This Week in Review | October Recap, Central Bank Policy, Q3 GDP, Trade

Transcript

Stephanie Kuehne:

Hello, and welcome to This Week in Review. This weekly segment is designed to highlight a few important developments that 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, let's review what happened this week.

First, a quick October recap.

Today marks the last day of October, wrapping up the first month of the fourth quarter. This week, markets notched a new all-time high, and as of this filming, stocks are on track to return around 3% for the month. Notably, this contrasts with October's reputation as the month of crashes. October's featured some famously bad slides, such as in 1987 and 2008, but this isn't the norm. Historically, stocks have risen 61% of the time and averaged just under 1% monthly returns in October. We believe this underscores the danger of anchoring to particularly painful years with market drops, and letting those memories overly influence what you expect ahead. We expect stocks to continue rising ahead. Fundamentally, this bull market has many tailwinds. Economic drivers are chugging along amid growing investor optimism For long-term investors, stocks have plenty to like in this overall fine backdrop.

Next, central bank meetings.

This was a busy week for central banks, with announcements from the US Federal Reserve, the Bank of Japan and the European Central Bank. The Fed and the ECB announced rate cuts while the Bank of Japan announced a hike. The media focused heavily on the Fed's decision, attempting to predict future Fed moves from Chair Powell's comments during the press conference. Many feel that figuring out the Fed's next move is critical to investors. Over the summer, jobs and inflation data made some investors nervous, with some calling for central banks to cut rates to support the economy. But more recently, that concern has flipped. Some now worry the Fed might lower rates too quickly, which could cause lending to heat up and spark inflation again. We believe investors often give central banks a little too much credit for influencing the economy. The cost to borrow is still mostly driven by bank deposits, not by the Fed. And a change in policy rates doesn't guarantee a specific outcome for the economy. To us, the past few years have shown that central bank rate decisions aren't the main thing driving markets or the economy. If you'd like to read more about our thoughts on the Fed's decision to cut rates, check out our latest Market Minder article.

Next, Q3 2025 GDP estimates. The US preliminary Q3 data reading was delayed this week in response to the ongoing government shutdown. Meanwhile, the eurozone's initial third quarter GDP data showed a 0.2% growth, which exceeded analysts expectations. This data from the eurozone, along with the expected economic growth in the US, fits with our view that the global economy will likely keep expanding this year, even with tariffs in the mix. Importantly, stocks don't need strong GDP growth to rise. They need conditions to turn out better than expected. In line with our forecast that non US stocks should outperform, the United States has revised estimates for GDP down, while estimates for Europe's GDP have continued to rise. Whether headline GDP reading looks good or bad, we believe it's essential to look beyond the surface. Digging into GDP's underlying components gives you a clear picture of how the private sector is performing, and that's what stocks care most about.

Finally, trade deal updates.

It's been another newsworthy week for trade deals as trade talks between the US and China heated up. And while the US's trade dispute with Canada continues. Let's take a closer look at what all of this means for investors. The US and China have indicated, ahead of more trade talks between their respective leaders, the countries have reached a preliminary consensus to pause additional tariffs and consider renewed Chinese purchases of American soybeans. The latest framework with China follows a common pattern. Initial tough rhetoric gives way to productive talks, and now both nations are signaling optimism. Meanwhile, the dispute with Canada over a television commercial has resulted in new, largely symbolic tariffs, since the majority of imports remain duty free due to the US-Mexico-Canada agreement. Recent history suggests this issue will likely be resolved once the ad controversy fades. To us, the recent developments in trade negotiations between the US, China and Canada highlight the market's capacity to adapt. Tensions and threats that once shook markets have become more routine, enabling investors and markets to look past these updates with greater confidence. Overall, while ongoing trade negotiations could still spark some short term volatility, the seemingly established patterns to these negotiations have allowed the markets to anticipate and navigate these fluctuations with greater ease.

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!"