Global Markets Weekly Review: Fed Rate Cut Fuels U.S. Rally Amidst Global Divergence

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The global financial landscape was reshaped during the week ending September 19, 2025, by a pivotal policy shift from the U.S. Federal Reserve. The central bank’s decision to implement its first interest rate cut in nine months served as a powerful catalyst, propelling major U.S. equity indices to unprecedented highs and injecting a fresh wave of optimism into risk assets. However, this dovish turn in Washington cast a stark light on the growing divergences in economic performance and monetary policy across the globe. While American markets celebrated the prospect of continued easing, the sentiment was not universally shared. European central banks maintained a more cautious and hawkish posture, grappling with persistent inflation. In Asia, the Bank of Japan took a historic step toward policy normalisation by announcing plans to unwind its vast holdings of market assets, a move with profound long-term implications. Compounding the regional complexities, a stream of weak economic data from China confirmed a deepening slowdown, weighing on regional sentiment and posing a significant headwind to global growth prospects.

The week’s primary themes underscored this fractured global picture. The clear divergence in central bank policy, with the U.S. easing while others hold firm or signal tightening, is set to become a dominant driver of international capital flows and currency market volatility. An examination of the U.S. rally reveals potential fragilities; despite record-setting headline numbers, the advance has been driven by a narrow cohort of mega-capitalisation stocks, with underlying market breadth deteriorating—a classic sign of a potentially unhealthy market. Meanwhile, China’s economic drag was palpable, influencing commodity prices and the performance of its key trading partners. Cross-asset signals provided further context, with falling crude oil prices pointing to concerns about future global demand, even as equity markets rallied. Concurrently, rising gold prices and volatile government bond yields reflected a persistent undercurrent of investor uncertainty, suggesting that the path forward remains fraught with complexity.

The following table provides a quantitative snapshot of the week’s performance across key global indices and asset classes, setting the stage for the detailed regional analysis that follows.

Note: Data compiled from multiple sources.¹

United States: Record Highs Tempered by Economic Crosscurrents

U.S. equity markets concluded a landmark week, with major indices surging to new all-time highs, primarily fueled by the Federal Reserve’s long-awaited return to monetary easing. However, beneath the surface of the record-setting rally, a complex tapestry of volatile trading activity, mixed economic signals, and emerging political risks painted a more nuanced picture of the market’s health and trajectory.

The Fed’s Dovish Pivot Ignites the Market

The week’s defining event occurred on Wednesday, when the Federal Open Market Committee (FOMC) announced a 25-basis-point reduction in the federal funds rate, lowering the target range to 4.00%−4.25%.¹ This marked the first rate cut since December of the previous year and was broadly interpreted by investors as a green light for risk assets. The central bank’s rationale was carefully framed not as a response to an impending recession, but rather as a preemptive “insurance cut” designed to sustain the economic expansion in the face of a visibly cooling labour market.⁷

In the accompanying Summary of Economic Projections, the so-called “dot plot” revealed that most Fed officials anticipated one to two additional rate cuts before the end of 2025, reinforcing the dovish sentiment.¹¹ This forward guidance was crucial, as it signalled to the market that the September cut was likely the beginning of an easing cycle, not a one-off adjustment. The decision was not unanimous; new FOMC member Stephen Miran dissented, favouring a more aggressive 50-basis-point cut, a detail that underscored the internal debate but did little to dampen the market’s bullish reaction.⁷

Market Performance: A Record-Setting Week with a Volatile Finish

The market’s response to the Fed’s decision was initially muted but quickly gathered momentum. For the week, the S&P 500 climbed 1.2% to close at 6,650.93, while the Dow Jones Industrial Average advanced 1.1% to finish at 46,277. The technology-centric Nasdaq Composite was the standout performer, surging 2.2% to 22,571.¹ All three indices set new intraday and closing all-time highs on both Thursday and Friday, extending a powerful rally that has added nearly $15 trillion to the S&P 500’s value since its April lows.²

The bullish sentiment also extended to smaller companies, with the Russell 2000 index of small-cap stocks briefly touching a new record high for the first time since late 2021. However, in a sign of underlying indecision, the index reversed course on Friday to close the week with a loss.¹³

The week’s trading culminated in a dramatic and volatile session on Friday, driven by the quarterly “triple witching” event. This phenomenon, where contracts for stock index futures, stock index options, and individual stock options expire simultaneously, unleashed a torrent of activity. An estimated $5 trillion worth of options expired, leading to a massive spike in trading volume. Approximately 27.7 billion shares changed hands across U.S. exchanges, making it the third-busiest trading day since records began in 2008 and contributing to choppy price action into the close.²

Key Corporate Movers

The technology sector was at the heart of the week’s most significant corporate developments. Shares of chipmaker Intel (INTC) soared by nearly 23% on Thursday, its best single-day performance in decades, following the stunning announcement that artificial intelligence leader Nvidia (NVDA) would make a strategic $5 billion investment in the company. The deal, which includes co-development of data centre and PC chips, was seen as a major vote of confidence in Intel’s turnaround efforts. Intel shares pared some of those gains on Friday, while Nvidia’s stock also advanced on the news.¹³

Apple (AAPL) was another major contributor to the market’s advance, with its shares rising more than 3% on Friday. The gains coincided with the global launch of its new iPhone 17 models, with early reports from Asia suggesting strong consumer demand for the new devices.¹³

Corporate earnings provided a mixed but informative view of the U.S. economy. Logistics and delivery giant FedEx (FDX), often viewed as a bellwether for global economic activity, saw its stock rise 2.4% after it beat earnings expectations and reinstated its full-year financial outlook, providing a dose of confidence in business and consumer demand.¹³ In stark contrast, the housing market showed signs of strain. Homebuilder Lennar (LEN) reported quarterly revenue and profit that fell short of analyst expectations, causing its shares to drop 4%. The company cited a general softness in the housing market and the continued need to offer incentives to buyers grappling with elevated mortgage rates.¹³

Economic and Political Landscape

Away from the markets, the economic and political backdrop presented a series of crosscurrents. The latest inflation data offered a muddled view for policymakers. The Consumer Price Index (CPI) for August was hotter than anticipated, rising 0.4% on a month-over-month basis. Conversely, the Producer Price Index (PPI) for the same month unexpectedly declined by 0.1%, complicating the Federal Reserve’s narrative of a smooth return to its 2% inflation target.¹⁸

In Washington, political risks intensified. A stopgap spending bill designed to prevent a government shutdown on October 1 failed to pass the Senate, significantly increasing the probability of a near-term fiscal disruption that could rattle markets.¹ Adding to the long-term policy uncertainty, a group of Democratic lawmakers introduced the “Billionaires Income Tax (BIT) Act.” This ambitious proposal would levy an annual tax on the unrealised capital gains of tradable assets held by the nation’s wealthiest individuals, representing a potential future headwind for equity valuations if it were to gain political momentum.²⁰

The record-breaking performance of U.S. indices this week, while impressive on the surface, conceals underlying characteristics that suggest the rally may be built on a fragile foundation. A deeper analysis of market internals reveals that the advance has been remarkably narrow. While the market-cap-weighted S&P 500 has soared, its equal-weighted counterpart has lagged significantly, indicating that a small handful of mega-cap companies are responsible for the bulk of the gains.¹⁴ This concentration of performance is starkly illustrated by the fact that the top 10 stocks in the S&P 500 now constitute an extraordinary 40% of the index’s total market capitalisation.¹¹ Further evidence of this poor market breadth comes from the observation that only 55% of S&P 500 constituents are trading above their 50-day moving average, a level far below the 80% readings seen during healthier market phases earlier in the summer.¹⁴ This dependency on a few key “Magnificent Seven” stocks creates a precarious situation. The entire market’s stability is now disproportionately reliant on the continued outperformance of these few names, making it highly vulnerable to a correction should one or more of them face company-specific headwinds, such as a disappointing earnings report in the upcoming October season.¹

Furthermore, the reaction in the U.S. Treasury market sent a divergent and cautionary signal. Standard economic theory would suggest that a central bank rate cut should lead to lower bond yields across the curve. However, in the wake of the Fed’s decision, long-term Treasury yields moved higher. The benchmark 10-year Treasury note yield rose to 4.14% by the end of the week, while the 2-year yield, which is more sensitive to near-term Fed policy, also ticked up.¹ This counterintuitive price action suggests that bond market participants are looking beyond the immediate rate cut and are pricing in other, more powerful forces. These include concerns about the persistence of inflation, which recent CPI data suggests remains sticky, as well as the enormous U.S. fiscal deficit that necessitates a continuous and large supply of new government debt.¹⁸ The bond market, in essence, is signalling that the era of ultra-low long-term interest rates may be over, regardless of the Fed’s actions on the short end of the curve. This poses a potential long-term headwind for equities by increasing the cost of capital for corporations and enhancing the relative attractiveness of bonds as an alternative investment.

Europe: A Continent of Caution as Central Banks Hold Firm

European equity markets navigated a week dominated by major central bank decisions, ultimately closing with a slight negative bias. The cautious tone reflected a growing policy divergence with the United States, as both the Bank of England and the European Central Bank signalled a continued focus on inflation, standing in contrast to the U.S. Federal Reserve’s decisive move to cut interest rates.

Regional Market Performance

The performance across the continent was largely subdued. The pan-European STOXX 600 index finished the week down 0.13%, reflecting a broad-based lack of conviction among investors.¹ National indices mirrored this trend, with Germany’s DAX declining by 0.32% over the five sessions ¹⁰, and the UK’s FTSE 100 ending the week with a modest loss of 0.12%.⁴ This lacklustre performance came despite a strong rally in U.S. markets, highlighting the influence of local economic conditions and distinct central bank policies.

Bank of England’s Balancing Act

The most significant regional event was the Bank of England’s (BoE) Monetary Policy Committee (MPC) meeting on Thursday. As widely expected, the committee voted by a 7-2 majority to maintain its main interest rate at 4.0%.²² The decision to pause marked a halt to a series of five rate cuts that had been implemented since the summer of 2024. The primary justification for holding firm was the persistence of domestic inflation, which, at 3.8% in August, remains nearly double the central bank’s 2% target.²⁴

In a more nuanced and closely watched move, the BoE also announced an adjustment to its quantitative tightening (QT) program. The Bank will slow the pace at which it unwinds its massive balance sheet, reducing its holdings of government bonds (gilts) by £70 billion over the coming year. This is a reduction from the £100 billion target of the previous twelve months and was explicitly designed to avoid causing undue stress or volatility in the government bond market.²³

European Central Bank’s Steady Hand

While the European Central Bank (ECB) did not hold a monetary policy meeting this week, its recent actions continued to shape market sentiment. Investors were still processing the ECB’s decision on September 11 to keep its key interest rates unchanged. The accompanying commentary from that meeting reinforced the bank’s commitment to a data-dependent, meeting-by-meeting approach. The ECB’s latest staff projections see headline inflation averaging 2.1% in 2025 with GDP growth at 1.2%, a combination that gives the central bank little incentive to rush into an easing cycle in lockstep with the Fed.²⁶

Economic Indicators

The week’s economic data from the region was mixed. The United Kingdom provided a positive surprise, with retail sales rising by 0.5% in August. This marked the third consecutive monthly increase and surpassed economists’ forecasts, suggesting a degree of resilience among British consumers.²⁸ In contrast, data from Germany pointed to weakening industrial momentum. German producer prices fell by 2.2% year-over-year in August, the most significant annual decline in over a year and a clear indicator of slackening demand within the Eurozone’s largest economy.³⁰

The week’s central bank decisions have crystallised a significant and widening divergence in monetary policy across the Atlantic. The Federal Reserve’s rate cut, justified by a cooling U.S. labour market, stands in stark contrast to the resolute holds by the Bank of England and the European Central Bank, both of which remain primarily focused on their inflation-fighting mandates.¹² This policy schism reflects the different economic realities on each continent; while U.S. policymakers feel they have sufficient room to prioritise growth, their European counterparts are still contending with more entrenched price pressures, particularly in the UK. This growing divergence is likely to have profound consequences for global financial markets. A key channel of influence will be the currency markets, where a relatively more dovish Fed could exert sustained downward pressure on the U.S. dollar against the euro and the British pound. A stronger European currency, in turn, would make the region’s exports more expensive on the global stage, potentially acting as a drag on corporate earnings and economic growth.³²

Within the Bank of England’s decision, the adjustment to its quantitative tightening program represents a more subtle but equally important policy signal. While the headline action was holding the policy rate steady, the decision to reduce the annual QT target from £100 billion to £70 billion is a dovish concession to market realities.²³ The process of QT, where the central bank sells its bond holdings, inherently tightens financial conditions by increasing the supply of gilts that private investors must absorb, which tends to push borrowing costs higher. By tapering the pace of these sales, the BoE is effectively reducing that tightening pressure. This move is a tacit acknowledgment of the fragility of the UK government bond market and a recognition that it cannot absorb asset sales at the previous pace without risking disruptive volatility. It can be viewed as a form of “stealth easing,” providing a measure of relief to the bond market and the government’s financing costs, even as the Bank maintains a hawkish public posture on its primary policy rate. This highlights the complex trade-offs central banks currently face between combating inflation and preserving financial stability.

Asia-Pacific: A Region of Contrasts

The Asia-Pacific financial markets presented a fragmented and complex picture this week, shaped by a landmark policy shift in Japan, deepening economic woes in China, and the overarching influence of the U.S. Federal Reserve’s rate decision. The result was a divergent performance across the region’s major equity indices.

Japan’s Policy Inflection Point

The Bank of Japan (BoJ) was a central focus for global investors. As widely anticipated, the central bank maintained its benchmark short-term interest rate at 0.5% following its policy meeting.⁸ However, the BoJ delivered a historic announcement that signals a definitive step away from decades of ultra-accommodative monetary policy. The bank declared its intention to begin the gradual process of selling its vast holdings of exchange-traded funds (ETFs) and Japanese real-estate investment trusts (J-REITs).¹ This move marks the beginning of the unwind of one of the most unconventional and aggressive stimulus programs in modern history.

The Japanese equity market reacted to the news with initial volatility. The Nikkei 225 index dipped on Friday but managed to close the week with an overall gain of 0.62%, suggesting that investors, for now, are cautiously optimistic that the BoJ can manage this policy normalisation without derailing the economy.⁸ Supporting this view, the latest inflation data showed that Japan’s annual core inflation rate slowed to a 10-month low of 2.7% in August, providing the central bank with some flexibility as it embarks on this new path.⁸

China’s Worsening Slowdown

In stark contrast to Japan’s policy evolution, markets in China were dominated by a steady stream of negative economic news. The performance was split between the onshore and offshore markets: the mainland Shanghai Composite index fell by a notable 1% for the week, while Hong Kong’s Hang Seng index, which is more accessible to international investors, managed to eke out a 0.6% gain.⁹

The bearish sentiment in mainland China was driven by a raft of official data for August that confirmed the country’s post-pandemic recovery has not only stalled but is actively deteriorating. Industrial output expanded by a mere 5.2% year-over-year, its weakest performance since August 2024. Retail sales grew by only 3.4%, the slowest pace since November 2024, indicating profound weakness in domestic consumer demand.³⁴

The crisis in the crucial property sector also deepened, with data showing a continued fall in new home prices and a nearly 13% year-to-date decline in property investment. The labour market also showed signs of strain, as the urban unemployment rate crept up to a six-month high of 5.3%.³⁵ Against this backdrop, investors remained cautious ahead of a scheduled phone call between U.S. President Trump and Chinese leader Xi Jinping, with discussions expected to cover sensitive issues including trade tariffs and the future of the social media platform TikTok.⁹

Performance Across the Region

The headwinds emanating from China and the policy uncertainty in Japan had a ripple effect across the region. South Korea’s KOSPI index fell on Friday, closing down nearly 0.5% for the session, while Taiwan’s Taiex also registered a decline, reflecting the broader sense of caution among investors in export-oriented economies that are highly sensitive to Chinese demand and global technology cycles.¹⁵

The Bank of Japan’s announcement that it will begin selling its ETF holdings is a far more consequential development than its decision to hold its policy rate steady. This action marks the true beginning of the end of Japan’s radical, multi-decade monetary experiment. For over a decade, the BoJ has been an active and massive purchaser of Japanese equities through ETFs, becoming a top shareholder in many of the country’s most prominent corporations in an effort to suppress risk premia and stimulate economic activity.⁸ The process of unwinding this unprecedented position is entirely uncharted territory. The central bank now faces the delicate task of offloading trillions of yen worth of stocks without triggering a market crash, a challenge that introduces a major new source of uncertainty for Japanese equities. While the market absorbed the initial announcement calmly this week, the long-term implications are immense. This process could lead to significantly higher market volatility, a fundamental re-pricing of risk for Japanese stocks, and a potentially stronger yen if it is perceived as the start of a broader hawkish policy turn. Global investors will monitor this unwind with intense interest, as it will serve as a crucial test case for how central banks globally can retract from their deep and prolonged interventions in capital markets.

Simultaneously, the August economic data from China provides unequivocal evidence that the world’s second-largest economy is failing to rebound, posing a significant and growing risk to the global outlook. The data confirms a deepening slowdown across all critical sectors—industrial production, retail sales, investment, and property—with the added concern of rising unemployment.³⁴ This is not a transient setback but the continuation of a worrying trend. The traditional engines of Chinese growth, real estate and exports, are under severe structural pressure, and domestic consumer confidence remains profoundly weak. The ripple effects of this slowdown are global. A weaker China translates directly into lower demand for commodities, hurting resource-exporting nations like Australia and Brazil; reduced demand for capital goods, impacting industrial powerhouses like Germany and Japan; and softer sales for consumer products, affecting U.S. and European multinational corporations. The unavoidable conclusion is that the global economy can no longer depend on China as its primary engine of growth, placing a heavier burden on the U.S. to sustain global momentum.

India: Outperformance Driven by Domestic and Global Factors

Indian equity markets demonstrated remarkable resilience and strength during the week, bucking the mixed trend seen in other parts of Asia and extending their recent rally. The positive performance was underpinned by a powerful combination of supportive global tailwinds, growing optimism on the domestic front, and specific corporate developments that boosted investor confidence.

A Bullish Week

For the third consecutive week, India’s benchmark equity indices posted solid gains. Both the BSE Sensex and the NSE Nifty 50 advanced by approximately 0.8% over the five trading sessions.⁶ The upward momentum was sustained for most of the week, though a bout of profit-taking on Friday caused the indices to retreat from their highs, snapping a three-day winning streak.⁵ Despite the modest pullback at the week’s end, the overall tone remained distinctly bullish.

Key Catalysts for the Rally

Several key factors converged to propel the Indian market higher. A primary driver was the dovish shift from the U.S. Federal Reserve. The Fed’s decision to cut interest rates was a significant positive for emerging markets like India, as it signals a more accommodative global liquidity environment and tends to encourage capital flows into higher-growth economies.⁵

On the domestic front, sentiment was bolstered by tangible progress in trade negotiations between India and the United States. Officials from both nations described the latest round of talks as “constructive” and “forward-looking,” renewing hopes for a comprehensive trade agreement that could further boost economic growth and corporate earnings.⁵

Adding to the positive narrative was a significant vote of confidence from a global credit rating agency. Japan’s Rating and Investment Information, Inc. (R&I) upgraded India’s sovereign credit rating to ‘BBB+’ with a stable outlook. In its assessment, R&I highlighted the country’s strong domestic demand, improving fiscal discipline, and enhanced external stability. This was the third such upgrade from a major rating agency in 2025, reinforcing the perception among international investors that India’s macroeconomic fundamentals are robust and improving.⁴¹

Finally, a significant piece of company-specific news removed a major market overhang. Shares of companies within the Adani Group surged after the Securities and Exchange Board of India (SEBI) cleared key executives, including Gautam Adani, of allegations that had been levelled by a U.S.-based short-seller. This regulatory clearance provided relief to investors and contributed to the positive market tone.⁵

The strong performance of the Indian market this week, particularly when contrasted with the struggles of its regional giant, China, highlights a significant structural shift in the landscape for emerging market investment. While Chinese onshore markets fell 1% amidst a slew of negative economic data, Indian markets rallied nearly 1% on the back of positive domestic and international news.⁶ This divergence is not an anomaly but rather the result of fundamentally different trajectories. India’s advance is supported by projections of robust GDP growth in the mid-6% range, an improving fiscal position, and a positive credit rating outlook.⁴¹ China, conversely, is grappling with a deep-seated slowdown across its most critical economic sectors.³⁵ This economic decoupling is amplified by the geopolitical environment. The global “China plus one” strategy, which sees multinational corporations actively diversifying their supply chains and investments away from China, is creating a substantial and durable tailwind for India. The positive momentum in U.S.-India trade talks further solidifies this narrative.⁴⁰ Consequently, global investors are increasingly viewing India not merely as one of many emerging markets, but as the primary large-scale alternative to China for deploying long-term growth capital. This potential for a structural reallocation of global investment funds could provide a powerful and lasting tailwind for Indian equities, supporting higher valuations and sustained capital inflows for the foreseeable future, provided the government maintains its focus on economic reform.

Oceania: Australian Markets Continue to Lag

The Australian equity market continued to underperform its global peers this week, weighed down by a complex interplay of diverging central bank policies, mixed signals from commodity markets, and ongoing concerns about the health of the global economy.

Third Consecutive Week of Declines

For the third straight week, Australia’s benchmark S&P/ASX 200 index registered a loss, falling by approximately 0.7%.⁷ This continued a corrective phase that began after the market reached record highs in the previous month. The week’s decline was broad-based, with notable weakness in the energy, consumer staples, healthcare, and telecommunications sectors, indicating a risk-off sentiment among local investors.⁷

The RBA in the Spotlight

The decision by the U.S. Federal Reserve to cut interest rates has placed the Reserve Bank of Australia (RBA) in a challenging position. While the RBA’s policy decisions are driven by domestic conditions, the Fed’s dovish pivot creates significant external pressure. The market is now grappling with the prospect of a widening policy divergence, where the Fed may ease more aggressively than the RBA.⁷

A critical channel through which this divergence impacts the Australian economy is the currency. If the gap between U.S. and Australian interest rates narrows or inverts, it could lead to a stronger Australian dollar ($A). A rising currency acts as a natural headwind for Australia’s export-heavy economy, making its goods more expensive for foreign buyers and reducing the value of overseas corporate earnings when translated back into local currency. This potential for a stronger A strengthens the argument for the RBA to implement further rate cuts of its own to maintain competitive neutrality and support domestic growth.⁷

Commodity Market Influence

The performance of commodity markets, a vital driver for Australia’s resource-rich stock index, provided little clear direction this week. Prices for iron ore and crude oil rose, which would typically be supportive for major ASX-listed miners and energy producers. However, this was offset by a decline in the prices of other industrial metals.⁷ Gold prices reached a new record high, but the gains were modest, as the market had largely anticipated the Fed’s rate cut in advance.⁷ This mixed and somewhat contradictory performance from the commodity complex failed to provide the strong positive catalyst needed to lift the broader equity market.

The underperformance of the Australian market this week, especially in the context of a global rally led by the U.S., can be understood as the market being caught in a difficult crosscurrent between a dovish Federal Reserve and a potentially more hawkish Reserve Bank of Australia. The very event that fueled bullish sentiment in the United States—the Fed’s rate cut—has created a unique and problematic dynamic for Australia.¹ While the U.S. market celebrated lower borrowing costs, the Australian market focused on the potential negative consequences of the policy divergence. The primary concern is that the RBA, facing its own domestic inflation challenges, will be slower to cut rates than its U.S. counterpart. This policy gap is likely to attract capital flows into Australia, pushing up the value of the Australian dollar.⁷ A stronger currency directly harms the profitability of the large mining and resource companies that dominate the S&P/ASX 200 index by making their exports more expensive and reducing the value of their U.S. dollar-denominated revenues. Therefore, the dovish pivot by the Fed, which was a clear positive for U.S. equities, has paradoxically created a headwind for the Australian market, leading to its notable relative underperformance.

Conclusion: Navigating a Post-Cut Landscape

The week ending September 19, 2025, will be remembered as a moment of significant transition in global financial markets, defined by the U.S. Federal Reserve’s decisive return to a monetary easing stance. This single policy action was powerful enough to catalyse a record-setting rally in U.S. stocks, but its true importance lies in how it illuminated the growing fractures in the global economic and policy landscape. The week was a tale of divergence: while the United States celebrated renewed stimulus, Europe maintained a posture of cautious restraint, Japan embarked on the long and uncertain road of policy normalisation, and China’s formidable economic engine showed further signs of sputtering.

Looking ahead, the market’s trajectory will be determined by how these divergent themes evolve and interact. In the United States, the immediate focus will shift to the upcoming third-quarter corporate earnings season. The key question is whether corporate profitability, particularly among the handful of mega-cap technology stocks that have single-handedly carried the rally, can validate the market’s current lofty valuations and optimistic outlook.¹

Globally, the central bank narrative will remain paramount. The Fed’s move has set off a potential domino effect, and markets will be watching closely to see if other central banks, such as the Reserve Bank of Australia, feel compelled to follow suit. Alternatively, if policy divergence continues to widen, it could fuel further volatility in currency and bond markets, creating a more complex environment for investors. Finally, the most significant known headwind to global growth remains the slowdown in China. Any signs of more decisive and effective policy stimulus from Beijing, or a meaningful de-escalation in trade tensions with the United States, would be greeted with significant relief by global markets. Until then, China’s economic health will remain a primary source of uncertainty and a drag on global risk appetite.

Disclaimer

This report is for informational purposes only and is not intended to provide, and should not be relied on for, investment, financial, legal, or tax advice. The views expressed are those of the author(s) as of the date of publication and are subject to change without notice. All investments involve risk, including the possible loss of principal. The past performance of a security, asset class, or financial product does not guarantee future results or returns. The information contained herein has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. You should consult your own financial, legal, and tax advisors before making any investment decisions.

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