Market Review 6th October 2025
- Simplicity News Desk
- Oct 6
- 4 min read
Everything you need to know, Simplified!
Summary
Global equities pushed higher as investors looked past the US government shutdown, focusing instead on resilient growth, strong earnings and an increasingly supportive policy backdrop
High valuations remain sustainable in the absence of recession risk, with markets confident that earnings growth can justify current multiples
Healthcare led gains after a sharp policy-driven rebound, offering a more attractively valued counterbalance to the dominant growth sectors
Credit markets were firm with investment grade spreads tightening to their narrowest since 2007, supported by strong corporate fundamentals and persistent demand
Soft US labour market data was viewed positively as it signalled a cooling labour market consistent with further rate cuts
This week focus will be on Wednesday’s Federal Open Market Committee (FOMC) minutes, which will likely reveal tensions within the committee over the justification for rate cuts despite upgraded growth and inflation forecasts.
Market Review
Equities: onwards and upwards
The march higher in global equities continued as markets looked past the US government shutdown to focus on the broader, rosier picture. Recession risk is viewed as minimal, underpinned by strong corporate earnings, resilient consumption, rising productivity and an increasingly accommodative monetary and fiscal policy backdrop.
Without a recession high valuations can be justified, as sustained earnings growth allows stocks to grow into their multiples - or at least, sustain them. High valuations don’t create bear markets; recessions do. While fears of slowdown can trigger brief corrections, valuations tend to recover quickly when the downturn fails to materialise.
Last week healthcare was the best-performing sector, posting its sharpest single day bounce in years across both Europe and the US. Much-needed policy clarity from Washington provided the catalyst, helping to lift sentiment after a year of regulatory headwinds. Having lagged sharply, the sector now trades at a meaningful discount and offers an appealing counterbalance to the high-multiple growth sectors that have driven the rally.
With the US government in shutdown, September’s labour market report was not released as scheduled on Friday. Around 750k federal employees have been furloughed, including staff at the Bureau of Labor Statistics (BLS). Instead, it was Wednesday’s Automatic Data Processing (ADP) National Employment report that surprised markets, showing a loss of 32k private-sector jobs - well below expectations for a gain of 51k. The ADP data, which tends to be more volatile even than the unreliable BLS figures, may have been distorted by second order effects of prior Department of Government Efficiency layoffs.
The equity market reaction was, if anything, positive as the slowdown in the labour market is viewed as a healthy one that facilitates further rate cuts, which will add support to an already thriving equity market.
Credit: more clear skies
It has been clear and calm cruising for credit markets as spreads continue to tighten in a particularly strong technical environment. At 0.70% global investment grade credit spreads (the additional yield for lending to corporates over sovereigns) are the tightest since 2007, while US investment grade spreads are at their narrowest since the late 1990s. This reflects both the strength of corporate balance sheets and the relative deterioration of sovereign issuers.
There is a little more value using other measures of credit spreads including vs. the interbank swap curve rather than the sovereign curve. Corporate bonds trade around 1.15% over swaps, having sat inside 1.0% for much of 2021 and at similar levels at the end of 2018. On this basis, there may still be some room for further tightening (upside).
The market remains driven by strong technicals and demand. If anything, technical strength could sustain spreads from here, and given the attractive level of all-in yields, this makes for a compelling return. As with equities, credit spreads can stay narrow for some time, provided the economy and corporate fundamentals remain healthy – this is the markets’ current perspective.
The week ahead
Wednesday: FOMC meeting minutes
Our thoughts: The US government shutdown will be in focus this week and it is not clear what data will be published. The FOMC meeting minutes will likely draw attention, particularly with Stephen Miran now on the committee. Miran has argued that the neutral rate is materially lower than the broader committee’s view, setting up an interesting internal debate.
The latest quarterly economic projections showed upgraded growth and inflation forecasts yet still pointed to two further cuts in the remaining meetings of 2025. That combination is unexpectedly dovish, and the minutes may reveal some unease within the committee over the justification for such cuts.
Your weekly market review was powered by Canaccord Wealth
Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. The information provided is not to be treated as specific advice. It has no regard for the specific investment objectives, financial situation or needs of any specific person or entity. Where investment is made in currencies other than the investor’s base currency, the value of those investments, and any income from the m, will be affected by movements in exchange rates. This effect may be unfavourable as well as favourable. Past performance and future forecasts figures are not a reliable indicator of future results.
