Monthly Report October 2025

Market Development – October 2025

‍Equity markets continued to advance in October, supported by mostly solid quarterly results from companies. The broad Swiss SPI Index gained 1.4%, while Germany’s DAX rose 0.3% in EUR. In the U.S., both the S&P 500 and the MSCI World Index benefited from the ongoing strong performance of technology stocks, advancing 2.3% and 2.0% respectively in USD. Despite negative performance in China, the MSCI Emerging Markets Index managed to post a 4.2% gain in USD.

Toward the end of the month, the U.S. Federal Reserve lowered its key interest rate by 0.25% for the second consecutive time. Consequently, 10-year U.S. yields declined further toward 4%, supporting bond prices. Gold extended its strong upward movement in the first half of the month but later gave back a significant portion of its gains, closing with a 3.7% increase in USD.

Government Shutdown and U.S.–China Trade Conflict Without Significant Market Impact

‍Since October 1, large parts of the U.S. administration have been shut down due to the inability of Republicans and Democrats to agree on a new federal budget. Institutions deemed non-system-relevant remain closed or have placed employees on unpaid leave, while around 32% of federal workers continue to work without pay. A key point of contention is healthcare spending. Democrats want to reverse cuts to Medicaid, the public healthcare program for low-income citizens. Republicans, on the other hand, aim to limit subsidies for private health insurance (Obamacare) to two years and only for those with legal residency status. Democrats fear that millions of Americans could otherwise lose their insurance coverage. With over 35 days, this is now the longest government shutdown in U.S. history.

In response to new Chinese export controls on rare earth elements, U.S. President Trump threatened additional 100% tariffs on Chinese imports. However, following a meeting with President Xi Jinping at the end of October, Trump declared that all obstacles in the dispute had been “removed.” China agreed to suspend the planned tightening of export restrictions for one year, while the U.S. announced it would significantly scale back its technology sanctions and trade tariffs. So far, neither the government shutdown nor the trade tensions between the U.S. and China have had a material impact on the equity markets.

Funds and Mandates Performance

‍All Format portfolios achieved positive returns in October. The Format Aktien Schweiz fund recorded the strongest performance, rising 1.6% and slightly outperforming the SPI benchmark. Meanwhile, Format Aktien Schweiz Dividendentitel gained 0.2%, lagging its reference index for once.
Performance figures for all Format funds and mandates year-to-date can be accessed via the link below.

Outlook

Following the latest rate cut, Federal Reserve Chair Jerome Powell tempered expectations for further reductions this year. Instead, the Fed announced that its quantitative tightening program—balance sheet reduction through security sales - will end on December 1.

Although equity valuations have risen recently, they remain justified, particularly in the technology sector, given the continued growth in corporate earnings. It remains uncertain when risks such as an economic slowdown, escalating trade disputes, or widening fiscal deficits might weigh on markets. For now, maintaining an invested position continues to be the prudent approach.

Best regards,
Matthias Hug and Markus Lackner

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