This Week in Review | Tech Volatility, Rate Decisions, UK Budget, Q3 GDP

Paige Tyson:

Hello, and welcome to This Week in Review. This weekly segment is designed to highlight a few important developments you may have missed this week, what they may mean for markets, and most importantly, the potential impact for investors. To stay up to date with our latest market insights, subscribe to our YouTube channel or visit FisherInvestments.com. Now, before we dive into our recap of the week, we want to acknowledge the volatility that has reemerged this morning as headlines swirled about Tech earnings. The developments are worth watching. But as we always say, volatility can happen at any time, for any reason or no reason at all. We encourage investors to remain disciplined and not let scary headlines spook you into deviating from your plan. Now let's review what happened this week.

First, central bank rate decisions.

It was a busy week for central banks. The US Federal Reserve, the Bank of Japan, the European Central Bank all kept rates unchanged, while the Bank of Canada raised its key rate by 25 basis points to 2.5%. Now, for years after the global financial crisis, central banks held interest rates near zero, and they bought a large amount of long-term bonds to push borrowing costs lower. Today, many are moving away from those extraordinary measures and letting market forces play their usual role in setting long-term rates. Over the past year, central banks have raised short-term rates to fight inflation, and some investors worry that higher short-term rates signal tighter policy that could slow economic growth. But focusing on short-term rates alone misses the bigger part of the picture. When long-term rates rise more than short-term rates, as we've seen recently, it's actually bullish. Banks' funding costs tend to follow short-term rates, while the rates they charge on long-term loans follow long-term rates. So a wider gap between the two makes lending more profitable. So banks tend to lend more. That puts more money to work across the economy, and stocks tend to do well in that environment. The bottom line: rate decisions grab headlines, but the relationship between short and long-term rates tells you more about the road ahead. When the next announcement arrives, it's worth taking a step back to look at the broader global picture.

Next, the UK Autumn Budget.

On Wednesday, UK Chancellor of the Exchequer John Healey delivered the Labour Party's first budget under new Prime Minister Andy Burnham. After months of rumors and speculation, the final package held few major surprises, offering clarity on changes that had mostly been previewed already. For markets, a measured outcome is often a constructive one. In the run up to the budget, fears centered on possible capital gains hikes and even a wealth tax, but neither materialized. Some of the measures that did make the cut came in smaller than many expected. Like every budget, this one creates winners and losers, but overall it proved less onerous than feared. The market's reaction was relatively calm. UK stocks finished the day roughly flat and bond yields were mixed. That measured response tells us something pretty important that markets had already pre-priced the rumors. Stocks don't wait for official announcements. They take in widely known information well ahead of time. The bigger story to us is clarity. Months of uncertainty can weigh on sentiment and make businesses and households hesitant to spend and invest. Now that the details are public, much of that uncertainty is lifted and we see that as a tailwind for stocks. Now, headlines haven't been kind. Commentators across the political spectrum have largely panned the budget, arguing that the UK's growth is too slow for modest tweaks to make a difference. But that gloom isn't necessarily bad news for investors. It keeps expectations low, and the UK doesn't need rapid growth for stocks to do well. Even continued modest growth could be a positive surprise. Ultimately, the UK autumn budget serves as a useful reminder that widely discussed policy changes tend to move the market less than headlines suggest. We think investors are better served by looking past the short-term noise and keeping their focus on the economy's underlying fundamentals and what those may mean for markets over time.

Finally, Q3 GDP estimates.

On Thursday, the US Bureau of Economic Analysis released its official first estimate for third quarter 2026 GDP. US GDP grew 3.4%, beating expectations of 3.1% and accelerating from 2.2% in the second quarter. We also got the first third quarter GDP estimates for the eurozone. Eurozone GDP eased to 0.4% in the third quarter, down from 0.6% in the second, but still exceeded economists expectations of 0.2% in the US. Resilient consumer spending and strong business investment, particularly in technology related equipment, supported growth. On the other hand, rising energy costs and inflation continue to pressure households, and trade weighed on overall growth. As with most economic data, there will be plenty of debate over whether this report is truly positive or just good on paper. And that's why it's worth remembering one simple idea: Stocks are forward looking, GDP is backward looking. GDP tells us what already happened last quarter. Stocks don't wait for that report. They pre-price widely known information and move well ahead of the economy. With the Iran war ongoing and inflation still elevated, certainly some investors worry growth could slow from here. And they assume strong GDP is a must for strong stock returns. It's an understandable concern. But history tells a different story. The stock market has often delivered nicely positive returns, even during periods of modest economic growth. In fact, fears about a slowing economy can work in stocks favor, When expectations are low. it doesn't take much for reality to beat them, and that sets the stage for upside surprises.

That's it for this week.

Thanks for tuning in to This Week in Review. If you're looking for more insights, then don't miss our other series 3 Things You Need to Know This Week, released every Monday. You can also visit FisherInvestments.com anytime for our latest thoughts on markets. Thanks again for joining us, and don't forget to hit like and subscribe.