October was one for the books. Despite a wave of bad news – a full US government shutdown, trade tensions with China, and renewed geopolitical sanctions – global markets somehow managed to surge to new highs.

So, what’s really going on beneath the surface? Let’s unpack this month’s biggest stories.

Inflation Risks Rise as Oil Soars

The US found itself juggling multiple crises at once. First there was the government shutdown which cost an estimated $18 billion (due to lost economic activity). The US regional banking sector also faced some serious challenges. For example, Zions Bancorp and Western Alliance saw their share prices drop sharply because of big loan losses and cases of fraud. This situation has reminded many people of the Silicon Valley Bank collapse back in 2023. And finally the US and China trade war flared up after Beijing tightened rare earth exports – prompting Trump to threaten a 100% tariff on Chinese imports. That move sent shockwaves through crypto markets. Over $19 billion was liquidated in a single event, and Bitcoin tumbled from $125,000 to $102,000.

The US announced new sanctions on Russia which led to a 5% jump in the oil price (due to fears of reduced supply). The halt of trade talks with Canada raised the oil price even further with Canada being a major oil supplier to the US. These developments have reignited inflation fears, especially as the US grapples with potential food supply shortages.

A recent report from the US Department of Labour warns that 42% of agricultural workers might not be able to work in the US because they could be deported by immigration authorities (ICE) or choose to leave. This could lead to fewer workers in farms, which would reduce the food supply. With less food available, food prices could rise faster than the current rate of 3.2%.

South Africa: A Bright Spot on the Inflation Front

Back home, South Africa’s inflation story is remarkably calm. At around 3.5%, consumer inflation sits near the bottom of the SARB’s target range. That’s a far cry from the near double-digit spikes that we saw back in 2022.

Although overall inflation seems low, it hides big price increases in certain areas. Energy costs have dropped, but prices for agriculture and other goods are still higher than the average producer price index. For consumers, meat prices jumped from -0.5% in January to 11.3% in August, and vegetable prices peaked at nearly 15% in July. The key point: average inflation figures can be misleading. Households that spend more on items like meat, vegetables, health insurance, or school fees feel much higher inflation than the overall average.

South Africa’s reserve bank (SARB) wants inflation close to the bottom of its target range. This is good for stability, but it might slow economic growth. Inflation is already low (core inflation at 3.1%), and prices for regulated services aren’t rising much. Interest rates, after adjusting for inflation, are still high, making borrowing costly. So the question is: should the bank stay so strict when the economy is weak and demand is low? This cautious approach could be holding back investment and spending, making economic recovery harder.

The AI Boom Keeps Powering the US Economy

The US economy is witnessing an extraordinary shift, powered by an AI infrastructure boom that rivals historic tech investment cycles. Although technology accounts for just 4.5% of GDP, AI-related capital spending has contributed almost as much to GDP growth this year as consumer spending, which makes up 68% of the economy.

OpenAI, under CEO Sam Altman, has orchestrated unprecedented deals, securing 26 gigawatts of computing capacity from Oracle, Nvidia, AMD, and Broadcom. According to Financial Times calculations, these agreements represent over $1 trillion in spending commitments across the next decade – before a $250 billion deal with Microsoft’s Azure. The scale is incredible, requiring the energy equivalent of about 26 nuclear reactors.

OpenAI’s aggressive expansion comes despite steep operating losses: $8 billion in the first half of the year, against $13 billion in annual recurring revenue. The company’s strategy? Leveraging external balance sheets to fund growth.

The Magnificent Seven alone are projected to spend $400 billion in capex over the past 12 months. This investment wave is bolstering US growth even as hiring in the overall labour market slows.

China: Export Growth Today, Domestic Focus Tomorrow

China’s economy surprised on the upside in Q3, posting 4.8% GDP growth, driven largely by a rebound in exports. While shipments to the US remain under pressure amid ongoing trade tensions and tariff threats, demand from other global markets has helped offset the shortfall. This resilience emphasises China’s ability to pivot quickly in response to geopolitical headwinds.

But people in China are still spending carefully, and many are not very confident about the future. Because of this, the government’s next big plan (the 15th Five-Year Plan for 2026–2030) will focus on making the country less dependent on exports, encouraging people to buy more at home, speeding up progress in technology, and improving social support programmes. These changes are meant to help protect the economy from problems coming from outside and to support steady, innovation-driven growth.

Global Outlook: Not Great, But Not a Disaster Either

According to the IMF, the global economy is expected to grow 3.2% this year — slightly better than expected — before slowing to 3.1% in 2026 as tariffs bite.

Volatility remains the name of the game. Inflation risks, geopolitical frictions, and speculative excitement (especially in U.S. tech and crypto) suggest we’re nearing a market top. But for now, momentum is holding. As the saying goes: don’t fight the Fed.

Final Thoughts

October was a wild ride. Markets kept climbing even with a government shutdown, trade wars, and inflation worries in the mix. Underneath the headlines, big shifts are happening – the AI boom is powering US growth, China’s gearing up for a more self-reliant future, and global tensions aren’t going anywhere. For anyone watching the markets, the takeaway is simple: stay flexible and keep an eye on the bigger trends. Momentum’s still strong for now, but the next few months could bring surprises.