From Hawkish Easing to Tactical Rotation
Fed caution, China’s policy pivot, and Brazil’s rate-cycle tailwind set the tone for November positioning.
🧭 Macro Overview
The Federal Reserve cut rates by 25bps to 3.75–4.00% at its October meeting but delivered a hawkish tone. Chair Jerome Powell signalled caution on inflation, prompting a rise in US Treasury yields (10Y at 4.1%) and a stronger dollar, while gold and Bitcoin fell and the S&P 500 declined 1.83%.
China–US relations eased modestly as President Xi and President Trump reached a temporary “ceasefire” consensus, largely in line with market expectations.
Elsewhere, Japanese equities continued to outperform, supported by yen weakness and semiconductor strength, while China’s property sales fell over 40% YoY, highlighting persistent fragility in the real estate sector.
Investment theme: maintain focus on Brazilian equities, which continue to benefit from positive earnings momentum and improving real yields.
🇺🇸 United States
The Fed’s October rate cut has lowered policy rates, but Powell’s hawkish remarks tempered expectations for another move in December — with rate-cut probability dropping from 90.9% to 70% post-meeting.
The government shutdown continues to delay macro data, but recent headlines highlight large-scale corporate layoffs at UPS, Amazon, Intel, and Accenture, raising concerns over labour-market softness.
However, state-level jobless claims declined, suggesting underlying employment resilience.
Tech earnings broadly exceeded expectations, but sentiment was shaken as Michael Burry’s Scion Asset Management reportedly shorted AI-heavy names such as Palantir and Nvidia, reigniting debate over stretched valuations in the AI sector.
🇪🇺 Europe & 🇬🇧 United Kingdom
The European Central Bank (ECB) kept policy rates unchanged at 2%, while the 10-year German Bund yield held steady around 2.6%. Eurozone core inflation rose 2.4% YoY, slightly above expectations.
Markets now expect the ECB to pause through year-end, effectively marking the end of the tightening cycle.
🇨🇳 China
China’s property market downturn deepened in October, with the top 100 developers reporting sales down over 40% year-on-year, underscoring persistent fragility in the real estate sector and its drag on consumer confidence.
Against this backdrop, the draft of the upcoming 15th Five-Year Plan (2026–2030) sets a more balanced growth agenda.
It targets GDP growth of 4–5%, places greater emphasis on household consumption and Total Factor Productivity (TFP), and signals a strategic shift from supply-side expansion toward a technology- and consumption-led model — aiming to stabilise growth while improving quality and efficiency.
In commodities, Beijing’s introduction of a tax on gold jewellery transactions seeks to temper speculative demand. The measure is largely symbolic, exerting limited impact on gold prices or mining profitability, but reinforces the government’s preference for financial discipline over short-term exuberance.
Meanwhile, geopolitical tensions in the Middle East have rippled through global supply chains, driving up transportation costs. Crude freight rates from the Persian Gulf to China surged 30% overnight, adding to inflationary pressures and highlighting China’s sensitivity to external energy risks despite recent progress in supply diversification.
🇯🇵 Japan
The Bank of Japan maintained its policy rate at 0.5%, as the Nikkei 225 climbed +3.16% for the week.
The VIX volatility index rose +19.1%, but Japan remains a relative outperformer, supported by currency depreciation and semiconductor-led earnings strength.
📈 Investment Theme: Brazil Equities
Brazil stands out as one of the most compelling tactical opportunities among emerging markets. The MSCI Brazil 25/50 Index trades at only 10x forward earnings with a ~5% dividend yield, offering both value and income appeal.
A weaker U.S. dollar remains supportive — historically, every 1% drop in the USD corresponds to a 4.5% gain in the MSCI Brazil Index. Brazil has also entered a monetary easing cycle, following a peak policy rate of 15%, marking an inflection point for domestic liquidity and equity valuations.
The 2026 presidential election could bring further policy stability, while global investors remain underweight Brazilian equities amid broad overweight positions in bonds. We continue to favour the iShares MSCI Brazil ETF (EWZ, unhedged) for direct exposure.
💼 Corporate Earnings & Market Sentiment
Corporate earnings across major markets have remained broadly resilient, with most large-cap companies reporting positive year-on-year growth, reinforcing confidence in global fundamentals.
The overall Q3 season underscored macro stability across both developed and emerging markets, even as policy and currency volatility persisted.
However, sentiment within the AI and technology complex turned more cautious following new regulatory disclosures from Michael Burry’s Scion Asset Management, which reportedly allocated around 80% of its portfolio to short positions in AI leaders Palantir and Nvidia.
The scale of these bearish bets has drawn intense market attention, highlighting growing scepticism toward elevated valuations in the AI sector. Palantir’s shares fell nearly 8% following the disclosure, a reminder that even within a strong earnings cycle, investor positioning remains highly sensitive to shifts in narrative and confidence.
Together, these developments capture the defining tone of the current market: earnings resilience tempered by valuation discipline — a backdrop in which selectivity, balance, and timing remain the critical drivers of alpha.