set path, which helped lift Treasury bond yields during the month. Political gridlock also intensified, with the US government shutdown continuing and a potential 750,000 federal workers estimated to be furloughed daily as a result of failed negotiations. The economic cost is estimated at around USD $400 million per day in lost wages.

US-China relations ease slightly

There was at least one bright spot in global economics: at the APEC summit, Presidents Trump and Xi announced a package of tariff adjustments. The GOP trimmed tariffs on Chinese imports from 57% to 47%, while China lifted restrictions on rare earth exports and increased their purchases of US agricultural goods. Both sides also committed to joint action on fentanyl trafficking. Although major issues like Taiwan remain unresolved, the announcements signalled a meaningful cooling in trade tensions.

Despite plenty of noise, from rate cuts and inflation readings to political tensions and ongoing economic slowdowns, financial markets seem to have taken October in their stride. Globally, shares continued their upward trend, bond markets steadied after central bank moves, and currencies shifted around changing rate expectations.

Heading into the final months of the year, the big themes remain the same: slowing global growth, cautious central banks, and share markets still driven by a small handful of high-performing tech giants. Throughout what may be the volatility to come, we continue to reiterate the same message: we're about the long-term and letting the markets do their thing, so ignore the noise, keep calm and carry on!

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