Investment Views - November 2025

Global equities reached all-time highs in October, led by strong momentum in the AI sector in the US, expectations of Fed easing, and positive sentiment around fiscal expansion in Germany. However, a resurgence of the US-China trade spat, concerns over some credit events in the US, and continuing US government shutdown created volatility in risk assets. While the US and China have extended their truce, we’d like to see how effectively this is sustained in the long term. 

Consumption pressures in the US may affect economic activity there as effects of US tariffs materialise. On the other hand, while inflation expectations are still under control, an expansionary fiscal policy, a Fed inclined to cut rates and US tariffs passthrough to inflation in the real economy may change that. Hence, curves will steepen further. In Europe, inflation doesn’t seem to be an issue, but domestic demand could be.

Equities have delivered strong performance since the beginning of September on the back of multiple factors, including the AI sentiment. An important consideration for us is to what extent AI could boost corporate earnings and how much of a valuation premium is justified for such businesses. Thus, while we believe in the long-term potential for such technology to enhance productivity, we are unwilling to pay excessive valuations. 

The US economy has remained resilience so far, but trade policies and tariffs are complicating the outlook with respect to their effect on consumption and inflation. In Europe, pressures on exports are visible and domestic demand may also show some vulnerabilities. Despite that, the overall economic environment is not of a recession. In this environment, central banks are willing to cut rates and governments are providing fiscal support. However, headwinds in the form of trade tensions, geopolitics and valuations persist. Hence, we believe there is a need to reinforce hedges.