Market Overview
Equity markets worldwide rose in October, as surging enthusiasm for artificial intelligence (AI) fueled a technology-driven rally that offset concerns about an uncertain global economic outlook.
Market behaviour during the month was driven by a familiar set of catalysts. The calm that had settled over global stock markets over the past several months came to an abrupt end in early October after the U.S. threatened to impose additional import taxes on Chinese goods in retaliation for export controls China had placed on its rare-earth minerals, which are critical components in the production of virtually all modern technologies. News of the U.S.’s warning to China sparked a steep market sell-off on concerns that trade tensions between the world’s two largest economies were once again escalating. Markets recovered in subsequent days after the U.S. appeared to soften its stance on higher China tariffs and on hopes that a highly anticipated meeting between the leaders of the U.S. and China would lead to further easing of tensions between the two countries. Notably, the results of that meeting, which included an agreement to extend the trade truce for one year, a reduction in U.S. import taxes on Chinese goods, and a one-year delay in the imposition of Chinese export controls on rare-earth metals, received a muted reaction from global stock markets, which were hoping for a grand bargain instead of the small gestures that broke little new ground.
While investors were digesting the latest developments in U.S. trade policy, they were also closely monitoring the most recent policy decisions by key central banks, with the U.S. Federal Reserve (Fed) at the forefront of this scrutiny. Despite the latest data suggesting that domestic inflation remained above its 2% target, the Fed, as expected, lowered interest rates 25 basis points (bps) at its October policy meeting, citing the slowing job market for its decision. However, the U.S. central bank also warned that its interest rate-policy path was not on a preordained course and that further reductions in borrowing costs were not a “foregone conclusion.” The yield on the benchmark 10-year U.S. Treasury note ended October at 4.08%, 7 bps lower than a month earlier.
Across the Atlantic, the European Central Bank (ECB) held interest rates steady in October, marking the third consecutive policy meeting in which it has done so. In justifying its latest action, the ECB reiterated its earlier assertion that its monetary policy was “in a good place” amid abating risks to economic growth in the eurozone. The most recent data suggested that year-over-year inflation in October in the common currency bloc continued to hover near the ECB’s 2% target. In the U.K., where the economy has been hampered by persistent inflationary pressure, expectations were growing that the Bank of England will leave interest rates unchanged at its policy meeting in November. In October, the yield on the 10-year German Bund, Europe’s principal safe-haven asset, fell 8 bps, ending the month at 2.63%.
Meanwhile, in Japan, the Bank of Japan held interest rates steady in October but warned that a rate hike was on the horizon, possibly as soon as December, as domestic inflation has exceeded the Japanese central bank’s 2% target for over three years.
Despite concerns about heightened global economic uncertainty, market enthusiasm for AI continued to grow during the month, thanks to a slew of deals, including a few involving ChatGPT maker OpenAI for its Stargate project, a $500 billion initiative aimed at building AI infrastructure. The combination of strong AI-deal activity and solid earnings results from several technology giants provided the momentum to sustain the stock-market rally for a seventh consecutive month. Notably, of the top 10 contributors to the MSCI All Country World Index’s appreciation in October, nine were technology stocks and accounted for 89% of the index’s overall return.
The start of the new earnings season provided investors with the latest update on how company profits have held up amid a challenging macro environment. In the U.S., 83% of the companies in the S&P 500 Index that reported results topped consensus estimates, outperforming the long-term average of 67%. The third-quarter earnings growth rate is estimated to have increased 10.8% from a year earlier. In Europe, 48% of the companies in the STOXX 600 Index that reported results posted better-than-expected earnings, below the 54% that do so in a typical quarter. The third-quarter earnings growth rate is expected to have increased 1.9% from a year earlier. In Japan, 62% of the companies in the TOPIX that reported results posted positive earnings surprises, surpassing the 53% beat rate over the past four quarters. The third-quarter earnings growth rate is estimated to have decreased 3.1% from a year earlier. In Hong Kong, 39% of the companies in the Hang Seng Index that reported results registered better-than-expected earnings, lagging the 57% beat rate over the past four quarters. The third-quarter earnings growth rate is projected to have decreased 10.7% from a year earlier.
Against this backdrop, equity markets in both the developed and developing worlds rose in October, with the latter outperforming the former. In the U.S., the S&P 500 outperformed, thanks to strong earnings results from several index heavyweight Big Tech companies. Across the Atlantic, the pan-European STOXX 600 gained but lagged the broader global index, as the Continent’s limited exposure to companies leveraged to AI continued to hamper performance. In Japan, the TOPIX outperformed, as investors cheered the elevation of a new business-friendly prime minster. In China, the Hong Kong-based Hang Seng Index, whose constituents include some of China’s major technology companies, fell, thanks to investor caution over trade uncertainties and profit-taking of shares of AI-linked companies.
Information technology was the best-performing sector in October, as investor fervor over AI boosted companies linked to this technology. Real estate was the worst-performing sector, as the Fed’s warning that interest rate cuts in the near term were not guaranteed dampened investor sentiment for real estate investment trusts (REITs). High interest rates increase borrowing costs for REITs and make real estate investments less appealing.
Outlook
Increased uncertainty surrounding the U.S. economic outlook and key policy measures, including specifically tariffs and an ongoing government shutdown, continue to sow volatility in markets and have interrupted what had previously been, in our opinion, a clearer line of sight towards decelerating inflation and strong likelihood of success achieving an economic soft-landing. On the other hand, the beginning of an easing monetary policy cycle by the U.S. Federal Reserve which began in September has provided a measure of support beneath companies in industries that typically exhibit a high degree of sensitivity to cost of capital.
While markets continue to wrestle with considerable uncertainty, we expect Infrastructure to continue to exhibit critical defensive qualities and remain an invaluable diversification component for investment portfolios given the essential nature and real asset characteristics of the asset class. In contrast to businesses and industries where valuation is underpinned primarily by revenue growth and often highly competitive profit margins, critical infrastructure derives considerable valuation support from its high fixed cost of investment and high visibility, high margin cash flows collected over long periods of time [to recoup the initial capital outlay].
This important combination of characteristics tends to lend itself to superior defensive positioning, in our view, against global trade uncertainty, inflationary pressure, economic recession and market volatility. On the risk side of the ledger, however, we include typically above-average levels of balance sheet leverage and sensitivity to interest rates.
From a sectoral standpoint, we see a number of multi-year critical infrastructure investment trends likely to continue largely undeterred by recent tariff and trade uncertainty. Electrification and the growing demand for power to accommodate the Artificial Intelligence (AI) / Data Centre development surge serves as an example, in our view. Utilities were a key positive contributor to performance during 2024 and have been as well in 2025. While we maintain a favourable sector outlook for Utilities and foresee scope for upward earnings revision, valuations have also re-rated higher, and we do not expect the same pace of returns for utilities to continue in the U.S. On the other hand, we continue to find very compelling valuations and opportunities in utilities outside the U.S.
Outside of the utilities sector, we believe U.S. midstream energy, namely oil & gas storage and transportation, continues to offer a compelling combination of attractive valuation and improved capital allocation discipline. And while increased uncertainty regarding global trade and the risk of global recession now weighs more heavily on energy prices and the sector earnings outlook generally, the vast majority of the cash flows associated with the portfolio’s midstream holdings are fee-based and enjoy strong support from take-or-pay contracts and spread differentials at key access points.
Elsewhere within the portfolio, we see an abundance of opportunities stemming from large-scale investment in transportation infrastructure, information technology and energy development & security, leading to increased demand for materials, capital goods and industrial equipment.
We believe the portfolio remains well-positioned to take advantage of these opportunities in real asset infrastructure businesses as well as key enablers, including materials, services, and technologies, that will both facilitate and benefit from increased investment in infrastructure.
The information contained herein provides general information about the Fund at a point in time. Investors are strongly encouraged to consult with a financial advisor and review the Simplified Prospectus and Fund Facts documents carefully prior to making investment decisions about the Fund. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated.
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Allocations and security selection are subject to change. The performance quoted represents past performance. Past performance is not a reliable indicator of future results. Mention of these securities should not be considered a recommendation or solicitation to purchase or sell the securities. It should not be assumed that any investment in these securities was, or will prove to be, profitable, or that the investment decisions we make in the future will be profitable or equal to the investment performance of securities referenced herein. There is no assurance that any securities referenced herein are currently held in the portfolio or that securities sold have not been repurchased. The securities mentioned may not represent the entire portfolio.
Equity securities will fluctuate in price; the value of your investment will thus fluctuate, and this may result in a loss. Securities in certain non-domestic countries may be less liquid, more volatile, and less subject to governmental supervision than in one’s home market. The values of these securities may be affected by changes in currency rates, application of a country’s specific tax laws, changes in government administration, and economic and monetary policy. Emerging markets securities carry special risks, such as less developed or less efficient trading markets, a lack of company information, and differing auditing and legal standards. The securities markets of emerging markets countries can be extremely volatile; performance can also be influenced by political, social, and economic factors affecting companies in these countries.
Securities and instruments of infrastructure companies are more susceptible to adverse economic or regulatory occurrences affecting their industries. Infrastructure companies may be subject to a variety of factors that may adversely affect their business or operations, including additional costs, competition, regulatory implications, and certain other factors.
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Published on November 18, 2025.