Entering the final phase of this year, which is usually the best.

November 3rd, 2025

The last two months of the year are usually the best for equities. Traditionally it is the time of the year where portfolio managers start to window-dress their portfolios and hedge funds as well as banks' trading desks are trying to boost performance, since the 30th November is for many of them their fiscal year-end, when performance fees and bonuses will be calculated. Also in November, most of the 3rd quarter results have already been announced, so the probability for negative corporate surprises diminishes and corporate buybacks resume after the blackout period and these bids reappear in the market. Last but not least, it is only two months before the Christmas holidays with spirits and sentiment high, especially during a very positive year.

But then again, almost nothing has worked according to the historic patterns this year. Could this end-of-year traditional rally be in danger ? Another great question for which I do not have the answer. But we can take a look of how the year has evolved so far. In April, equities slumped against the fact that this month is the 3rd best of the year (behind only guess what ... November and December). In August/September equities rallied although it is supposed to be a period of lackluster results and the period when usually corrections take place. Of course, and before we get any more worried, we should also mention that the S&P500 has already suffered a 20% drop this year, hence the probability of such a major correction until year-end is probably very low.

Global equities had a rather mixed picture last week. Nasdaq finished 2% higher, propelled by just a couple of sizeable rallies in the likes of Alphabet and Amazon, as the other US indices underperformed (small caps index Russell 2000, -1.5%). Speaking of Tech results , the common message was that spending on AI is accelerating further and for some names (Meta Platforms) their capex growth is now outpacing their revenue growth which does not bode well with investors (shares finished at a five-month low). European equities were under correction mode, as flagship electrification names fell 4-5% after their earnings results and defense has lost its momentum. Luxury names are also in correction mode, after their recent rally. China lost ground (Hang Seng -1%) despite the meeting between Trump and Jinping which produced some positive results. AI is the last man standing ahead of this year's grand finale.

The FED lowered rates by 25bp , as expected, but the message was rather hawkish. There were again dissents as (the Trump-appointed) Governor Mr. Miran voted in favor of a 50bp reduction, as he did in September, and Mr. Schmid voted for no rate cut. In the press conference Chair Powell described a very divided committee and that there exists a wide range of views among participants. He pointed out that "Policy is not on a preset course, At this meeting, there were strongly differing views about how to proceed. In December, a further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it." With no fresh labor market data and inflation keep rising, the situation is becoming more complicated, and a divided FED is not something that the markets would normally like.

The ECB kept rates on hold, with the depo rate at 2%, as expected. The main message of Mrs. Lagarde's responses at the press conference was an acknowledgement of improved macro data, a focus on resilient corporate investment activity, and a mention that some of the recent downside risks had receded somewhat (i.e. the US-EU trade frictions, Middle East geopolitics, the US-China relations). Therefore it appears that the ECB is a bit more confident on the Eurozone's economic resilience than before and feeling relaxed with the future path of inflation. Hence the market is currently convinced that the ECB will not cut rates further, also given the fact that the sizeable fiscal stimulus in support of defense (EU) and infrastructure (Germany), will become increasingly visible from early 2026.

Eurozone October inflation moderated, as expected. The headline number declined 0.1pp to 2.1%, matching expectations while core remained unchanged at 2.4% also in-line with expectations. Within core, consumer services inflation rose 0.2pp to 3.4%, partially driven by the pick-up in airfares. In contrast, consumer goods inflation fell 0.2pp to 0.6% y/y which to some extent appears to be driven by weaker clothing. Looking ahead, the expectations are for benign inflation, hovering around the current level until the end of the year, and then potentially falling closer to 1.5% in Q1 of 2026, as base effect is a tailwind.

Eurozone's 3rd quarter GDP rose by 0.2% q/q (+1.3% y/y) above consensus expectation of 0.1% q/q.  Among the large Eurozone countries, a clear divergence was visible between strong growth in Spain (+0.6%) and France (+0.5%, which was a significant upside surprise) and stagnation in Germany and Italy (both at 0.0%). The German macro numbers continue to disappoint and all hopes lie for 2026 where the big government spending on defense and infrastructure will start taking place. German equities and the stocks that have direct exposure to this theme have already discounted this, so we need reality to follow these hopes, otherwise we are in for major surprises for some government-spending related stocks next year.

Bonds had a volatile week, primarily in the US curve. The US 10yr yield jumped 10bp after the FED's rather hawkish meeting which had the result of the market starting to price-out the possibility of a rate cut in December. It finished the week at 4.10%. The EUR curve did not move as much, but yields were higher by a few basis points for the week. The German 10yr found itself back closer to 2.65% after a brief trip lower than 2.60%. As we have mentioned several times, current yields in the EUR 5-10yr maturities should be considered low and unattractive given the prospects of higher growth in the Eurozone in 2026. Also given the fact that corporate spreads are very low, one should stick to the highest quality (AA and above) when choosing to position in long-term bonds.

Gold managed to stabilize. The yellow metal dropped to a low of 3900$, closer to the area which he highlighted last week as a first major support (3750-3800$) and bids reappeared to take it back to 4000$ at the end of the week. Retail investors appear to be exiting Gold ETFs at a high rate and central banks seem to be absent for now. Many traders are now on the sidelines, waiting either for another wash-out towards perhaps 3500$, or for momentum to re-appear. The path of least resistance remains south for now, but the wash-out of overcrowded/momentum chasing positions is a positive in the medium-term.

Chart of the Week : Last week the S&P500 rose on a day with the most negative market breadth since 1990.

Let us first explain what we see in the above chart. The x-axis on the bottom is the net number of advancing-declining stocks of the S&P500, a number which if it is negative signals that more stocks fell than advanced and the opposite. The y-axis is the % change of the S&P500 during that day, and the above charts indicates only the positive days of the S&P500 since 1990 ! What happened last week (which is the red data point) is that almost 300 stocks out of the 500 fell and the market still managed to register a small gain. This shows the huge impact of just a handful of stocks on the S&P500, which has basically become the previous Nasdaq with now more than 40% in Tech-related companies. It is certain that this concentration in just 10-15 stocks cannot continue forever, but nobody can call when it stops. But when it does stop the underperformance will be brutal.

Disclaimer

• The content of this document has been produced from publicly available information as well as from internal research and rigorous efforts have been made to verify the accuracy and reasonableness of the hypotheses used. Although unlikely, omissions or errors might however happen.

• The data included in this document are based on past performances and do not constitute an indicator or a guarantee of future performances. Performances are not constant over time and can be positive or negative.

• This document is intended for informational purposes only and should not be construed as an offer or solicitation for the purchase or sale of any financial instrument and it should not be considered as investment advice. The market valuations, views, and calculations contained herein are estimates only and are subject to change without notice. Any investment decision needs to be discussed with your advisor and cannot be based only on this document.

• This document is strictly confidential and should not be distributed further without the explicit consent of Kendra Securities House SA.

• Sources: Chart of the Week : Financial Times/Bespoke Investment Group