October In Review: Growth Slips Value Rips

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October characterised a big rotation out of tech, healthcare and discretionary sectors into resources in anticipation of an improving global outlook.

• October dominated by market rotation into resources
• Australian indices notable laggards vis a vis global markets
• Hawkish RBA adds to subdued investor sentiment
• Earnings forecasts jump higher, mostly led by commodities

By Danielle Ecuyer

Australia lags the rest of the world

October is often thought of as a month of increased volatility. This year the ASX200 index eked out a total positive return of 0.39%, but underlying the headline index result hides some large and diverse price action.

Depending on the positioning of one’s portfolio, it was either a month to remember or a month to forget, such was the disparity between sectors and individual stocks.

Commodities took the gold, silver and bronze medals for performance, apart from gold (excuse the pun) which reversed its melt-up, weakening over -8% between October 20-27.

Resources lifted 4%, supported by global trade tensions abating, including an ‘agreement’ (note the quotation marks) between China and the US, with improving sentiment around global growth.

Gold stocks were up 13% by mid-October and finished the month down -0.4%, even though the gold price managed to hold on to a 3% gain despite its sell-off. Macquarie is quick to point out the October sell-off in gold stocks is merely a flesh wound, with the sector up 69% over the year past.

A much higher-than-anticipated September quarter CPI print pulled the ‘lower rate’ outlook off the table, shaking confidence and taking with it the more interest-rate-sensitive sectors and the ASX200.

As highlighted by Morgan Stanley, the index peaked at 9095 on October 21, a new all-time high before profit-taking moved in. The market odds of an RBA November rate cut shifted from 62% on October 27 to 7% pre the meeting. 

As expected, the RBA did leave interest rates on hold at the November meeting, in what some commentators are describing as a “hawkish hold”.

Morgan Stanley continues to forecast two more rate cuts to a terminal rate of 3.1%. The two -25bp cuts have been deferred until August and November 2026.

By comparison, as Macquarie notes, FedWatch has the odds of a Fed cut in December at nearly 70%.

From a macro perspective, the pathway of interest rates is not favourable for Australia relative to the US.

Despite the sentiment boost from higher commodity and metal prices (aluminium, copper and zinc lifted 7.8%, 6% and 4.6%, respectively) the MSCI showing Australia lagged Emerging Markets, which rose 4.2%, and Developed Markets, up 2%, with Asia Pacific ex Japan up 4.3%.

Nasdaq rose 4.7% as the AI trade rolled on (ex-Australia) with the S&P500 up 2.3%. Resource-heavy FTSE100 also advanced 3.92%.

The Nikkei225 was the absolute standout, up 16.6% stimulated by a favourable election outcome.

Japan’s first female Prime Minister brings forth not only an admiration for Britain’s Iron Lady, Margaret Thatcher, but market expectations her policy agenda will favour demand-led growth over inflation control, with an expansionary fiscal policy.

The haves and have nots in October

Breaking down the sector performance, large-cap technology, discretionary and healthcare stocks were a drag on the index, with the Small Ords outperforming Large by 1.6% over October.

Morgan Stanley points to a barbell strategy as a winner, with Materials adding 87.8bps and Financials 49.1bps to the index, offsetting Discretionary, minus -55.4bps, Healthcare, minus -36.6bps, and Technology, minus -28.5bps, for a net market gain of 39bps.

Specifically, WiseTech Global ((WTC)) shares fell over -23%, a -16.64bps drag, in seemingly another ‘own goal’ with ASIC and Australian Federal Police raiding head office over share trading activity, some 12 months post the last governance PR travails for the company.

Light & Wonder ((LNW)) moved its primary listing to the ASX, and investors dumped the stock over -15%, taking Aristocrat Leisure ((ALL)) with it for a minus -15.3bps impact on the index, Wesfarmers ((WES)) shares contributed a negative -34.1bps and Pro Medicus ((PME)) a negative -9.1bps, as that share price weakened by -14%.

Unlike US markets, growth stocks were on the nose. Value, up 2.1%, outperformed growth, down -1.9%, with Macquarie also pointing the finger at CSL ((CSL)) for another earnings downgrade. That share price lost -10% in October.

Large banks did some heavy lifting, with CommBank ((CBA)) up 29bps, a reversal of September’s losses, and with ANZ Group ((ANZ)) up 37.8bps. BHP Group ((BHP)) up 17.1bps, Fortescue ((FMG)) up 16bps, and Rio Tinto ((RIO)) up 14.9bps completed the top five contributors for the month.

Looking at FNArena’s selections of stock performance data (see further below), it is also worth noting Treasury Wine Estates ((TWE)) shares fell -15.3% with ongoing oversupply and inventory problems for both China and US markets.

Shares in Droneshield ((DRO)), which was swept up in the global defense stock euphoria, deflated -17.8%.

For the longer-suffering lithium investors, Pilbara Minerals ((PLS)) and Mineral Resources ((MIN)) topped the list of ASX100 top performers, up 31% and 18%, respectively.

Earnings forecasts upgraded on better global growth outlook

An improved global growth outlook triggered a rally in commodity prices, boosting earnings forecast upgrades for the Materials sector, which helped underpin positive revisions across the broader market.

Morgan Stanley notes the ASX200 earnings forecast for FY26 is 2.5% higher than a month ago.

Macquarie analysts’ bottom-up FY26 EPS estimate has been upgraded by 240bp to 5.2% growth, with FY27 up 680bp to 7.5% growth, again mainly attributed to higher commodity pricing forecasts.

AGM season has equally thus far been positive, with net guidance upgrades of 10pts. The latter broker anticipates more upbeat surprises from upcoming AGMs.

If the Australian market can traverse the inflation and interest rate cycle concerns, the set up for the month of November is considered positive. Over the last decade, November has had the highest average monthly returns, with US equities gaining 4.4%, Macquarie points out, and the ASX advancing 3%.

Macquarie’s FOMO Meter has lifted to 0.96, the highest in 2025, with active investors ‘bullish’ and equity exposure of 100.8% compared to November’s usual positioning at over 100%.

Further rate cuts from the Federal Reserve and improved economic momentum globally are expected to continue to boost investor sentiment.

Morgan Stanley is more than happy to blow its own trumpet, where Materials has been a key Overweight call for the broker’s Macro-plus Model Portfolio.

The positive earnings indications from the resources sector support the broker’s conviction of market rotation, which was strongly evidenced in October on the ASX.

ASX100 Best and Worst Performers of the month (in %)

ASX200 Best and Worst Performers of the month (in %)

ASX300 Best and Worst Performers of the month (in %)

ALL-TECH Best and Worst Performers of the month (in %)

All index data are ex dividends. Commodities are in USD.

Australia & NZ

The World

Metals & Minerals

Energy

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