Geopolitical uncertainty, which had been building for months, remained elevated in October and was compounded by rising political instability, with the U.S. government shutdown taking center stage. Even so, markets showed resilience. The Federal Reserve cut its policy rate; this provided support for equities, which held firm thanks to solid corporate earnings and ongoing momentum in the technology and artificial intelligence sectors, yet fixed income continued to reflect the tensions of the month: the 10-year Treasury yield fluctuated between 4.00% and 4.20%, influenced by political noise, the absence of macro data during the shutdown, and episodes of risk aversion. Gold was among the strongest performers and oil moved within a more moderate range. Europe had a fragile month, driven in part by political instability in France and its credit rating downgrade, while Asia moved largely in line with shifting U.S.–China dynamics. The month ultimately ended with a modest stabilization in risk sentiment, supported by monetary easing and early signs of easing trade tensions.
November saw a broad market correction and a clear pullback in risk appetite, driven by doubts about the sustainability of elevated tech/AI valuations. The U.S. government shutdown —which delayed key data and reduced visibility— along with uneven Fed communication kept markets oscillating between expectations of a December rate cut and a pause, leaving the Treasury curve highly reactive during repeated flight-to-quality episodes. Equities weakened globally: the US lost momentum, and Asia saw heightened volatility amid growth concerns and regional tensions. The correction extended across the tech and semiconductor space and into cyclical sectors and emerging markets, signaling pressure across the broader economic landscape. Commodities softened (oil under supply pressures, copper reflecting China’s weak industrial tone, gold acting as a moderate haven), and FX moves remained contained overall. Cryptocurrencies sold off sharply in a wider de-risking environment. November marked a clear shift toward caution, with broad risk adjustment, renewed demand for duration, and limited clarity on the macro outlook.
December unfolded with markets showing relative resilience into year-end, though sentiment remained cautious in the absence of clear catalysts to shift the outlook. The Federal Reserve cut rates by 25 bps, bringing them to 3.50%–3.75%, a decision largely interpreted as neutral: while it provided some support to risk assets, fixed income remained sensitive, with ongoing volatility in the 10-year Treasury yield. Equities managed to hold up thanks to seasonal liquidity. In commodities, performance was mixed, with gold standing out as a defensive asset and oil trading within tight ranges despite a still-tense geopolitical environment. In currencies, the dollar tended to weaken toward month-end amid expectations of further rate cuts in 2026. Overall, December closed with a slightly more constructive bias, supported by monetary easing and typical year-end dynamics, although macro visibility remains limited heading into 2026.
Against this backdrop, we continue to emphasize the importance of maintaining well-diversified portfolios across asset classes and regions. The final quarter of the year reflected a market environment marked by episodic volatility, valuation sensitivity, and evolving policy signals. As uncertainty around growth and geopolitics persists, active management and careful asset allocation remain key pillars for navigating market fluctuations and preserving portfolio stability.
Below, you can find a brief summary of the allocation views for the upcoming months from some of our key partners.
United States Equities
PIMCO is constructive on US equities but emphasizes a rotation toward value, arguing that value-oriented stocks remain attractively priced and could benefit from a stable economic backdrop that helps broaden earnings beyond the most concentrated segments of the market. AllianceBernstein shares this favorable macro view while placing greater attention on valuation risk, highlighting the need for selectivity and diversification, including low-volatility strategies. Franklin Templeton holds the most optimistic view, projecting that strong earnings growth combined with sustained high multiples could drive significant upside in the S&P 500 through 2026, while acknowledging higher volatility. BlackRock aligns with the positive outlook and is overweighting US equities, supported by AI-driven earnings growth, Fed easing and reduced policy uncertainty.
Emerging Markets Equities
Asset managers broadly agree that opportunities in emerging market equities are improving. PIMCO highlights EM equities as policy easing supports domestic demand, pointing to China, Korea and Taiwan as ways to access technology and AI exposure at more reasonable valuations. AllianceBernstein shares this view, citing lower local rates, improving earnings and a softer dollar,. Franklin Templeton is more optimistic, expecting EM earnings growth to match the US. BlackRock, however, remains neutral on EM equities overall, remaining selective, highlighting opportunities tied to AI, the energy transition and supply-chain reconfiguration.
Europe Equities
Views on European equities are mixed. Franklin Templeton is constructive, expecting monetary and fiscal easing to support a cyclical recovery in 2026. But BlackRock remains neutral, arguing that recent outperformance would require more business-friendly policy and deeper capital markets to be sustained, and therefore favors select sectors, such as: financials, utilities and healthcare, rather than a broad overweight.
Gold
PIMCO views gold as a strategic reserve asset, supported by geopolitical risk, rising sovereign debt and central bank diversification away from US Treasuries. While it sees potential for further gains as interest rates fall, PIMCO cautions that valuations appear elevated relative to real yields, warranting careful position sizing. J.P. Morgan, by contrast, holds a more bullish outlook, arguing that the drivers behind gold’s rally—tariff uncertainty and strong demand from central banks and ETFs—remain in place, and projects a significant further rise in gold prices over the coming years, even if gains are not linear.
US Sovereign Debt
There is broad alignment that lower policy rates will make cash unattractive and support reallocating into bonds. PIMCO favors rotating into high-quality 2–5 year bonds to lock in yields. AllianceBernstein also prefers short and intermediate maturities, noting that government bonds have regained their negative correlation with risk assets, while avoiding excessive duration risk. Franklin Templeton is negative on long-dated government bonds, arguing that large deficits and borrowing needs will weigh on performance. BlackRock broadly shares this caution, remaining neutral on the short end but underweight long US Treasuries. Overall, the consensus disfavors long duration and favors quality and intermediate tenors.
US Credit
AllianceBernstein believes the credit backdrop remains supportive but warns that tight spreads leave little room for error, favoring investment-grade and BB-rated bondsr. Franklin Templeton also expects investors to move into corporate credit as cash rates fall. BlackRock is more selective, remaining neutral on short-term investment-grade credit, underweight long-term IG due to duration risk, and neutral on high yield, citing increased dispersion between strong and weak issuers. While all managers see carry as attractive, none expect significant price upside, reinforcing the emphasis on quality and issuer selection.
International Bonds and Credit (including EM Debt)
Emerging market debt stands out as one of the strongest areas of consensus. Franklin Templeton is highly constructive, supported by Fed cuts, a weaker dollar and declining currency-hedging costs for non-US investors. BlackRock shares this optimism mostly in EM hard-currency debt, where it is overweight, while remaining neutral on local-currency debt given uncertainty around the durability of dollar weakness. Overall, EM debt is viewed as a key beneficiary of the global easing cycle and a compelling alternative to developed-market bonds.
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