October 2026 Investment Market Update

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UK: Economic growth revised up and market returns were solid, but inflation continued to climb
Europe: Inflation rose again and markets recorded losses, but economic growth was stronger than earlier estimates
US: Inflation remained high, but economic growth and market returns were relatively strong
Asia: Markets delivered mixed returns, but inflation remained low
Looking ahead

At a glance

Market returns were broadly low in the third quarter (Q3) of 2026, with several recording losses. However, the UK was a relatively strong performer.

While Q3 was a challenging period for markets, year-to-date returns remain strong across the board, highlighting why it’s important to focus on long-term trends rather than short-term movements.

Inflation, interest rates, and global events continued to influence markets, with rising energy prices caused by the Middle East conflict driving prices up in many regions.

Overview

Global markets delivered mixed returns in Q3, with low gains in some regions and losses in others, as pressure on energy prices and persistent inflation caused markets to lag.

The UK was among the stronger performers, with Japan and the US also standing out. Elsewhere, Asia (excluding Japan), Emerging Markets, and European indices all recorded losses.

Economic growth remained positive across the major regions. However, inflation remained above central bank targets in most areas, while generally staying lower across Asia.

UK: Economic growth revised up and market returns were solid, but inflation continued to climb

The UK had a good quarter, as the economic growth figures were revised up and markets performed well relative to global peers. However, inflation continued to rise and reached its highest level in five months.

The latest data shows inflation rose to 3.1% in the year to August, up from 2.9% in the previous month. Transport, particularly motor fuels, made the largest contribution to the increase¹.

With inflation rising and the ongoing conflict in the Middle East creating uncertainty around energy supplies, the Bank of England held the base rate at 3.75% at its September meeting, meaning it has remained unchanged since December last year. The Bank also warned that inflation could continue to rise².

In more positive news, the UK economy grew by 0.5% in Q2 2026, revised up from the previous estimate of 0.4%. This was largely driven by growth in the services sector, as well as information and communication³.

For investors, rising inflation could make future interest rate cuts less certain. However, continued economic growth may provide support for company earnings and investor confidence.

While global markets were generally subdued in Q3, the UK was the second-strongest performer of the quarter among global peers. The FTSE All-Share Index, which tracks about 900 of the UK’s largest listed companies, returned 2.4% as equities benefited from exposure to financials, energy, and commodity sectors⁴.

Europe: Inflation rose again and markets recorded losses, but economic growth was stronger than early estimates

Eurozone inflation rose again in September, and markets struggled throughout Q3, but economic growth was solid.

The annual inflation rate increased to 3.8% in September, up from 3.2% in August and reaching its highest level since September 2023. Price acceleration was driven by a surge in energy costs amid the ongoing conflict in the Middle East. Inflation rose across all the euro area’s largest economies⁵.

In response to rising inflation, the European Central Bank raised its key interest rates from 2.4% to 2.65% at its September meeting – its second hike since the US-Iran war began⁶.

The eurozone economy grew by 0.6% in Q2, revised up from previous estimates of 0.4%, marking the strongest quarterly growth since Q2 2022⁷.

For investors, higher interest rates can increase borrowing costs, which can reduce profits and the value of shares. However, continued economic growth may help to support business performance and investor confidence.

European markets had a challenging Q3, as the MSCI Europe ex-UK Index, which tracks large- and mid-cap companies across the region, fell by 1.3%⁸.

US: Inflation remained high, but economic growth and market returns were relatively strong

US inflation remained high in August, while growth and market returns were strong.

The annual rate of inflation remained at 3.4% in August, unchanged from July, as gas and oil prices continued to rise⁹.

To help combat the persistently high inflation the US has experienced throughout 2026, the Federal Reserve raised interest rates at its September meeting to 3.75% – 4%, up from 3.5% – 3.75%. This marked the first increase in more than three years¹⁰.

The US economy grew by 2.2% in Q2, following growth of 2.5% in Q1¹¹.

For investors, higher interest rates can put pressure on market returns, but the strong economic growth can support business performance and investor confidence.

US equities performed relatively well in Q3. The S&P 500, which tracks 500 of the largest listed companies in the US, rose by 2.3% over the quarter¹².

Asia: Markets delivered mixed returns, but inflation remained low

Asian markets had mixed results in Q3.

Japan’s TOPIX, which tracks a broad range of companies listed on the Tokyo Stock Exchange, returned 3.8% over the quarter, making it the standout performer.

But the MSCI ex-Japan Index, which covers large and mid-sized companies across Asia excluding Japan, and the MSCI Emerging Markets Index, which tracks companies across developing economies, both fell by 0.2% over the quarter¹³.

Japan’s inflation rate was 1.9% in August, unchanged from July and remaining at its highest level since December 2025¹⁴.

In China, inflation rose to 0.8% in August 2026, up from July’s six-month low of 0.5%¹⁵.

For investors, the mixed returns on Asian markets in Q3 highlight the importance of maintaining a diversified approach that doesn’t concentrate your holdings in one particular region or market.

Looking ahead

The UK Budget is scheduled for 28 October. The weeks building up to a Budget can bring some market uncertainty as investors and businesses speculate about what it may include.

However, it’s typically best to wait until the Budget is delivered to make any decisions rather than acting on rumours. Reacting to short-term headlines can distract from your longer-term goals. A well-diversified portfolio, built around your individual circumstances and goals, is designed to help you navigate periods of uncertainty.

If you have questions about your portfolio, or recent market movements have left you uncertain about what they could mean for your investments, your Wealth Planner can talk this through with you in the context of your long-term goals.

A simple glossary

Inflation is the rate at which prices rise over time. If inflation is 2%, something that cost £100 a year ago might cost around £102 today.

Low and high inflation both matter. Lower inflation can ease pressure on household spending and may give central banks more room to cut interest rates. Higher inflation can make everyday costs rise more quickly and may keep interest rates higher for longer.

Interest rates influence the cost of borrowing and the return on savings. When rates are higher, borrowing can become more expensive for households and businesses. When rates fall, it can sometimes support spending, investment and company confidence.

Index is a way of measuring how a group of investments has performed. For example, the FTSE All-Share follows a broad range of UK-listed companies, while the S&P 500 follows 500 of the largest listed companies in the US.

Equities are shares in companies. When you invest in equities, your return is linked to how those companies perform and how other investors value them.

Volatility means the ups and downs in investment values. It can feel uncomfortable, especially when markets fall, but it is a normal part of investing.

Emerging markets are economies that are still developing compared with larger, more established markets such as the US, UK or Europe. They can offer growth opportunities, but they may also experience sharper short-term market movements

Please note

The content of this guide was accurate at the time of writing. Information may change after publication because of changes in circumstances, regulation, or legislation. This guide is for general information only and does not provide personal advice. It is intended for retail clients.

The value of your investment, and any income from it, can go down as well as up. You may not get back the full amount you invested.

Succession Wealth Management Limited is authorised and regulated by the Financial Conduct Authority. Financial Services Register number 588378

Succession Wealth Management Limited is registered in England and Wales at The Apex, Brest Road, Derriford Business Park, Derriford, Plymouth PL6 5FL: Registered Number 07882611

Last updated October 2026

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October 2026 Investment Market Update

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