Glittering gold offsets market optimism
October monthly commentary
Global equities extended their recovery in October, led by the US and Japan. The S&P 500 gained 2.3% and the NASDAQ 4.8%, while Japan’s Nikkei surged 16.7% on foreign inflows and a weaker yen. Europe also posted solid gains (Euro Stoxx +2.5%, UK +4.1%), though breadth narrowed as investors rotated back into growth and AI-related names. Australia lagged, with the ASX 200 up just 0.4%, held back by sharp declines in technology (-7.0%) and discretionary sectors (-6.7%) despite materials and energy outperforming on stronger commodity prices.
Markets navigated a brief but noticeable uptick in volatility during the month, with the VIX index spiking above 20 before retracing as sentiment steadied into month-end. The move served as a reminder that even in a broadly constructive environment, markets remain prone to short, sharp bouts of risk aversion, particularly as positioning and valuations become increasingly stretched.
In the US, lower yields and renewed optimism around AI reignited large-cap tech, while financials and defensives underperformed. Emerging markets were positive (MSCI EM +4.2%), supported by modest gains in China (+0.2%) and firmer sentiment across Asia. The overall tone was one of cautious optimism with investors remain willing to price in a “soft landing”, though the re-emergence of volatility hints that confidence may be more fragile than it appears.
Gold, growth and the search for stability
In a recent Market Brief video, we discussed gold’s re-emergence as a strategic asset. Despite equity markets grinding higher, gold (a traditional safe-haven asset) has continued to attract flows, buoyed by central bank demand, renewed currency volatility and an underlying sense that the rate cycle is peaking.
Gold’s strength emerges from the intersection of two powerful forces: the transition from tightening to easing, and the erosion of faith in other safe havens. As investors weigh lower real yields against persistent fiscal deficits, the appeal of scarce, uncorrelated assets has grown.
Equities, meanwhile, are navigating their own balancing act. Optimism about AI and rate relief continues to drive prices, but much of this hope is already priced in. In our view, the market narrative has shifted from “how high can rates go” to “how long can growth last”. This marks a subtle but important turn in the cycle, in which momentum and fundamentals begin to diverge.
Positioning: Holding ground in transition
We continue to maintain a tactical, defensive posture within our Dynamic models. We maintain a preference for fixed interest, where bonds offer more reliable value as yields stabilise and inflation pressures ease. Our portfolios performed well in October, supported by our defensive positioning, as volatility briefly resurfaced. The results reaffirm the value of maintaining balance and discipline as markets navigate shifting narratives and renewed uncertainty.
Over the past year, performance remains strong, a reflection of disciplined risk management through volatile market phases. As the narrative evolves from peaking to pivoting, we see opportunity, not in chasing optimism but in holding conviction through transition.
At Human Financial, our focus remains clear: long-term rewards are best achieved by managing the risks others ignore.
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