The Black Friday countdown traditionally marks the start of the final stretch in global consumption. Rarely has the backdrop been as mixed as this year. The delayed reports on US job data were uneven, consumer sentiment has slipped according to the Michigan survey, and the macro-economic narrative feels decidedly ‘late-cycle.’
Yet resilience keeps surfacing: global equity futures extended their Friday rebound and traders have now pushed the probability of a December Federal Reserve (Fed) rate cut to around 70 per cent, following dovish hints from central bankers. Monetary comfort is creeping back in, just in time for the holiday rush. Geopolitics, meanwhile, remain on the agenda. The US and Ukraine are working on a refined version of a potential peace plan. Japan unveiled USD 112 billion in fresh stimulus, its largest package since the pandemic.
Positive signs from healthcare, tech, and Italy
In the chip war, US officials are openly debating whether NVIDIA should be allowed to sell its H200 artificial intelligence chips to China – a subtle reminder that technology remains as political as it is commercial. Italy offered a rare European bright spot, securing its first Moody’s upgrade in 23 years (see our number of the week). Corporate news delivered its own blend of extremes: Eli Lilly became the first healthcare company to reach a valuation of USD 1 trillion, BHP ended its pursuit of Anglo American, and Alibaba’s revamped Qwen application reached ten million downloads in its first week. Last, but not least, Bayer reported encouraging results in its stroke medication trials.
The prospect of a year-end-rally remains intact
As for markets, last week’s downturn was not pleasant, but it does not negate the prospect of a year-end rally. From a technical perspective, the sentiment reset looks sufficiently washed out to support a rebound. Fundamentally, consumption patterns remain intact, and the Fed is clearly shifting towards a more accommodative stance. These elements underpin the traditional recipe for late-year strength.
With a packed agenda – from global GDP releases and inflation data to a series of rate decisions and a full earnings slate – sharp price moves are definitely a possibility. However, history is consistent on one point: capitulating right as the holiday season begins has rarely paid off. With the backdrop stabilising, 2025 still has a credible chance to end on a constructive note.
AI jitters shake equity markets
Equity markets continued to sell off this week, driven by US stocks. Since the highs of late October, the tech-heavy Nasdaq is down 7.0 per cent and the S&P 500 is down 4.2 per cent. The core driver for the continued sell-off since the end of October remains mounting AI valuation fatigue. Investors are focusing on the growing mismatch between record capex announcements and the near-term clarity of monetisation. This disconnect has triggered broad derisking among investors. A secondary drag came from shifting rate expectations. Mixed employment data and a divided Fed have reduced the probability of a December cut, nudging yields slightly higher and reinforcing an already fragile backdrop.
Investors should broaden exposure beyond tech
Beyond the headline moves, the recent pattern reinforces our key message for the 2026 Market Outlook: since part of the AI segment of the equity market is priced for perfection and many investors remain concentrated in the ‘AI hyperscale’ theme, the recent shake-out validates our call to broaden exposure and seek opportunities where valuations and sentiment are less crowded. Earnings momentum is no longer confined to technology: defensive sectors – especially healthcare – offer attractive valuations and improving revisions; European cyclicals and value stocks continue to benefit from fiscal support and easing headwinds; and Asia offers a diverse, compelling opportunity set. In short, we advocate for a more diversified stance as the cycle matures.