October Recap

October 2026 brought a sharp shift in market leadership as investors moved out of mega-cap technology and AI-related stocks and into value, cyclical and defensive assets. Doubts over AI spending and rising Middle East tensions drove the rotation. In the US, mortgage rates that peaked near 7.40% kept housing activity slow, pushing median time on market to 63 days

In the U.S., the S&P 500 slipped about 0.9% despite setting record highs early in the month, while the tech-heavy Nasdaq Composite fell 5.3% on profit-taking and disappointing earnings. The Dow Jones Industrial Average, by contrast, gained roughly 1.7%, and the Russell 2000 edged up 0.5%. The S&P 500 Equal Weight Index jumped 5.0%, beating its cap-weighted counterpart by nearly six percentage points. Energy, consumer staples, utilities and real estate led, while communication services, information technology and industrials lagged.

Abroad, European equities held up well, with the MSCI Europe Index up 0.4% and the UK’s FTSE All-Share up 1.1%. Asia struggled: Japan’s Nikkei 225 fell 5.2%, South Korea’s Kospi plunged more than 15%, Taiwan lost 8.4%, and China’s CSI 300 dropped 7.0% into bear market territory. Brazil fell 12.0% after President Lula’s election victory.

Government bonds regained their safe-haven role as yields fell back from September highs. UK gilts, German bunds and Japanese government bonds each gained between 1.6% and 1.8%, and global investment-grade credit added 1.3%, though high-yield debt lagged. The Federal Reserve held rates at 3.75%–4.00% in a 10–2 vote, with some officials favoring a hike because of sticky inflation, and the ECB and Bank of Japan also held steady.

Shipping disruptions near the Strait of Hormuz sent WTI crude up 15.6% to above $100 per barrel and Brent to about $118. Gold, meanwhile, slid 6.3% to $3,913 per ounce, its lowest level in a year.