Welcome to October’s Stock Market Trends and Updates. This month, we examine the intricacies shaping the stock market, including the geopolitical and economic developments that continue to reshape global markets.
As dynamics evolve and challenges persist, heightened market volatility highlights the need for vigilance and flexibility in navigating today’s interconnected financial landscape.
Whether you’re an experienced investor or new to the markets, we’re here to deliver valuable insights as we analyse the trends, fluctuations, and evolving risks driving global market performance.
The third-quarter earnings season is delivering encouraging results that are reshaping market sentiment. With 86% of companies beating consensus earnings estimates so far, the S&P 500’s blended earnings growth rate has climbed to 8.5% year-over-year, surpassing the 7.9% expectation at quarter-end. Looking ahead, analysts project solid earnings growth of 11.0% for 2025 and 13.9% for 2026.
The technology giants known as the Magnificent 7: Microsoft, Meta Platforms, Amazon, Apple, NVIDIA, Alphabet, and Tesla, remain the primary drivers of market performance. These powerhouses are expected to deliver 14.9% year-over-year earnings growth in the third quarter, significantly outpacing the 6.7% growth projected for the remaining 493 S&P 500 companies. This divergence highlights their outsized influence on overall market capitalisation and earnings momentum.
The financial sector emerged as a standout performer, with its blended earnings growth rate jumping from 13.2% to 18.2%. Major banks, including JPMorgan Chase, Goldman Sachs, Bank of America, and Morgan Stanley, exceeded expectations, benefiting from strong trading and investment banking revenues. However, the sector faces headwinds as smaller regional banks reported loan fraud issues, causing divergent performance between mega-banks and their regional counterparts.
While most sectors show positive momentum, the energy sector faces significant challenges due to declining oil prices, with the steepest year-over-year earnings decline expected among all industries. Meanwhile, sales growth across the S&P 500 stands at 6.6%, above expectations and supported by nominal GDP growth of 4.8%. Additionally, a weaker US dollar compared to last year should provide a tailwind for the 41% of S&P 500 revenues generated internationally.
While domestic markets capture much of the attention, notable shifts in international markets are also emerging this year.
US stocks have dominated for decades, but international markets are showing signs of life in 2025. Year-to-date, the MSCI ACWI Ex-US index has outperformed the S&P 500 by 11.9 percentage points. However, currency movements tell much of this story. The weakening US dollar has contributed 9.3 percentage points of that outperformance, providing a significant tailwind for US-based investors holding foreign equities.
However, the recent currency increase represents a departure from historical trends. Over the past twenty years, the S&P 500 has delivered a total return of 700.6%, vastly outpacing the 233.3% return from broad international markets. Much of this divergence stems from the exceptional performance of US technology stocks, which have surged 2,053.8% over the same period. Even emerging markets, which benefited most from currency tailwinds with a 68.7% gain over twenty years, still trailed the S&P 500 by a substantial margin.
An often-overlooked aspect of international diversification is sector composition. The S&P 500 allocates 35% to technology, while foreign markets weight the sector at just 14%. When including tech-adjacent companies like Amazon, Meta Platforms, and Alphabet, US technology-related exposure climbs to 46%. By contrast, international indexes lean heavily toward financial companies and banks. This creates an implicit sector bet for investors shifting capital abroad.
International stocks currently trade at a forward price-to-earnings ratio of 14.7 times compared to 22.1 times for US stocks. While the discount is notable, US companies justify higher valuations through superior return on equity and profit margins. In these metrics, the technology sector’s influence is particularly evident. The lower international valuations reflect these fundamental differences in profitability rather than simply presenting a bargain opportunity.
Rather than pursuing predetermined international allocations based on global market capitalisation weights (which would suggest 49% in US stocks), some prominent investors advocate for targeted international positions. Additionally, US investors should consider that over 40% of S&P 500 revenues already come from international sources, providing global exposure through domestic holdings.
Beyond earnings and currency movements, global geopolitical shifts continue to exert influence on markets and investor sentiment. From the US’s escalating trade tactics to more assertive moves by China and shifting alignments around the world, political strategy is increasingly shaping economic outcomes. As nations deploy tariffs, export controls, and diplomatic manoeuvring to forward national agendas, markets are reacting in real time, particularly across trade-sensitive sectors like energy, manufacturing, and technology.
Tariff pressures and supply-chain tensions loom large. The US has warned that China’s newly-imposed export controls on rare-earth elements could prompt decoupling of supply chains, sparking alarm in global markets about trade fragmentation and resilience. Washington’s threats of secondary tariffs on countries importing Russian oil are raising energy-market risk globally, adding another layer of complexity to an already volatile sector.
Europe and Africa find themselves balancing trade and diplomacy. The European Union is under pressure to respond cohesively to US trade aggression. Still, internal divisions persist, leaving the region vulnerable as tariff and political risks rise. Meanwhile, South Africa’s deepening economic ties with China are signalling realignment as US pressure mounts. These shifts highlight how continents once seen as passive in trade wars are now becoming strategic players in the global power dynamic.
Markets are listening and reacting. Tightening geopolitical fault-lines are influencing everything from raw-material prices to trade flows and corporate earnings. The evolving landscape of trade diplomacy warrants close attention: when national security and supply-chain strategy collide, the ripple effects can be broad and fast.
As we navigate through October’s market landscape, the connection between strong domestic earnings, sector divergence, evolving international dynamics, and heightened geopolitical tensions continues to shape the investment environment. These trends highlight the importance of staying informed as market conditions evolve and new patterns emerge across global markets.
As we move through October, uncertainty persists as a central theme, making vigilance and awareness particularly relevant.
MarketWatch, reports that Apple stock is approaching record highs ahead of its earnings report. Market sentiment also received a boost from White House advisors indicating that a potential government shutdown could be resolved within the week. The prospect of averting a shutdown has alleviated some near-term uncertainty, contributing to the positive momentum across equity markets.
While the markets may experience sharp swings and uncertainties, it’s essential to remember that these dynamics are inherent to the investment landscape. Staying well-informed, maintaining a diversified portfolio, and adopting a long-term perspective can help investors weather the storm and seize opportunities that arise during these challenging times.
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