As the end of 2025 approaches, investors welcomed another positive month for risk assets in October. Improved political clarity in Japan, resilient corporate earnings, and optimism around a more constructive trade relationship between China and the US supported market sentiment.
In the US, the government shutdown has become the longest on record, significantly limiting the flow of economic data. However, the release of September inflation data proved a key catalyst for markets. Softer-than-expected price pressures reinforced expectations for further monetary easing, allowing the US Federal Reserve to deliver a second consecutive interest rate cut. Growth assets continued to outperform value, supporting a strong month for the Long Hold Growth-focused portfolios, particularly across US and Asian markets.
Despite holding elevated cash levels, the Volatility Managed (VM) OBI portfolios kept pace with their fully invested benchmarks. A moderate overweight to Asia and Emerging Markets provided a positive contribution, while selective global equity exposure allowed the portfolios to capture some of the recent strength in trade- and technology-related themes, despite the absence of directional US equity exposure amid stretched valuations.
Back-to-Back US Federal Reserve Rate Cuts
Following September’s unanimous decision to cut interest rates amid a rapidly weakening labour market, October’s FOMC decision proved more finely balanced. The ongoing government shutdown, now in its sixth week, has halted the release of key economic data, increasing uncertainty around employment conditions, inflation trends, and consumer spending.
Nevertheless, US policymakers received some clarity from the release of September inflation data, published to support Social Security cost-of-living adjustments. The report showed further moderation in price pressures, prompting markets to quickly price in another rate cut. The FOMC subsequently voted 10-2 in favour of a further reduction at its October 29th meeting.
Looking ahead, the path for interest rates is less certain. Fed officials have characterised recent cuts as ‘risk management’ measures, and in our view, further easing is unlikely without clear evidence of economic deterioration. The increasingly divided vote highlights the potential for greater market volatility, particularly as investors recalibrate expectations in the absence of reliable economic data, leaving Fed communication to play a more influential role while the shutdown persists.
Japan Marches On
Japanese equity markets regained momentum in October following a period of political uncertainty triggered by the resignation of Prime Minister Ishiba after poor election results. Markets responded positively to the appointment of Sanae Takaichi as prime minister, with her fiscal policy stance viewed as supportive for domestic growth.
With households continuing to feel pressure from rising living costs, expectations of targeted fiscal support—particularly for energy bills—alongside measures to encourage wage growth and capital investment among smaller companies, boosted domestic-focused equities. A more supportive global trade environment also aided exporters, contributing to Japanese equities’ outperformance over the month.
Positioning Update
As we move into the final two months of the year, and with markets likely to become increasingly sensitive to news flow, we continue to hold elevated levels of cash within the tactically managed OBI Volatility Managed portfolios. After assessing the risk-return trade-off across regions and sectors, we concluded that near-term upside potential was limited, while downside risks had increased following a strong rally and subdued economic data. This positioning has helped limit volatility, with the VM portfolios outperforming fully invested benchmarks at a lower level of volatility over the past 12 months.
The Long Hold Growth and Long Hold Income portfolios, by contrast, remain positioned to capture longer-term opportunities, accepting short-term market volatility. The Income suite continues to offer a more defensive profile, targeting an attractive yield during periods of uncertainty.
Overall, we have taken action to reduce near-term risk within the VM portfolios, while retaining flexibility to add exposure should market weakness present attractive valuation opportunities.
OCM Portfolio Performance
The OCM portfolio suite continued to build on recent gains, with US and Japanese assets leading performance. Corporate earnings in the US have largely supported sentiment, although investors have become increasingly selective, particularly within the technology sector. Companies reliant on heavy spending to drive growth—such as Meta Platforms—have been punished where earnings have failed to keep pace with rising AI-related costs. Recent equity market weakness reflects a period of consolidation following rapid valuation expansion.
Fixed income returns were more muted, although US Treasury and UK Gilt yields recorded their strongest monthly moves in three years as markets priced in a faster pace of monetary easing. In the UK, uncertainty ahead of the Autumn Budget has reinforced our cautious stance on gilts, despite some encouraging signs over the month.
Past performance cannot be used as a guide to future performance and the value of your investment will fall as well as rise in value. You may not get back all your investment and the final value of your investment will depend on the performance of your portfolio. The actual performance of an individual client’s portfolio may differ due to different funds being used and being restricted in relation to certain asset allocations. Performance figures quoted include fund manager charges but exclude adviser, discretionary, custodian and switch charges. Unless stated, income is reinvested into the portfolio. The information contained in in this document is for information purposes only. It does not constitute advice or a recommendation or an offer or solicitation for investment. OCM Wealth Management Limited is authorised and regulated by the Financial Conduct Authority (FCA Registration No: 418826) OCM Asset Management is a trading name of OCM Wealth Management Limited
