3 Things You Need to Know This Week | UN Assembly, ECB, French Politics

Transcript

Meg Leiken:

Hello and welcome to 3 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, the UN Assembly.

The United Nations begins its annual assembly this Tuesday with high-level general debates starting two weeks later. The summit will address major geopolitical issues, including the Russia-Ukraine war and the conflict in Gaza. However, these meetings rarely produce outcomes with immediate, tangible impacts on the global economy or stock markets.

While war takes an immense and tragic human toll on those directly affected, market history consistently shows that regional conflicts are unlikely to trigger a global economic recession or a bear market—even when the US or other major powers are involved.

A resolution in Ukraine could help lift the cloud that has weighed on European investor sentiment for years. However, we encourage long-term investors not to assume a peace deal would dramatically move stocks. Markets already factor in widely known information, and as this topic is so widely discussed, the surprise power from any potential peace deal is likely limited.

Next, the latest on the ECB.

On Thursday, the European Central Bank—or ECB— is expected to make a policy announcement. Recall, the ECB cut its key interest rate by 25 basis points in June, warning that US tariffs could drive European inflation higher. However, eurozone inflation has remained near the ECB's 2% target. This suggests economic conditions may exceed pessimistic expectations, supporting continued European stock market leadership.

The ECB's rate cuts have steepened Europe's yield curve, creating an underappreciated tailwind for economic growth, and European banks in particular. A positive yield curve—where long-term rates exceed short-term ones— encourages lending by boosting bank profitability. In contrast, the US yield curve remains relatively flat, providing less incentive for loan growth. While yield curve changes don't solely determine market direction, the steepening trend could quietly sustain European market leadership throughout the year.

Finally, French politics.

The key question surrounding France today is whether political uncertainty is increasing. French Prime Minister Bayrou has scheduled a budget confidence vote for September 8th. Unlike earlier this year, when he survived three no-confidence votes within a month, Bayrou lacks sufficient support to survive this time. If he loses the confidence vote, his government will likely collapse, creating political uncertainty for French markets.

While uncertainty isn't ideal for markets, this situation isn't unprecedented or surprising for France. When Bayrou survived the earlier confidence votes, the opposition openly stated that they were reserving their efforts for budget discussions, marking this moment a key political milestone. Even if Bayrou's government falls, French markets are unlikely to be shocked since this outcome appears somewhat anticipated.

And that's it for this episode of 3 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!