The Eurozone economy grew by 0.2% in Q3 2025, stronger than the expected 0.1%. The main driver was France, whose GDP rose by 0.5% – the strongest growth since 2023, despite political turbulence and an S&P downgrade from AA- to A+. Germany narrowly avoided a technical recession but has suffered from stagnant or declining economic performance for 14 consecutive quarters. The ECB kept its key interest rate at 2% for the third time in a row. Hopes for Germany lie in higher government spending on defense and infrastructure as well as tax incentives for businesses. In the U.S., the Bureau of Labor Statistics remained furloughed in October 2025 due to the government shutdown – the first time since 1921 that monthly inflation data may fail to appear. Around $7 trillion in inflation-linked bonds and contracts could rely on estimates if official inflation data is missing—creating significant uncertainty for affected markets. While the “government shutdown” continues at home, the U.S. has agreed on closer cooperation with Japan (“a golden age”) and signed trade agreements with South Korea and China. South Korea will invest USD 350 billion in the U.S. and benefit from lower tariffs on cars and semiconductors. China will receive lower tariffs and, in return, suspend its export restrictions on rare earths and chips for one year. Implementation would have had noticeable global effects, as such measures would raise raw material costs and threaten Western supply chains, especially in the automotive, medical, and defense industries.
The third-quarter earnings season is in full swing. What is striking is the increasing, sometimes drastic price fluctuations of individual mega-cap stocks. Changes in market capitalisation of over USD 100 billion in a single day for individual companies are no longer an exception. Such movements have already been recorded more than 120 times this year – a record. The main drivers of these developments are mega-cap companies such as NVIDIA, Apple and Microsoft, but the derivatives market and leveraged ETFs are also contributing factors. The fact that the volatility of the overall market has remained comparatively low – the VIX fear gauge is currently at a low 17.44 – is due to the low correlations between individual stocks: Themes such as artificial intelligence and trade policy headlines have given some individual stocks a strong boost, but have led to price losses for others. However, if it turns out that the high AI investments do not generate corresponding returns – coupled with a subdued economic environment – the risk for the overall market is likely to increase significantly. As a result, both higher volatility and stronger correlations on the stock markets would be expected, accompanied by lower prices. Such scenarios are not part of our baseline expectations, but we are nevertheless protecting our portfolios against them with appropriate strategies. Without neglecting the prevailing risks, we are therefore cautiously optimistic about the future.
The market had already anticipated a further interest rate cut by the US Federal Reserve, so the 25 basis point cut came as no surprise, even though there appeared to be widely differing views within the Fed itself. However, Fed Chairman Jerome Powell expressed doubts about a further interest rate cut in December, comparing the current situation to ‘driving through fog’ given the lack of economic data due to the government shutdown. Expectations of a further interest rate cut in December fell from 87% to 74%. After temporarily reaching almost USD 4’400, the price of gold fell below the USD 4’000 per troy ounce mark and was last quoted at USD 4’002.28. It should be noted that the performance for the month of October remains at 4.8% in CHF. The sharp rise in the price of gold this year was driven by geopolitical uncertainties, high government debt and the weakness of the US dollar. Central banks also bought gold for diversification purposes, although their demand has weakened recently. Despite short-term uncertainty, we remain optimistic in the long term and are not particularly surprised by the recent price correction, which we consider to be healthy. In October, the Swiss franc remained robust against most major currencies, with the exception of the US dollar. The Japanese yen fell particularly sharply, losing almost 3% against the franc following the election of Sanae Takaichi.
Financial markets largely continued the upward trend seen in previous months. Reports about a possible bubble on the US stock markets, drawing comparisons with the dot-com bubble, are now appearing in various places. Elsewhere, the current AI hype is not considered exaggerated, especially as the rally is supported by real profits. Both views are understandable from a neutral perspective. Against this backdrop, the prevailing low volatility is a welcome development, especially as it allows portfolios to hedge at favourable conditions without having to forego any further price gains. Furthermore, in view of the rapid price developments for gold and silver, we carried out several rebalancings in the first half of October, both in the precious metal positions themselves as well as in our gold mining stock allocation. Our portfolios thus remain well diversified and we look to the future with confidence.