MARKET INSIGHT – November 2025

MARKET INSIGHT

Prime Partners’ monthly analysis of global economic and financial market news.

The air gets thinner as you approach the summit

Following a month of September that belied its poor reputation for stock markets, October saw equities continue their upward trajectory. Admittedly, this did not come without a struggle, as the irrepressible President Trump added fuel to the fire of Sino-American relations, this time over the crucial issue of rare earths, which China seems determined to use as a bargaining chip with the rest of the world. This is par for the course. Fortunately, Donald Trump, in a now familiar display of backpedaling, was quick to calm market participants after triggering the biggest cryptocurrency sell-off in history. You can’t change who you are.

The US president then flew off on a tour of Asia, where, at the time of writing, he is treating us to a few dance moves and, of course, statements full of optimism, both about upcoming “deals” with his counterparts, including President Xi, and about the technological revolution currently sweeping the world, led by the biggest American tech companies. Whether you like him or not, Donald Trump has once again demonstrated the extent of his influence over investors in recent weeks.

In Jules Verne’s classic “Journey to the Center of the Earth” (published over 160 years ago!), the illustrious French author wrote that we must “learn lessons from the abyss.” In other words, that we must confront our fears in order to overcome them. For almost three years now, the trajectory of the stock markets, particularly in the US, has inexorably led investors to confront a fear with which they are all too familiar.

The specter of a sudden recognition that current valuations are excessive in relation to economic reality, and that corporate earnings may be lower than anticipated, is legitimately creeping into our minds. Whether these fears take the form of an AI bubble, a US debt crisis, or a loss of independence for the Fed (or a mix of all three), it is important to take stock of the situation on a regular basis.

The specter of a sudden recognition that current valuations are excessive in relation to economic reality, and that corporate earnings may be lower than anticipated, is legitimately creeping into our minds

The past month has seen scant economic data in the United States due to the government shutdown, which is on track to become the longest in the country’s history. Despite this predicament, the release of inflation figures showed that the rebound appears to be less than expected, potentially paving the way for the Fed to cut rates twice this year. This constitutes a first positive sign in terms of visibility.

On a less cheerful note, concerns have suddenly surfaced in the private credit market. Reality has caught up with some of the sector’s major players, with several loans granted to companies sporting potentially dubious balance sheets imploding. So far, nothing catastrophic has happened, but experience has taught us that problems affecting the banking and financial sector can spread like wildfire and often have numerous ramifications. We must therefore be wary of any domino effect.

Staying in the US, the earnings season will serve as referee, as has been the case for many quarters now. This will be particularly true for technology stocks, whose prices have been boosted by the advent of artificial intelligence over the past two years. We are inevitably approaching the end of a golden period for the sector, during which repeated announcements of huge investments, particularly in the construction of data centers, have excited investors. This phase should soon give way to a more down-to-earth assessment of the monetization of AI, and therefore of the concrete returns on investment from the massive amounts being deployed. In other words, a delayed takeoff, or lower than expected (or less quantifiable) returns, would be bad news for the S&P 500, where technology companies now make up more than 40% of the index, with Nvidia, Microsoft, and Apple accounting for more than $13 trillion in market capitalization.

Let’s now turn to Europe, where concerns and current events are very different. Even artificial intelligence has not yet found a miracle solution to the French problem, where the government saga is becoming almost boring due to a lack of real progress. The fact remains that the virtual political paralysis of Europe’s second-largest economy drags on and is not without consequences for the bond markets.

Germany, meanwhile, has other worries, starting with the question of how to emerge from a prolonged economic slump, epitomized by the vital automotive sector, which has seen sales in China collapse. Porsche’s latest results are a case in point. Over the last three years, the share price of the legendary German brand has fallen by almost 50%… Not exactly something to brag about.

For once, a few words about Switzerland, whose economic resilience is being severely tested. This is of course due to the grotesque 39% customs tariffs still in force with the United States, but also to stagnant Chinese demand and the plight of Germany, a long-standing customer of many Swiss companies. Finance is a ruthless world, and the Swiss franc’s safe haven status gives the local currency a strength that many exporters would gladly do without at the moment. Downward revisions to economic growth forecasts for 2026 are thus becoming increasingly common, although at this stage there are no signs of a recession.

Finally, China is still facing the same difficulties since the end of Covid. The negative fallout from the huge real estate bubble remains clearly visible, prompting consumers to exercise caution. The impact of US tariffs has left the country with significant production overcapacity, particularly for goods that are heavily subsidized by the government. Electric cars and solar panels are two of the best-known examples. The Chinese Communist Party’s stated desire to shift the country’s economic model towards greater domestic consumption is currently coming up against the reality of international trade, which has been profoundly altered since “Liberation Day” last April.

This economic overview leads us to maintain our scenario of subdued global growth ahead. Current oil prices confirm that, despite new sanctions affecting Russia’s two largest producers, there is no upsurge, mainly due to weak demand and sluggish trade. However, it is important not to confuse the soft global economy with stock market indices, which do not paint the same picture.

It is important not to confuse the soft global economy with stock market indices, which do not paint the same picture

Fully aware of a certain disconnect between economic reality and financial markets, we believe it is essential not to portray them too negatively, especially in the context of a diversified asset allocation. October turned out to be a good month for our portfolios, buoyed by our investments in technology and electrification stocks, which also benefited from the AI boom. Emerging markets, helped by major Chinese and South Korean technology stocks in particular, also had a very good month. Gold was once again a contributor to performance, with the precious metal continuing its impressive upward trajectory of 2025, despite a bout of volatility.

The diversification patiently built into our allocations over recent quarters continues to bear fruit. They weathered well the more volatile October sessions triggered by Donald Trump’s statements on China and the threat of potential additional tariffs on Beijing. As we get to the heart of the matter with the publication of the tech giants’ results, we do not believe that expectations for the third and fourth quarters of 2025 are overdone.

Furthermore, the combination of a rebound in inflation less pronounced than expected and the now fairly clear slowdown in the US economy, apart from the technology sector, suggests that the US Federal Reserve should signal, still cautiously but a little more unequivocally, that monetary easing is now underway.

All of these considerations have prompted us to slightly increase the equity portion of our allocations, while being careful not to dilute the weighting of emerging markets, which we continue to favor.

We will not be traveling to the center of the Earth like Jules Verne’s hero, but the rigor of our portfolio construction process and the resulting diversification ensure that we do not have to learn too many “lessons from the abyss” in order to navigate the current environment.