Insights & Resources

North American stock markets had an up and down month before ending October higher. Volatility flared on several occasions due to US-China trade tensions, unexpected concerns about the health of US regional banks, and the enormous sums tech companies are spending on AI. Yet solid US corporate earnings and eventual signs of calmer US China trade relations helped underpin the upward trend for equities. Major US stock indices have now risen for six consecutive months. In Canada, equities moved sideways before eking out a small gain. The Canadian economy is limping, with preliminary data indicating essentially no growth in the third quarter. The International Monetary Fund (IMF) released its latest World Economic Outlook in October, lifting its global growth forecast to 3.2% in 2025 (down from 3.3% in 2024) and 3.1% for 2026. The report noted improved resilience in major economies despite global trade frictions but cited ongoing concerns about debt levels, geopolitics and uncertain policy directions. For the month, the S&P/TSX Composite Index rose 0.97%, the S&P 500 Index climbed 2.32%, the Nasdaq Index gained 4.72%, the MSCI World Index rose 2.57% and the MSCI EAFE Index gained 3.41%. In the U.K., the FTSE 100 Index rose 4.09% and Germany’s DAX Index rose 0.32%. In Asia, Japan’s Nikkei 225 surged 16.65% and the MSCI China Index slipped -3.91%. In the US, the yield on the 10-year Treasury note was little changed at month end. In Canada, the FTSE Canada Universe Bond Index rose 0.69% for the month. Gold hit another record high in a volatile month gaining 4.83%, which weighed on the S&P/TSX. Brent crude oil slipped -2.23%.

• In the US, the ongoing federal government shutdown which began October 1 continued to delay the flow of economic data, including the preliminary Q3 GDP report.
• The Federal Reserve trimmed the federal funds rate by 25 bps at the end of October, as expected, to a range of 3.75-4.00%. However, Fed chair Jerome Powell noted that a further rate cut in December cannot be counted on, adding that the lack of official data is a factor. The rate decision followed a 25 bps cut in September.
• Late in October Donald Trump and Xi Jinping met at the APEC summit in South Korea and took steps to lower trade tensions, including China maintaining rare earth exports for one year and the US cutting select tariffs.
• September US inflation was 3%, annualized, slightly below expectations of a 3.1% rise, but up from 2.9% in August.
• In a mid-month speech Jerome Powell noted that the US labour market continues to slow down, with low levels of both hiring and layoffs.
• The University of Michigan’s consumer sentiment survey fell to 55.1 in September from 58.2 in August. The decline was broad based, with key concerns cited being inflation and employment.
• According to The Institute for Supply Management (ISM) its purchasing managers’ index (PMI) of manufacturing activity fell to 48.7 in October from 49.1 in September. Expectations had been for a slight pick up. Readings under 50 indicate a contraction and the PMI has hovered below that level for eight consecutive months.
• In Canada, the Bank of Canada (BoC) lowered its policy rate by 25bps to 2.25%, the fourth reduction this year. Governor Tiff Macklem indicated the cut may be the last one for a while despite a fragile economy.
• Macklem stated that US tariffs and trade uncertainty have weakened the Canadian economy, added costs for many businesses and fed inflationary pressures. “The weakness we’re seeing in the Canadian economy is more than a cyclical downturn,” Macklem noted, adding “It is also a structural transition.”
• Statistics Canada reported that August GDP fell 0.3%, with September growth estimated at 0.1%. Both the services and goods sectors contracted in August. Q3 annualized growth is currently estimated at 0.4%, following a 1.6% drop in Q2.
• The downturn in manufacturing continued in October but at a slower pace. The S&P Global Canada Manufacturing Purchasing Managers’ Index rose to 49.6 during the month from 47.7 in September. The October PMI was the highest since January, but a reading below 50 still indicates contraction.
• Inflation rose unexpectedly in September to 2.4%, annualized, from 1.9% in August, driven largely by gas and grocery prices. Core inflation, which excludes food, energy and mortgage interest costs, remains within the BoC’s target range at around 3%.
• The unemployment rate held steady at 7.1% in September, slightly better than expectations of 7.2% but still at its highest level since August 2021. Job gains of 60,400 handily beat forecasts of a modest 5,000 gain and helped partly offset a 106,000 decline over the previous two months. Full-time employment rose while part-time jobs fell.
• In Europe, the European Central Bank (ECB) held its benchmark interest rate steady at 2%. Eurozone GDP growth in Q3 was 0.2%, while the seasonally adjusted unemployment rate was 6.3% in September, according to Eurostat, the statistical office of the European Union.
• In the UK, inflation in September was 3.8%, annualized, below expectations of 4% but still above the Bank of England’s target range of 2%.
• Data released in October pegged UK GDP growth in August at a lackluster 0.1%, but better than the 0.1% decline posted in July.
• In China, Q3 data indicated a mixed outlook. Real GDP rose 4.8%, annualized, slightly above expectations but slower than Q2. Retail sales climbed 3% in September, but property investment plunged 21% from a year earlier. Industrial production increased 6.5%, annualized, supported by solid exports, which rose 8.3%.
• In Japan, the surprise election of Sanae Takaichi as leader of the ruling LDP party (and therefore the next prime minister) resulted in some market volatility. The LDP lacks a majority in either house of parliament, so Takaichi will need to work closely with opposition parties to implement policies. Donald Trump visited Takaichi at month end following the APEC summit in South Korea.
• The Bank of Japan held its policy interest rate at 0.5%.
• Australia’s unemployment rate rose to 4.5% (from 4.1%), in September, higher than expected. Employment rose but was overtaken by the increase in people looking for work.
• In New Zealand, the Reserve Bank trimmed its key interest rate by 25bps to 2.75%, as expected amidst continued signs of weak demand and softer inflation in recent months.

What can we expect now?

Stock markets overcame some periods of doubt to continue their advance in October. Both the IMF and Bank of England flagged high valuation levels during the month, observations echoed by Wall St. leader Jamie Dimon, CEO of JP Morgan. The unexpected bankruptcy of US auto parts supplier First Brands and Tricolor, a subprime auto lender, raised questions of credit quality and transparency in private markets. For Canada, the core economic issue of our trading relationship with the US is still unresolved, and as seen in October, remains subject to unexpected interventions by the US president. Mark Carney’s government will present its first budget in early November, an event that could provide investors with some further insights into the government’s strategy for responding to the American challenge in the absence of a trade deal – or deals. As noted by the IMF (see above) global economies have navigated the turbulence of 2025 somewhat better than initially feared. And stock markets, driven in large part by the promise of AI and tech more broadly, have had a stellar year to date.  

Important Disclaimers

All index performance is in Canadian dollars. The information in this letter is derived from various sources, including CI Global Asset Management, BNNBloomberg, Statistics Canada, Wall Street Journal, U.S. Bureau of Labor Statistics, Financial Times, The Globe and Mail, Reuters, and BBC at various dates. This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources and reasonable steps have been taken to ensure their accuracy. Market conditions may change which may impact the information contained in this document. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances. Certain statements contained in this communication are based in whole or in part on information provided by third parties and CI Global Asset Management has taken reasonable steps to ensure their accuracy. Market conditions may change which may impact the information contained in this document.