Explore the latest trends and strategic insights in the October 2025 edition of the “Market Compass.”
October 2025 was marked by political gridlock in Washington and continued dynamism in US equity markets. While the United States experienced its 21st government shutdown since 1970, tech giants from Silicon Valley continued their impressive rally, driving indices to new highs.
Highlights Include:
Gridlock in the USA – Here we go again: The United States is experiencing its 21st government shutdown since 1970. As Democrats and Republicans in the US Congress failed to agree on a joint budget for the coming year, approximately 800,000 federal employees were placed on furlough, which naturally significantly constrains the functionality of the government apparatus. Economically speaking, a government shutdown is typically not a major issue – provided it remains time-limited. According to empirical analyses, each week of a shutdown is likely to reduce real US GDP growth by 0.1%-0.2%. Since 1970, however, the political tug-of-war in Washington has averaged just 8 days.
Fed picks up pace again – At its September meeting, the US Federal Reserve lowered key interest rates by 0.25%, as expected. Fed Chairman Powell characterized the recent rate cut as a risk management cut, a proactive measure to prevent further weakening of the labor market. The Fed’s new interest rate projection anticipates two additional rate cuts by the end of 2025 – with one additional cut each contemplated for 2026 and 2027. Markets responded to the central bank’s latest decisions with rising rates, as many investors had probably hoped for a somewhat more accommodative stance. The 2-year US rates rose by 10 basis points in the second half of the month, while 10-year bond yields gained approximately 12 basis points toward month-end.
Tech stocks drive the US equity market – Once again, the giants from Silicon Valley ensured that the US equity market was able to significantly outperform its global competitors. The Nasdaq 100 advanced by a further 5.4% in the reporting month, while the S&P 500 gained 3.5%. In this context, however, it should be noted that market breadth in the US equity market remains rather concerning. The equal-weighted S&P 500 rose by barely 0.9% in September. Once again, semiconductor stocks benefiting from the AI Boom (+12.4% in September) profited from a whole series of positive corporate announcements. Intel (+37.8%), Lam Research (+33.1%), Oracle (+23.8%), and Broadcom (+10.4%) stood at the center of investor interest.
Intel celebrates surprising comeback – The former problem child of the US technology industry celebrated what was probably the most surprising stock comeback of the year in September. After the US government had built up a strategic stake in Intel in late summer, chip giant Nvidia announced a few weeks ago that it would also invest USD 5 billion in the company to advance the joint development of data center chips. Intel’s shares gained an impressive 37.8% in September.
Gold overtakes the Euro as global reserve currency – At market prices, gold accounted for approximately 20% of global official reserves in 2024 – more than the Euro at 16%. Central banks have played a key role here – they purchased over 1,000 tons of gold last year, equivalent to one-fifth of annual global production and double their annual average over the past decade. With an increase of 47% since the beginning of the year and +11.9% in September alone, gold once again proves that it is far more than just a relic of the past.
Tactical positioning for Q4 2025 – With the fourth quarter begins traditionally the most profitable phase of the investment year. We have adjusted our tactical allocation toward equities from underweight to neutral. The combination of favorable seasonality, a shifting market narrative, and persistently defensive equity positioning by institutional investors should help limit potential market pullbacks. Regionally, we continue to favor US equity markets as well as selected Asian countries such as Japan and Vietnam. Beyond equity markets, we maintain an overweight allocation toward bonds, with a clear preference for investment-grade issuers in USD and EUR.
Ready to dive in? Download the full PDF of our October 2025 Market Compass for a detailed analysis and forward-looking guidance on navigating today’s financial markets.
Do not hesitate to contact us with any questions about the topics discussed. We are happy to assist you with our expertise.
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