Content

• UK: Inflation increased, but markets outperformed global peers

• Europe: Inflation continued to rise, while economic growth remained positive

• US: Economic growth accelerated, but technology stocks came under pressure

• Asia: Emerging markets experienced sharp falls as technology stocks weakened

• Looking ahead

At a glance

Most major global markets fell in October. UK markets were the strongest performers in the month, while emerging markets saw the biggest declines.

Inflation continued to rise in many regions, but economic growth remained positive across most major economies.

Despite a challenging month for investors, market returns remain strong year-to-date. This highlights the importance of taking a long-term approach rather than being pressured or swayed by short-term dips and volatility.

Overview

After a difficult September, global markets fell further in October, though performance varied by region. Technology stocks were among the weakest performers, as investors began to question whether the significant investment being made in AI would generate sufficient returns.

The UK was an exception, as its relatively high exposure to energy and defence sectors helped it to outperform other major markets. European markets also delivered positive returns, while US markets were held back by dips among some of their largest technology companies.

In more positive news, the US, UK, and eurozone economies continued to grow. However, inflation continued to rise in many regions, largely driven by rising energy prices amid the ongoing conflict in the Middle East.

UK: Inflation increased, but markets outperformed global peers

The UK had a relatively strong month compared with other major markets, although inflation continued to rise and economic growth remained low.

Inflation rose to 3.5% in September, up from 3.1% in August. Higher transport costs, particularly motor fuels, made the largest contribution to the increase¹.

The Bank of England raised the base rate to 4% in its November meeting, marking the first rise since April 2023. The Bank noted that the war in the Middle East had disrupted energy supplies and warned that there could be further rises in inflation².

There was slightly more encouraging news for the economy, as the latest figures show GDP continued to grow, though only by 0.1% in August. This followed growth of 0.4% in both June and July, while the economy expanded by 0.7% over the three months to August³.

For investors, rising inflation could mean further interest rate hikes are on the horizon. However, continued economic growth offers some reassurance.

Against this backdrop, the FTSE All-Share Index, which tracks around 900 of the UK's largest listed companies, gained 1.1% in October. This made the UK the strongest-performing major market over the month, with its exposure to energy and defensive sectors helping to support returns despite wider market uncertainty⁴.

Europe: Inflation continued to rise, while economic growth remained positive

European markets also delivered positive returns in October and economic growth was solid, although inflation continued to rise.

Inflation in the eurozone increased to 3.8% in September, up from 3.2% in August. Energy prices were the largest contributor to the increase, with the rate of energy inflation reaching 18.8%, compared with 14.3% the previous month⁵.

There was more positive news for economic growth, as the eurozone economy expanded by 0.4% in the third quarter of 2026, following growth of 0.6% in the previous quarter⁶.

The European Central Bank kept interest rates unchanged at its October meeting, following an increase in September, noting the risk that energy prices could lead to higher inflation⁷.

For investors, rising inflation and uncertainty over future interest rate decisions remain important considerations. However, continued economic growth could help support business performance and investor confidence.

European markets delivered positive returns in October. The MSCI Europe ex-UK Index, which tracks large- and mid-cap companies across the region, gained 0.7%. However, concerns about France's financial position and political uncertainty continued to weigh on some markets⁸.

US: Economic growth increased, but technology stocks came under pressure

The US economy delivered stronger growth in the third quarter, although inflation remained high and concerns about AI investment wavered confidence in some of the largest companies in the market.

Inflation increased to 3.7% in September, up from 3.5% in August. Rising petrol prices were a major contributor, with costs increasing by 9.1% over the month⁹.

There was encouraging news on economic growth, with the economy expanding by 3.4% in the third quarter of 2026. This was up from the 2.1% growth recorded in the previous quarter¹⁰.

The Federal Reserve held interest rates unchanged at its October meeting, maintaining its target range at 3.75% to 4%. It noted that economic activity continued to expand at a strong pace, although inflation remained elevated and uncertainty surrounding global events persisted¹¹.

For investors, stronger economic growth offers some reassurance about the health of the US economy. However, persistent inflation makes the timing of potential interest rate cuts less certain, while concerns about the returns from AI investment have led to volatility.

US equities had a difficult month. The S&P 500, which tracks 500 of the largest listed companies in the US, fell by 0.9%. However, the equal-weighted version of the index, which gives each company the same weighting, gained 5%. This highlights how weakness among some of the largest technology companies masked stronger performance across other parts of the market¹².

Asia: Emerging markets experienced sharp falls as technology stocks weakened

Asian markets were among the weakest performers in October, with technology-related stocks performing particularly badly amid concerns about AI investments.

The MSCI Emerging Markets Index, which tracks companies across developing economies, fell by 8%. Meanwhile, the MSCI Asia ex-Japan Index, which covers large and mid-sized companies across Asia excluding Japan, declined by 8.2%¹³.

Inflation remained moderate in the region compared with other major economies. Japan's inflation rate was 2.1% in September, unchanged from August¹⁴. In China, inflation increased to 0.9%, up from 0.8% in August, although prices remained relatively stable overall¹⁵.

For investors, the falls in Asian markets highlight the risks associated with concentrated exposure to particular sectors and industries. However, the Asian and Emerging Markets remain the strongest performers year-to-date, which highlights the importance of focusing on long-term trends rather than short-term movements, as well as ensuring you maintain a diversified portfolio.

Looking ahead

The Bank of England has warned that inflation could still rise higher, and this could lead to further hikes in the base rate. This could weigh on markets and investor confidence.

However, despite a challenging month, markets remain strong year-to-date and many investments outside technology sectors continue to deliver positive returns.

So, October serves as a reminder of the importance of focusing on your long-term goals rather than reacting to short-term market movements. It also highlights the value of maintaining a well-diversified portfolio, as relying on any one region, sector, or asset class can leave you vulnerable to dips in that market.

If you have questions about your portfolio, or recent market movements have left you uncertain about what they could mean for your investments, your wealth planner can talk this through with you in the context of your long-term goals.

A simple glossary

Inflation is the rate at which prices rise over time. If inflation is 2%, something that cost £100 a year ago might cost around £102 today.

Low and high inflation both matter. Lower inflation can ease pressure on household spending and may give central banks more room to cut interest rates. Higher inflation can make everyday costs rise more quickly and may keep interest rates higher for longer.

Interest rates influence the cost of borrowing and the return on savings. When rates are higher, borrowing can become more expensive for households and businesses. When rates fall, it can sometimes support spending, investment and company confidence.

Index is a way of measuring how a group of investments has performed. For example, the FTSE All-Share follows a broad range of UK-listed companies, while the S&P 500 follows 500 of the largest listed companies in the US.

Equities are shares in companies. When you invest in equities, your return is linked to how those companies perform and how other investors value them.

Volatility means the ups and downs in investment values. It can feel uncomfortable, especially when markets fall, but it is a normal part of investing.

Emerging markets are economies that are still developing compared with larger, more established markets such as the US, UK or Europe. They can offer growth opportunities, but they may also experience sharper short-term market movements.

¹ 21.10.26 Consumer price inflation, UK: September 2026 – Office for National Statistics ²05.11.26 Interest rates and Bank Rate: our latest decision – Bank of England ³15.10.26 GDP monthly estimate, UK: August 2026 – Office for National Statistics ⁴02.11.26 Review of markets over October – JP Morgan ⁵16.10.26 Annual inflation up to 3.8% in the euro area – Eurostat ⁶30.10.26 GDP up by 0.4% in the euro area and by 0.5% in the EU – Eurostat ⁷29.10.26 Monetary policy decisions – European Central Bank ⁸02.11.26 Review of markets over October – JP Morgan ⁹14.10.26 Consumer Price Index – September 2026 – US Bureau of Labor Statistics ¹⁰29.10.26 GDP (Advance Estimate), 3rd Quarter 2026 – US Bureau of Economic Analysis ¹¹28.10.26 Federal Reserve issues FOMC statement – Federal Reserve ¹²02.11.26 Review of markets over October – JP Morgan ¹³02.11.26 Review of markets over October – JP Morgan ¹⁴23.10.26 Consumer Price Index: September 2026 – Statistics Bureau of Japan ¹⁵15.10.26 Consumer Price Index in September 2026 – National Bureau of Statistics of China

Please note

The value of your investment(s) and the income derived from it, can go down as well as up and you may not get back the full amount you invested.

This guide is for general information only and does not constitute advice. The information is aimed at retail clients only.

The content of this guide was accurate at the time of writing. While information is considered to be true and correct at the date of publication, changes in circumstances, regulation, and legislation after the time of publication may affect the accuracy of the guide.

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Succession Financial Management Limited is authorised and regulated by the Financial Conduct Authority. Financial Services Register number 225831.

Succession Financial Management Limited is registered in England and Wales at The Apex, Brest Road, Derriford Business Park, Derriford, Plymouth PL6 5FL. Registered Number 04454027.