Markets Unshaken by the U.S. Government Shutdown
Despite the U.S. government shutdown and the Federal Reserve’s cautious tone, markets continue their steady climb, driven by investor optimism and the tech sector’s stellar performance.
Despite the U.S. government shutdown and the Federal Reserve’s cautious tone, markets continue their steady climb, driven by investor optimism and the tech sector’s stellar performance.
Inflation Under Control Despite the Fed’s Caution
The near-total absence of economic data since the start of the U.S. government shutdown does not seem to bother investors. No news is good news. And since they did receive a rather reassuring inflation report, stock indices have continued to move upward. At 3%, inflation has not yet felt the impact of higher tariffs. Nevertheless, Federal Reserve Chair Jerome Powell opted for a 0.25% rate cut and appeared slightly more concerned than usual, citing moderate growth prospects and rising unemployment risks.
According to a recent study, it even appears that the United States would currently be in recession if not for the massive investments in artificial intelligence. In this context, it is likely that the Fed will continue to cut rates over the coming months. As further proof of its caution, the central bank will end its balance sheet reduction program as of December 1 and will resume limited purchases of Treasury securities, following signs of tension in the money markets.
Trade Truce and Tech Boom
Another piece of good news for markets in November came from the geopolitical front: Donald Trump and his Chinese counterpart Xi Jinping officially announced a trade and tariff truce between the United States and China. The discussions focused largely on tariffs and China’s export controls on rare earth materials. The U.S. president indicated that no restrictions on rare earth exports would be imposed for at least a year.
Meanwhile, corporate earnings season is in full swing, and this quarter’s results are once again strong, showing an average 10% increase in profits compared to the same period last year. Unsurprisingly, growth is being driven by the key technology sector, with strong results from Amazon, Microsoft, Alphabet, and AMD. In this context, buoyed by the ever-optimistic remarks of its CEO, Nvidia’s stock has continued to rise, surpassing the $5 trillion market capitalization mark — a staggering figure that now exceeds the combined value of the 50 largest European companies in the Euro Stoxx index.
Europe Lagging Behind, Switzerland Holding Steady
So what about Europe? Corporate results there are also fairly reassuring, though to a lesser extent (Airbus, Essilor, Danone, Capgemini, LVMH, Crédit Agricole, Santander…). However, this comes amid a less encouraging climate. In Germany, the ambitious recovery plan is taking longer than expected to roll out. And in France, while the risk of another parliamentary dissolution has receded, ongoing debates over fiscal and budgetary reforms continue to weigh on business sentiment.