3 Things You Need to Know This Week | Central Bank Meetings, Trade Update, Q3 GDP

View Transcript

Mat White:

Hello and welcome to Three Things You Need to Know this Week, our regular series designed to help you sift through the noise across financial media and understand what really matters for markets.

To stay up-to-date with our latest market insights, subscribe to our YouTube channel or visit FisherInvestments.com.

And with that, here are three things you need to know this week.

First, central bank meetings. This week is shaping up to be a busy one for monetary policy, with announcements expected from the US Federal Reserve, the Bank of Japan and the European Central Bank, or ECB. While the Fed will likely dominate headlines, other central banks may also announce rate changes, including a potential rate hike from the Bank of Japan.

Over the summer, jobs and inflation data sparked unease among investors. Some called for central banks to cut rates to help support the economy, while more recently, fears have shifted to the opposite concern: that the Fed might lower rates too quickly, potentially overheating loan growth and reigniting inflation. Now, we think both views overstate the influence central banks have on the economy. Lending costs are still mostly driven by deposits, not the Fed, and changes in policy rates don't guarantee a particular economic outcome. While we aren't ruling out the possibility of a recession this year, we believe the last few years have shown that central bank rate decisions are not the primary drivers of market or economic growth.

Next, international trade updates. Mexico and Canada are strengthening their trade ties ahead of the July 2026 renegotiation of the United States-Mexico-Canada agreement, or USMCA. Last month, the two countries announced the Canada Mexico Action Plan, a three-year initiative aimed at boosting trade and investment. To us, this collaboration underscores an underappreciated positive of increased trade cooperation amongst countries outside the US.

Things were less positive between the US and Canada, where trade negotiations broke down again last week, with President Trump announcing he was canceling negotiations with Canada. However, despite escalations earlier this year, the effective tariff rate for Canada and Mexico remains just 7%, well below the global average of 16%, as most goods these countries export to the US are already compliant with the existing USMCA, which allows tariff-free trade for most goods.

In other trade news, the 90-day negotiating period between the US and Mexico is set to expire at the end of this month, and President Trump is expected to meet with China's president on Thursday at the upcoming Asia-Pacific Economic Cooperation Summit. While trade tensions between the US and China remain high, it's important to remember that such tensions are not new for investors or the stock market. Tariffs have been a dominant headline for over six months, giving markets plenty of time to weigh potential outcomes and adjust accordingly.

Earlier this year, we saw the market rebound from a tariff-related volatility, demonstrating its growing resilience to trade issues. While we continue to closely monitor developments, we encourage investors to stay focused on fundamental economic trends and stick to their long-term goals, even in times of geopolitical tension.

Finally, preliminary US and eurozone Q3 2025 GDP estimates. Preliminary third quarter GDP data for the US and the eurozone will be released soon. While GDP is expected to have grown in both regions, US growth is likely to have slowed compared to Q2. This aligns with our view that the global economy will likely continue expanding this year, even with the impact of tariffs.

It's important to remember that stocks don't need strong GDP growth to rise; just for conditions to turn out better than expected. Slower economic growth may worry some because they assume robust GDP growth is necessary for strong stock returns. However, history shows that the US stock market has often featured double-digit positive returns even during periods of more modest economic growth.

Regardless of whether a headline GDP reading is good or bad, it's always essential to look beyond the surface. Digging into the underlying components provides a clear picture of how the private sector is performing, which is what stocks care about most.

And that's it for this episode of Three Things You Need to Know this Week. For more of our thoughts on markets, check out This Week in Review, released every Friday. You can also visit FisherInvestments.com.

Thanks for tuning in and don't forget to hit like and subscribe!