Fund Return 2025 - 2026

Fund return to 31 October 2025

Investment Commentary

Provided by Mercer - CERS Investment Adviser

Market Developments

Global equity performance was positive in October across US, non-US developed, and emerging markets. EM stocks outperformed US and non-US developed markets. Small cap underperformed large cap stocks, while growth outperformed value as measured by the Russell 3000.

At the start of October, the US government shut down. The current shutdown has lasted 31 days so far, close to the previous record (35 days in 2019). Economic data releases were patchy throughout the month as data agency employees faced furloughs. The Bureau of Labor Statistics released CPI data but did not release employment numbers.

As widely expected, the Federal Reserve cut rates by 25bps in October, the same as in September, still citing increased risks to the labor market. Inflation creeping up further above target this month led Fed Chair Powell to adopt a slightly more cautious tone regarding another cut in the upcoming December meeting. The Fed also announced they will end the Quantitative Tightening program beginning in December.

Economic data from private data providers showed job openings increased more than expected. Short-term inflation expectations slightly declined in October. Consumer sentiment also fell marginally but remained above the Liberation Day lows.

Headline inflation in the US rose 3.0% year-over-year in September, below expectations. Core price increases declined to 3.0% over the trailing year, also better than expected. Headline inflation in other developed markets was mixed; it remained at 3.8% in the UK, rose to 2.2% in the Eurozone, and 2.9% in Japan. The ECB held rates for a third consecutive meeting, and the BOJ held rates in their October meeting.

President Trump helped to broker the first phase of a ceasefire between Israel and Hamas in Gaza. The US imposed sanctions on two Russian oil companies as Russia continued to escalate the conflict in Ukraine. The political stalemate in France continued, leading to two more rating agencies to downgrade its sovereign debt rating. Sanae Takaichi was appointed as Prime Minister of Japan and met with President Trump to discuss trade and other issues later in the month. President Trump also had trade talks with South Korea and met China’s President Xi later announcing a trade truce pending further negotiations. Even as the geopolitical and trade environment remained uncertain, markets focused on the upside such as progress in trade negotiations and the ceasefire in the Middle East.

The US dollar strengthened slightly against developed market currencies in October. Oil fell by about 2.2% and gold continued to rally, even if this was a risk-on month. Listed real assets had negative performance, underperforming broad equities.

Outlook

We expect most central banks to continue to loosen policy. The Fed is likely to focus more on slowing growth rather than rising inflation, with the precise timing of cuts a function of labor market data. The ECB is nearing the end of its cutting cycle, but may cut one more time in 2025, especially if the euro remains strong. We expect the BoJ to raise interest rates again, ultimately taking rates above 1%. In China, monetary policy is expected to remain accommodative, but with any new policy loosening largely coming from fiscal rather than monetary policy.

We think equities are vulnerable due to elevated economic uncertainty, weaker economic growth, higher inflation in the US in the near term and stretched valuations. Bond yields may remain rangebound unless the Federal Reserve clearly indicates that it will meaningfully cut interest rates. Credit spreads are likely to widen modestly if, as we expect, weaker economic growth leads to higher default rates. We think the US dollar will continue to fall, with its valuation still high and global investors possibly looking to reduce their large dollar holdings.

Investment Update - October 2025 - updated 11.11.2025.

Notes

• Scheme Year to date performance is the period from 1 June 2025 to the most recent month shown.
• Performance shown is net of annual management charge.
• The investment choices offered by the Trustee will be regularly reviewed and may be varied from time to time.
• Before you choose a fund we recommend that you speak to a financial adviser. 
• If you require further information please contact the CIRT Team at [email protected]