Markets experienced political uncertainty in October, including the US government shutdown, France’s budget impasse and Japan’s change in leadership, even as clarity emerged on some tariff-related questions. The Templeton Global Macro team discusses investment implications and an updated outlook.
Key takeaways
͏͏͏͏͏͏͏͏͏͏October overview: Politics and uncertainty continued to cast shadows over markets during October. The US government shutdown continued throughout the month, with a number of data releases delayed as a result. In Europe, news out of France—the resignation (and subsequent reappointment) of the prime minister and a credit ratings downgrade—meant concerns over the fiscal situation in one of the European Union (EU)’s biggest economies remained center stage. Japan elected a new prime minister, who sought to assuage market concerns about prior comments related to preferring a weaker currency. China released its latest five-year plan, with various elements aimed at the country reaching a per-capita income level on par with mid-level developed countries in a decade. The United States and various Asian countries reached agreement on tariff packages. Growth-related releases remain relatively resilient even as risks remain elevated, partly due to tariffs. Inflation data in developed economies generally confirmed some pricing pressures were returning, but they remain more contained among a variety of emerging markets (EMs). The US Federal Reserve (Fed) cut interest rates again in October, though most central banks (many of which had been cutting rates during the Fed’s extended pause earlier in 2025) remained on hold. The US dollar (USD) was stronger overall in October, appreciating against most developed market currencies while having mixed performance against EM currencies. Bond yields fell in most countries during October, and EM sovereign credit was generally stronger.
Outlook: We see the global economy as undergoing a period of “global rewiring” on a number of fronts—evolving patterns and relationships that we anticipate affecting certain economies and markets for some time to come. Such rewiring could cover relationships between countries or developments within particular regions or economies. Our core themes of improving EM fundamentals, USD weakening and geopolitically induced shifts in global supply chains remain intact, with recent events providing further support to our views. Uncertainty remains elevated. Final tariff levels are still not decided for a number of countries. Risks from US tariff and trade policy encompass growth, inflation and/or geopolitical implications and vary by country. Domestic political developments in some countries raise fiscal and other policy concerns. Finally, the current lack of US data as the government shutdown continues and questions over the independence of traditionally non-partisan government institutions further increase uncertainty.
Continue reading further by downloading the PDF, which highlights the Templeton Global Macro team’s market and economic overview, and outlook for the month.
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Originally Posted November 7, 2025 – Global Macro Insights: October 2025
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