3 Things You Need to Know This Week | China Politics, Global PMIs, UK Budget Update

Transcript

Tim Schluter:

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.

Before we begin, we want to acknowledge the developments in the Middle East over the weekend. This episode was filmed beforehand, and first and foremost, our thoughts are with those affected. We recognize the very real human toll and uncertainty moments like this bring. From a market perspective, it's natural for markets to react to geopolitical conflict in varying degrees, such as through short-term volatility or energy price swings. History suggests, though, that unless a conflict becomes broad and global enough to trigger a recession, markets have typically been positive six and 12 months later. We'll continue to monitor events closely and provide a more detailed update in this Friday's episode of This Week in Review.

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

First, China's annual government meetings.

On Wednesday and Thursday, the Chinese government will begin their annual government meetings. With one session for China's legislature and one for its political advisory board, the yearly "Two Sessions" bring together thousands of delegates from across China, typically in March. These meetings set the stage for major policy decisions on the economy, trade and even the military. Among the key announcements expected—China's economic growth target for 2026, along with potential new measures to stimulate the economy. And it's almost certain that ongoing trade negotiations with the US will be discussed, although it's possible no trade announcement will be made. Following these meetings, President Trump is expected to attend a summit with President Xi Jinping In China, where tariffs and trade talks between the world's two largest economies will be in focus. China's economy expanded 4.5 percent year-over-year in the fourth quarter of 2025, marking the weakest rise in three years. Importantly, while headlines continue to emphasize familiar concerns like the housing market slump and trade tensions with the US, these factors are all well-known and lack much negative surprise power. Outside of real estate, China's industrial output has positively surprised, and consumer activity has held up better than expected. We think investors' focus on China's long-standing problems and its ongoing trade dispute with the US distracts from China's ongoing economic expansion and positive contributions to global growth. Looking ahead, we believe China's economy will continue to play a vital role in supporting global growth this year, which is a positive for stocks.

Next, global PMIs.

This week, we'll gain fresh insights into the global economy, as financial data provider S&P Global releases final February Purchasing Managers' Index data for the US, UK, eurozone and Japan. These PMIs, as they're known, help provide a near real time snapshot of business activity. So, what do recent PMI data tell us? Despite ongoing concerns about global economic health, initial February composite PMIs revealed continued private sector growth in the US, UK, eurozone and Japan. Looking to the US, while it's true that composite PMI has slipped some in recent months, readings there still signal expansion. The global economy certainly isn't perfect, and there will always be areas of weakness. However, recent PMI data have shown us that businesses continue to be much more resilient than many anticipated. The bottom line for investors? PMI data continue to highlight the underappreciated strength of businesses and the global economy, reinforcing support for the ongoing bull market— especially if economic data continues to positively surprise.

Finally, the UK's Spring Statement.

On Tuesday, UK Chancellor of the Exchequer Rachel Reeves will deliver the annual Spring Statement. Twice a year—in spring and autumn— the Chancellor provides an update on the government's budget and the economy, which can include announcements on tax changes and fiscal spending priorities. Last autumn, Reeves introduced adjustments to tax and spending policies, with some speculating that rising long term interest rates could increase debt financing costs and potentially lead to further tax hikes. The Spring Statement, however, is expected to be much less eventful. Instead of major fiscal policy changes, the statement is expected to focus on updated projections for the UK's budget, debt and economic growth. Sentiment in the UK remains subdued, fueled by the perception of a struggling economy and looming payroll tax hikes. Recent economic data has been mixed, though GDP data indicate the UK economy continued to grow through 2025. Moreover, year-over-year inflation has decelerated following a few months of higher readings mid-last year, with inflation falling to 3 percent year-over-year in January. But stocks don't need perfect economic conditions to thrive. They simply need reality to be better than expected. And right now, the UK's economic fundamentals appear to be better than many appreciate. That gap between sentiment and reality provided a tailwind for markets last year, with UK equities rising 35 percent compared to global stocks' 21 percent. To us, the headlines generated by this year's UK Spring Statement are mostly a window into how investors are feeling about the UK economy and markets. And we think the ongoing gap between subdued sentiment and an okay reality is another reason to be optimistic about UK equities.

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'!