Market Movers:
Q4 2025 Market Drivers:
Risks:
The U.S. economy faces growing headwinds as a weaker labor market and slowing wage growth curb activity. Persistent inflation continues to erode real incomes, weighing on consumption and hiring, yet the economy remains resilient overall. Meanwhile, international trade and disinflation trends outside the U.S. are relatively stable, supporting the global outlook.
In the U.S.: Growth moderating to 2% but to remain positive in 2026 as Fed set to ease rates by 100bps
The U.S. economy remains supported by consumer spending, improved business sentiment, and AI-driven investment. Job growth is weak, but the “One Big Beautiful Bill Act” should provide fiscal stimulus in early 2026. Inflation has picked up modestly, with one-off price rises expected as firms pass on higher costs. Markets anticipate about 100bps of Fed rate cuts in the next 12 months, bringing the policy rate near 3%.
In Europe: Eurozone steady with modest growth at 1.4% and easing inflation
The Eurozone economy remains resilient, with growth expected to reach around 1.2% in 2025, supported by the U.S.-EU trade deal and stabilizing manufacturing activity. High savings, low corporate leverage, and gradual policy support should sustain the recovery. Inflation is near the European Central Bank’s (ECB) 2% target but likely to dip below next year amid lower energy costs and a stronger euro. The ECB is expected to keep its deposit rate at 2% for an extended period.
In China: Growth momentum stable around 5% amid trade negotiations
China’s Q3 data show moderating retail and investment growth but steady industrial output and export trends. U.S.-China talks in Madrid advanced a potential TikTok framework deal, hinting at a Xi-Trump meeting later this year. GDP is expected to grow around 5% in 2025, with inflation remaining near zero.
Global equities continue to rise, driven by solid earnings and strong investor sentiment, though diversification remains essential. The Fed’s 25bp rate cut and weaker U.S. labor data have revived expectations of further easing, supporting bonds, equity, and other risky assets. In our opinion, financial bonds remain a relatively safe investment opportunity, as lower yields and slowing growth favor total returns. Meanwhile, a softer USD and lower interest rates have pushed gold to a new record high of USD 4,000.
Equities: Global equity markets continued to perform well in September amid solid corporate earnings and strong investor sentiment, led by the Hang Seng Tech (+13.9% MTD; +44.7% YTD) and Kospi 200 (+10.2% MTD; +49.2% YTD). Meanwhile, the S&P 500 rose 3.5% MTD (+13.7% YTD) and the Euro Stoxx 50 climbed 3.3% MTD (+12.9% YTD).
Fixed income: The 2-year U.S. Treasury yield edged down 1bp to 3.62% in September, while the Germany yield gained 8bps to 2.03% and the China yield inched up 2bps to 1.44%.
Currencies: The U.S. dollar further weakened against EUR and CHF in September, with EURUSD up 0.4% MTD (+12.7% YTD) and USDCHF down 0.5% MTD (-11.9% YTD). In contrast, the greenback slightly appreciated against JPY and RMB, with USDJPY up 0.6% MTD (-5.7% YTD) and USDRMB up 0.1% MTD (-2.5% YTD).
Commodities: Gold at USD 3,841/oz (+10.6% MTD; +46.1% YTD) and copper at USD 10,593/mt (+6.3% MTD; +20.5% YTD) surged on lower yields and strong demand, while WTI oil at USD 62.37/bbl (-2.6% MTD; -13.0% YTD) declined amid ample supply and softer growth expectations.
Crypto: Bitcoin at USD 115k (+6.3% MTD; +22.4% YTD) and Solana (+4.4% MTD; +9.0% YTD) advanced, while Ether (-3.0% MTD; +25.4% YTD) dipped after strong earlier gains.
Outlook for Q4 2025: Steady growth and expected U.S. rate cuts create a supportive environment for diversified and currency-hedged portfolios.
Global equities advanced as softer U.S. labor data strengthened expectations for Fed rate cuts amid a still-favorable economic backdrop. Asia, particularly China’s tech sector, outperformed on a weaker USD and local momentum. Despite labor softness, global growth forecasts are being revised higher, and earnings are expected to rise. With resilient growth, Fed easing, and strong structural drivers like AI, the outlook for equities remains positive.
In the U.S.: Fed cuts and AI optimism drive stocks to new highs
U.S. equities reached record levels (S&P 500: +14% YTD) as the Fed resumed rate cuts following weak summer job data and dovish signals from Chair Powell. Historically, equities perform well during non-recessionary easing cycles, and the resilient U.S. economy supports this pattern. Lower rates should sustain earnings growth and further market gains. Meanwhile, continued AI investment by major tech firms has reignited momentum in the “Magnificent 7.”
In Europe: Earnings recovery ahead
The Euro Stoxx 50 (+13% YTD) has lost its early-year outperformance as optimism over German stimulus and EU defense spending fades amid political and growth headwinds. Strong euro and uncertainty in France have further weighed on sentiment. Earnings have been flat through 2024–2025, but improving PMIs and trade clarity point to a gradual rebound. We expect Eurozone earnings to grow around 10% in 2026, supported by renewed investment and fiscal spending.
In China: China tech rally driven by AI innovation and strong liquidity
The Hang Seng China Enterprises Index (HSCEI) is up 31% YTD, led by renewed strength in the technology sector and supportive domestic policies. AI monetization, cloud investments, and innovation in chips and LLMs are reducing reliance on foreign tech. Gaming and advertising are benefiting from tangible AI gains, while e-commerce and EVs face margin pressure. Robust liquidity and solid 1H25 results reinforce an attractive outlook for China tech and growth stocks.
We expect the U.S. dollar to weaken again as the Fed cuts rates faster than other regions. Large unhedged foreign investments and widening fiscal and current account deficits add further downside pressure.
EUR climbs to 3-year high at 1.1750, up 13% YTD amid Fed rate cuts and ECB pause
The Fed has begun cutting rates due to a clear economic slowdown, especially in U.S. jobs data, while the ECB remains on hold. This divergence should narrow the rate gap and weaken the U.S. dollar’s yield advantage. With hard data confirming U.S. weakness and Europe buoyed by improving sentiment, USD depreciation appears likely.
USDRMB declines to 7.14 from 7.37 high as USD adjusts lower on Fed rate cuts
The RMB appreciated ~3% YTD, with USDRMB touching 7.10 amid solid Chinese macro data. Supportive factors include the People’s Bank of China’s (PBoC) commitment to a firm currency, easing trade tensions, and Fed rate cuts. The previous 7.37 all-time high is unlikely to return. USDRMB could test 7.00 soon, with deeper support near 6.30.
USDJPY rebounded above 150 (-5% YTD) following Sanae Takaichi’s win in the LDP leadership race
Her pro-stimulus agenda, centered on low JPY financing to support exporters and growth, is expected to delay Bank of Japan’s (BoJ) rate hikes. We anticipate higher USDJPY volatility under Japan’s new policy direction.
We maintain a positive view on major bank bonds as central banks continue lowering policy rates, supporting bond returns. Long-duration positioning offers value, aligned with U.S. policy efforts to stabilize long-end rates and reduce deficit pressure. The financial bond asset class provides a strong risk-return profile, especially if growth weakens and rate cuts accelerate. Bank bonds serve as an appealing cash alternative, offering yields above 4% in USD and 3% in EUR.
Gold: Reached a new record high of USD 4,000, up 52% YTD
Gold is supported by lower rates and rising risks. Gold’s strong year-to-date rally reflects its role as a portfolio hedge amid economic and geopolitical uncertainties. We expect continued support from lower real rates, a weaker USD, central bank buying, and concerns over debt and financial repression.
Oil: Down 13% YTD to USD 62/bbl; OPEC+ output rise absorbed as oil stays in tight range
OPEC+ members will raise output by 137,000 bpd in October, citing solid demand and low inventories. Despite higher supply, the market remains tight, with futures still in backwardation. Oil prices are expected to stay within the USD 60-70/bbl range, while potential U.S. sanctions on Russia add uncertainty.
