The week was marked by an atmosphere of uncertainty despite the end of the U.S. shutdown. Financial markets, which might have found support, instead remained nervous amid persistent questions about monetary policy, uneven quarterly earnings, and a tense geopolitical backdrop.
This creates a paradox: a resilient global economy driven by innovation and solid private demand, yet hesitant markets facing significant political and macroeconomic risks.
Current economic environment
A. Macroeconomics and Financial Markets
-
Equity indices paused despite the end of the shutdown, as investors reduced exposure amid monetary uncertainty.
-
U.S. economic data remains limited and delayed due to the shutdown, making the Fed’s path harder to predict.
-
The U.S. 10-year yield is testing resistance around 4.16%, signaling a bond market waiting for a clearer Fed signal.
-
Small caps (IWM) are testing a critical support level at $236. A breakdown could trigger a deeper correction despite normally favorable seasonality.
B. Global Macro Trends
-
Global markets: advancing thanks to strong earnings from tech companies and the rise of AI.
-
Economic cycle: resilience confirmed in the U.S. and Europe, supported by low private-sector leverage.
-
Structural risk: public debt remains the key medium/long-term vulnerability.
-
France: activity increased in October, especially in services and construction.
Key takeaway: strong growth driven by tech and the robustness of households and businesses, but heightened vigilance on public debt.
Geopolitics
-
Sudan: dramatic worsening of the humanitarian crisis in al-Fasher, with the UN warning of a major catastrophe.
-
Ukraine: political weakening of President Zelensky and new EU sanctions weigh on regional stability.
-
Middle East: ongoing discussions on Gaza/Israel, including proposals for an international force.
-
Global agenda: growing momentum for COP30 in Brazil and the G20 in South Africa.
Key takeaway: persistent geopolitical instability offset by highly active international diplomacy.
Risks & opportunities
Opportunities
-
Accelerating investment in technology and AI, key long-term growth engines.
-
Strengthened international cooperation on climate (COP30) and economic governance (G20).
Risks
-
Escalation of civil and military conflicts (Sudan, Ukraine, Middle East).
-
Sustainability of public debt in developed economies.
-
Risk of market consolidation if key technical levels break.
Investment Recommendation
Despite today’s market caution, several factors support continuing equity exposure, particularly in large-cap U.S. and European markets.
Why Invest:
Innovation is driving growth, as of now it is AI.
Tech companies remain the engine of the current cycle. Even as markets hesitate, the structural momentum is intact.
The private sector’s resilience supports the economy.
Households and companies are less leveraged than before 2008, helping absorb cyclical shocks.
Periods of uncertainty create attractive entry points.
Shutdown-related pullbacks offer opportunities to strengthen high-quality positions.
Potential rate cuts increase the appeal of equities.
A more accommodative monetary stance in the coming months could re-rate markets.
Recommended Strategy
- Favor high-quality equities, especially in tech, healthcare, AI, and business services.
- Diversify geographically, with controlled exposure to Europe and stable emerging markets.
- Maintain a defensive allocation (gold, investment-grade bonds) as a hedge against geopolitical volatility.
6. Conclusion
The current macro narrative is one of a robust global economy propelled by technology and supported by the private sector’s resilience. The geopolitical narrative, however, remains dominated by ongoing instability, humanitarian crises, and political tensions.
For investors, this translates into a blend of tactical caution and strategic optimism: markets may remain choppy in the short term, but the long-term growth fundamentals are still pointing in the right direction.