Autumn Market Outlook

Equity markets extended their gains as certainty about US tariffs and renewed AI optimism maintained positive investor sentiment. Many US trade partners struck agreements with the White House, generally lowering their trade barriers and promising public and private investment in the US, in exchange for lower tariffs. With lower tariffs and resilient economic growth, the chances of a global recession have significantly reduced. The tech sector continues to post growing earnings as it attracts huge new investment. Tariff certainty and tech growth helped Japanese and emerging market equities to gain. US stocks also rose due to gains from the largest tech companies as Google became the latest company to join the ‘$3 trillion club’.

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UK shares gained, especially in mining, telecoms, financials and utilities, as investors were lured away from the US by attractive relative stock valuations. Rising commodities prices also helped British shares. European stocks only made small gains as anaemic earnings growth, trade-war uncertainties and France’s political uncertainty held the region back.

Bond yields in the US, France and the UK hit multi-year highs as investors sought higher premiums, worried about rising levels of debt and growing deficits. This led gilts to trade flat. Meanwhile, corporate bonds made small gains, though the surge in issuance in the first half of the year tapered off in the third quarter, especially for investment grade bonds.

The acturial view

Until now, the US Federal Reserve’s fear of inflation has outweighed its concerns about any cooling in the jobs market. However, further signs of weakness have finally broken the Fed’s reluctance to cut interest rates and it has signalled two more cuts are likely before Christmas. Markets see rates continuing to fall through 2026; however, leading indicators, such as rising producer prices, suggest a further pick up for inflation. In this case the Fed may cut rates slower than markets are predicting.

Many of America’s trading partners have settled on higher reciprocal tariff rates, and trade talks with China are ongoing. This significantly reduces the chances of a worst-case scenario trade-war. Despite indicators showing little change in current economic activity, high US tariffs are generally expected to contribute a slowdown in global growth, and a mild recession in the US remains a possible outcome. In addition, the high valuations of some US equities present an ongoing risk if there is a shift in investor confidence. Against the negative outlooks, certainty about US tariffs brings the possibility of faster growth due to greater business investment. The potential for further Chinese stimulus as well as fiscal support from the US and EU, to address weakening growth, could lead to faster global economic growth and support equity values.

This post is the opinion of Velarium Wealth and contains a document produced by FE Investments that we feel is relevant at the current time. This document has been prepared for general information only and is not guaranteed to be complete or accurate. It does not contain all of the information which an investor may require in order to make an investment decision.