This Week in Review | Q3 Recap, US Jobs, US-China Trade

Transcript

Hello and welcome to This Week in Review.

This weekly segment is designed to highlight a few things you may have missed this week, what they could mean for financial markets and why they matter to investors like you. 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 Q3 recap.

With the final quarter of 2026 now underway, it's worth pausing to take a look at what investors navigated over the past three months. Stocks experienced a modest decline throughout July, but rebounded strongly to a record high in August. Then September brought more sideways chop, but the MSCI World still finished the quarter up around 2% for the quarter and nearly 12% for the year. Stocks rose in Q3 despite no shortage of headline risks along the way. Investors grappled with continued escalation in the US-Iran conflict, lingering tariff uncertainty, mounting worries about government debt and interest rates, a weakening Japanese yen and the UK selecting yet another prime minister. Monetary policy was another big storyline. The European Central Bank raised its policy rate for the second time this year, while the Federal Reserve delivered its first rate hike since 2023. Long-term government bond yields climbed around the world, too. The US 10-year Treasury yield pushed above 5%, and yields in Germany and Japan reached multi-year highs. And these moves revived some familiar concerns about inflation, borrowing costs and government finances, especially after US public debt crossed $40 trillion. Meanwhile, the Japanese yen fell to its weakest levels against the US dollar in roughly 40 years, eventually prompting an unusual joint intervention by US and Japanese policymakers. Yet, through all of it, stocks still closed the quarter near record highs. A key lesson for investors is that markets don't require perfect conditions to move higher. Time and time again, they climb through geopolitical tensions and economic uncertainty because they're already looking ahead to what conditions may be 3 to 30 months down the road. Short-term volatility is always possible, but history shows investors are generally better served by staying disciplined through unsettling headlines.

Next, US jobs.

Today, the US Bureau of Labor Statistics released September's job figures showing nonfarm payrolls rose by 29,000, while the unemployment rate increased to 4.2%. While job growth slowed from August's pace and missed expectations, the report still points to a labor market that keeps expanding overall. As we mentioned earlier, the Federal Reserve recently delivered its first interest rate hike since 2023. Given that backdrop, many investors were wondering if another month of positive jobs growth would increase the likelihood of more rate hikes ahead. September's slower hiring pace and the downward revisions to previous monthly job figures seems to have eased these concerns some, but jobs data can swing from month to month, so we wouldn't be surprised if the narrative around jobs growth causing inflation arises again in the coming months. That's because some believe labor market growth will lead to wage growth, and that could cause inflation. Believers of this theory assume, then, that stronger jobs numbers increase the likelihood of Fed rate hikes. But we would argue this argument is flawed. Labor market growth does not automatically lead to stronger wage growth. In fact, inflation adjusted wage growth has been negative for much of this year, even as the labor market has continued expanding. And even if wage growth were to pick back up, that doesn't automatically mean inflation will follow. Workers often seek higher pay to keep up with rising living costs, while businesses adjust compensation based on the economic environment that already exists. In that sense, rising wages are often a response to inflation rather than the cause of it. We believe stronger wage growth, should it emerge, would be a positive for workers and help support household spending, not something investors should automatically fear. That may not fit the inflation narrative often attached to positive jobs reports, but we believe it's the more important takeaway from today's data.

Finally, a US-China trade update.

This week, the United States and China announced an agreement to reduce tariffs on roughly $60 billion worth of goods, including a range of consumer products, industrial inputs and commodities. The announcement follows the recent meeting between President Trump and President Xi, and offers investors something they haven't seen much of lately: fewer trade barriers rather than another round of restrictions. While markets have learned to live with tariff headlines, we continue to believe that tariffs are an economic headwind. Tariffs can raise costs, disrupt established supply chains and create uncertainty for businesses trying to make long-term investment decisions. At the same time, one reason global growth has remained resilient is that businesses are highly adaptive. When trade policies change, companies adjust. Suppliers find new customers, manufacturers identify alternate input sources, governments pursue new trade agreements. We've seen this play out across the globe over the past two years. For investors, Monday's announcement matters most because it reduces, rather than adds to, a widely-discussed source of uncertainty. Markets have spent years digesting trade disputes and tariff negotiations. A step towards lower trade barriers won't solve every issue between the world's two largest economies, but it's a reminder that cooperation can emerge even after long periods of tension.

That's it for this week.

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