15 October 2025
October monthly market update - Reflections on September 2025

Here are some of the key themes in the global economy and financial markets that are guiding investment sentiment and the outlook for returns.
Why is US job growth faltering?
There are mounting signs that the US economy is losing momentum, with job growth slowing to a crawl over the summer. Employers added just 22,000 roles in August, significantly lower than the 76,500 new roles forecast by economists. At the same time, the unemployment rate edged higher, from 4.2% to 4.3%.
Analysts say the recent weakness in the job market stems in part from President Donald Trump’s changes to tariff and immigration policy, which economists have long warned would harm the economy by raising costs and uncertainty for firms. The outlook has also deteriorated noticeably since Trump’s Liberation Day tariffs were introduced.
Adding to the concerns, the US added 911,000 fewer jobs than previously reported in the year to March. This indicates that the labour market in the world’s largest economy began slowing sharply in 2024. The revision is the largest on record and roughly halves the earlier estimate of 1.8 million jobs created.
The US labour market plays a key role in the Federal Reserve’s (Fed) interest rate decisions. Fed Chair Jerome Powell said a weakening labour market has outweighed concerns about rising inflation, prompting the central bank to lower interest rates for the first time since last December.
Weak US employment data has fuelled expectations that the Fed will cut rates further in the coming months to support the economy – a shift that should provide support for equities. While the labour market is showing signs of softening, consumer spending continues to underpin economic and corporate earnings growth.
Will the UK chancellor raise taxes?
Worsening public finances mean Chancellor Rachel Reeves is under growing pressure to announce tax rises in the November Budget. Government borrowing climbed to a five-year high in August. Figures from the Office for National Statistics show public sector net borrowing rose to £18 billion – £3.5 billion higher than the same month last year.
Economists have warned that weak growth prospects, higher debt costs and an expected downgrade in productivity forecasts from the Office for Budget Responsibility will leave Reeves with little choice but to raise taxes or cut spending to stay within her fiscal rules. Capital Economics estimates the chancellor may need to find around £28 billion, largely through higher taxes, to maintain the £9.9 billion buffer against the fiscal rule outlined in March. The Treasury has already benefited from stronger National Insurance receipts, boosted by the £25 billion rise in employer contributions announced at Labour’s first Autumn Budget. However, these gains have been outweighed by higher spending on services, welfare and debt interest, according to the ONS.
What does this mean for tax bills? Commitments to working people made by Reeves in her Labour conference speech suggest there is no desire to break manifesto promises by increasing income tax, National Insurance or VAT. That leaves the Treasury searching for more indirect ways to raise revenue.
Why have equities hit new highs while bonds have faltered?
It has been a strong year for equities, with major indexes hitting fresh record highs despite concerns about tariffs and signs of slower growth. Global stock markets have been supported by expectations of interest rate cuts and strong corporate earnings, with technology stocks leading the gains. Easing trade tensions and the resilience of the US economy have also boosted performance.
In contrast, government bond markets have experienced a volatile year so far, with yields rising globally (when yields rise, prices fall).
Trade policy uncertainty, geopolitical tensions and aggressive economic measures in the US unsettled investors, pushing 10-year Treasury yields from below 4% to around 4.5% after Liberation Day, while 30-year Treasury bond yields also spiked.
Meanwhile, UK government bond yields climbed to their highest level since 1998 at the beginning of September. The surge in yields was driven by rising inflation, concerns over government borrowing and expectations that interest rates may stay higher for longer than previously anticipated. German and French 30-year yields also rose to their highest levels since 2011, highlighting investor concern over fiscal policy and growing borrowing needs.
After spiking at the beginning of September, global bond markets have now stabilised. US 10-year Treasury yields eased following weaker jobs data and have largely held in the 4.1% to 4.2% range, while 30-year yields have drifted lower. In the UK, long-dated government bond yields have also retreated from the highs seen earlier this year. However, concerns remain about the fiscal health of major economies, with long-term borrowing costs still near record highs.
Looking ahead
All eyes will be on Chancellor Rachel Reeves when she delivers her second Budget at the end of November. She faces a significant economic challenge, with a potential fiscal shortfall and pressure to balance spending plans.
The US Federal Reserve cut interest rates for the first time this year after signs of a weakening labour market. The central bank is expected to make another quarter-percentage-point rate reduction at its next meeting at the end of October, and perhaps one more at its final meeting of the year in December.
Global growth appears more resilient than expected this year. The Organisation for Economic Co-operation and Development (OECD) has upgraded its global growth forecast to 3.2% in 2025, compared with the 2.9% expansion forecast in June. Growth expectations for the US were also lifted from June’s estimate of 1.6% to 1.8%