Market Note
Mixed Signals at the Highs
The bull case is that the AI revolution is just getting started and the massive capex cycle justifies the next leg higher for this YTD rally in large cap tech.
Global Markets & Economic Data
- Markets Summary: The market finally took a breather this week, pulling back slightly from all-time highs as the US government shutdown continues with no end in sight.
- US: No economic data was released due to government shutdown. US bank quarterly earnings releases have featured increased concerns around credit exposures. Outside of financials, earnings reports are mostly upbeat; of the 51 S&P 500 companies that have reported, 82% beat forecasts, 16% missed and 2% were in-line.
- Europe: EU Aug. Industrial Production fell 1.2% m/m and is up 1.1% y/y. The latest inflation readings are sub 2% y/y, below the ECB's target. 2025 GDP estimates are for 1% annual growth. UK unemployment moved up to 4.8% and average earnings are trending higher. Consumer spending is keeping m/m GDP estimates marginally positive. Swiss 2025 GDP is estimated to be 1.3%, US tariffs are estimated to cost 0.9% to Swiss GDP over the next two years. The SNB is expected to be on hold at 0% after cutting rates six times since 2024.
- Asia: Japan Machinery Orders were down 0.9% m/m and recent industrial and service measures were softer than expected leading to the BoJ leaning to a more dovish stance. Chinese Sep. CPI was flat y/y while PPI is down 2.5% y/y. Forecasts are for Chinese Q4 GDP to hit 4.3% and 2025 growth to be 4.8%, below the BoC's 5% target
Index Returns Summary
| Asset Class | MTD | YTD |
|---|---|---|
| MSCI World | -1.56% | +16.28% |
| MSCI Asia Pacific | -0.26% | +20.74% |
| MSCI Europe | -0.30% | +27.91% |
| MSCI China | -2.30% | +39.54% |
| Bloomberg Barclays Global Aggregate Index | -0.38% | +7.53% |
| Bloomberg Commodities Index | -0.52% | +5.43% |
| HFRX Global | +0.03% | +5.68% |
| HFRX Macro/CTA | +0.19% | +2.81% |
| HFRX Equity Hedge | -0.32% | +7.95% |
Index data as of October 10, 2025
Market Spotlight: Hedge Fund Positioning
Source: Goldman Sachs
It is a good moment to check in on hedge fund positioning. Total gross exposure is running at the 80-90th percentile on a rolling 3-5 year basis but is only in the 44th percentile on a rolling 12-month basis.
Market Spotlight: Dangerous Instruments
Source: Koyfin
Market complacency and risks can be represented by the proliferation in engineered financial products sold to investors. Some examples of risky products currently in the marketplace are 3x levered ETFs as well as Korean “Auto callables”
Market Spotlight: Corporate Interest Expense
Source: Apollo
There has been a relentless bid for gold in recent weeks, that is somewhat coinciding with the US government shutdown. Perhaps the buying reflects growing investor apprehension in the ability for politicians and government officials globally to manage their economies in a way that adheres to prevailing economic principles.
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Contact UsDisclaimer: This material has been prepared by MASTERPIECE ADVISORS for informational purposes only and should not be construed as financial advice. Investments in hedge funds are speculative and involve a high of risk. This material is confidential and may not be disclosed without the express written approval of MASTERPIECE ADVISORS.