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The U.S. labor market remains weak in hiring but stable in job security, supporting consumer spending despite slower wage growth. The Fed continues cutting rates toward a neutral stance, reflecting domestic policy priorities. Globally, outside of the U.S., disinflation prevails and central banks are maintaining low rates, viewing current policies as neutral and effective, supporting the global outlook.
In the U.S.: Growth resilient at 3.1% despite policy and government shutdown headwinds
The U.S. economy continues to expand above trend, with Q3 GDP growth at 3.1% and robust consumer spending supported by income gains and AI-driven investment. Tariffs and the ongoing government shutdown pose short-term drags, delaying data and weighing on sentiment. Price increases remain moderate, likely peaking in 2026 as shelter inflation eases. The Fed is expected to cut rates by 100bps in 2026.
In Europe: Eurozone growth recovers at 1.3% as policy support strengthens
The Eurozone economy is set to accelerate in 2026, supported by policy easing in Germany, neutral monetary conditions, and a resilient labor market. Improved clarity on trade with the U.S., strong household savings, and low corporate leverage should further aid recovery. Inflation, slightly above 2%, is projected to fall below target next year due to lower energy costs and a stronger euro. The European Central Bank (ECB) is expected to keep rates steady at 2% for an extended period, signaling limited scope for further cuts.
In China: Stable growth close to 5% amid U.S. trade tensions easing
China’s economy shows steady momentum, with retail sales, investment, and non-U.S. exports supporting growth. Exports to the U.S. have declined, dropping to 10% of total trade (from 15%), as the U.S. imposed new measures on ports and chips, and China on rare earths. The Trump-Xi meeting at the end of October extended the trade truce by one year, easing near-term risks. Policy support remains strong, keeping GDP growth near 5% and inflation around zero.
Global equities continue to gain momentum, lifted by strong tech earnings and renewed optimism following the one-year U.S.-China trade truce extension. Financial bonds remain attractive as declining yields and slower growth support total returns. The Fed made its first rate cut of 2025, from 4% to 3.75%, signaling further easing amid labor market softness. A weaker U.S. dollar and falling rates have also propelled gold to a new all-time high.
Equity: Global equities rose in October, with the S&P 500 up 2.3% (+16.3% YTD) and the Nasdaq 100 up 4.8% (+23.1% YTD), driven by strong tech momentum. European stocks advanced as the Euro Stoxx 50 gained 2.4% (+15.6% YTD), while Japan’s Nikkei 225 surged 16.6% (+31.4% YTD). Korea’s Kospi 200 soared 22.2% (+82.3% YTD), continuing its regional leadership. In contrast, China’s Hang Seng Tech fell 8.6% (+32.2% YTD), highlighting divergence within Asia.
Fixed Income: Government bond yields declined in October: U.S. 10-year yield fell to 4.08% (-7bps MTD; -50bps YTD), German 10-year to 2.63% (-8bps MTD; -27bps YTD), and China 10-year to 1.76% (-12bps MTD; +6bps YTD), reflecting easing inflation and expectations of continued monetary accommodation.
Currencies: EURUSD fell to 1.1534 (-1.7% MTD; +10.8% YTD) and AUDUSD slipped to 0.6543 (-1.0% MTD; +5.2% YTD), while USDJPY strengthened to 154.00 (+4.1% MTD; -1.8% YTD). USDRMB held steady at 7.1207 (-0.1% MTD; -2.6% YTD).
Commodities: WTI oil fell to USD 60.98 (-2.2% MTD; -15.0% YTD) amid strong supply, while gold climbed to USD 3,982 (+3.7% MTD; +51.5% YTD) and copper rose to USD 11,168 (+5.4% MTD; +27.1% YTD) on improved industrial demand and lower interest rates.
Crypto: We note cryptocurrencies retreated in October: Bitcoin fell to USD 109,446 (-4.5% MTD; +16.8% YTD), Ether to USD 3,860 (-8.0% MTD; +15.4% YTD), and Solana to USD 186.76 (-11.0% MTD; -3.1% YTD), as profit taking followed earlier gains and risk sentiment softened.
Outlook for Q4 2025: Steady growth and central bank easy monetary policy create a supportive environment for diversified and currency-hedged portfolios.
Global equities continue to advance, driven by strong tech earnings and renewed optimism following the U.S.-China trade truce extension. Strategic AI partnerships are reinforcing confidence in a sustained investment cycle and clearer revenue growth. Economic activity has surpassed expectations, with momentum likely to accelerate in 2026. Easing tariffs, expected Fed rate cuts, and supportive fiscal policies provide a favorable backdrop for further gains.
In the U.S.: S&P 500 (+16% YTD) has reached new highs amid resilient growth and Fed easing
U.S. equities continue setting record highs, supported by steady economic growth, Fed rate cuts, and a surge in AI-driven investment. Despite softer activity, growth remains solid and is expected to accelerate into 2026 as tariff effects fade and rate-sensitive sectors recover. Fiscal policy is turning more supportive, reinforcing the expansion outlook. Ongoing Fed easing and sustained AI spending by major tech firms have reignited momentum, particularly in the “Magnificent 7.”
In Europe: Euro Stoxx 50 (+16% YTD) advances on improving earnings and easing headwinds
European equities have surpassed their March highs, driven by cyclical sectors as earnings prospects improve. Healthcare rebounded amid clearer tariff and drug pricing reforms, while tech and financials remain key growth drivers. Inflation, energy, and manufacturing headwinds are fading, supported by lower rates and stronger PMIs. Valuations remain within normal ranges, justified by the recovery in growth and earnings expectations.
In China: Stronger outlook amid AI leadership
The Hang Seng China Enterprises Index (HSCEI) is up 26% YTD as China’s macro backdrop is increasingly supportive. AI and technology innovation remain the core growth engines, supported by strong capex, domestic policy, and global diversification trends. China tech earnings are expected to grow 40% in 2026, outpacing global peers, as AI monetization and self-sufficiency initiatives gain traction. Robust domestic inflows and favorable financial conditions continue to underpin equity demand, while valuations remain deeply discounted. With global investors still underweight China, rising confidence and liquidity may fuel further gains in the coming year.
The U.S. dollar faces mixed drivers, political uncertainty, trade tensions, and evolving Fed policy expectations. While shutdowns have limited economic impact, continued labor market weakness and prospects of a dovish Fed leadership point to renewed downside pressure.
EURUSD close to 3-year high at 1.15, up 10% YTD, as easing French risks lift euro outlook
French political risks have eased, boosting euro sentiment. With the ECB pausing its easing cycle and fiscal stimulus set to begin, the euro has become a stronger short-term alternative to the USD. As the U.S. dollar’s carry advantage fades amid structural challenges, EURUSD remains supported.
USDRMB declines to 7.12 from 7.37 high as investment flows push RMB higher
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 all-time high of 7.37 is unlikely to return. USDRMB could test 7.00 soon, with deeper support near 6.30.
USDJPY rebounded to 154 (-2% YTD) following the election of new Prime Minister Sanae Takaichi
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: Stabilizes above 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 15% YTD to USD 61/bbl; oil market stabilizes as OPEC+ adjusts output
OPEC+ raised production by 137,000 bpd for November, citing steady global demand and low inventories. Oil supply remains ample as sanctioned producers and South American output offset moderating Chinese imports. Oil is expected to stay in the USD 60-70 range this year, with prices stabilizing.
