Investment Viewpoint: A gentle slowdown

Simplify the complex with clear and concise market insights direct from our investment experts every week.

Markets and macro insights with Bernard Swords, Chief Investment Officer

How did stocks perform last week?

• Global stock markets delivered a solid performance. The World Index just over 2.5% in euro terms, and the gains were broad-based, only one sector was slightly down on its previous showing. Technology and communication services were the standout performers, driven by renewed confidence in the artificial intelligence (AI) theme.

What was the main issue affecting market sentiment? 

• There was considerable discussion on the question of whether NVIDIA can maintain its leadership in semiconductors after Alphabet unveiled the latest version of its AI model. This debate sparked some volatility in individual share prices, with NVIDIA easing a little and other companies in the sector getting a boost.
• For Goodbody, this issue is not a concern. We invest in diversified, broad-based products, so we’re not relying on one company to win. What matters is that the AI growth story continues, and last week’s developments suggest that it will. Innovation carries on, and this will underpin growth in the area.

What was the main news from the United States?

• In the US, we saw a small dip in retail sales, down just 0.1% month-on-month, but they have been growing at an annualized pace of over 3.0%. Consequently, a slight slowdown isn’t alarming. Inflation data was also reassuring: producer prices (PPI) came in as expected, showing no major impact from recent tariff changes.
• These softer retail numbers and stable inflation have increased the chances that the Federal Reserve could cut interest rates at its next meeting. That expectation was a major driver of last week’s market strength. Lower rates generally support stock prices, so this is good news for investors.

What other factor influenced market sentiment? 

• An intensification of discussion regarding a potential peace plan for Ukraine had a positive effect on market sentiment, even though any prospective resolution is a long way off. Signs of efforts toward achieving a settlement encourage global stability and therefore investor confidence.

Fixed Income Markets with Elizabeth Geoghegan, Head of Fixed Income

What dominated the news in Fixed Income markets last week?

• It was a relatively quiet week in terms of market moves. The EuroAgg gained 0.25% as at close of business on Thursday. German Bund yields were relatively unchanged over the week, and spreads remained steady too.
• There has been a significant swing in expectations regarding a further Federal Reserve interest rate cut in December. At the start of last week, expectations had risen to over 60%, up from a low of 25% the previous Wednesday. Expectations had fallen following news that labour market data would be limited ahead of the Fed meeting this month. However, comments late on Friday November 21 from President of the New York Federal Reserve Bank John Williams that he saw room for another cut “in the near term” once again precipitated an increase in expectations for a December cut.
• Markets now estimate a more than 80% probability for a move in December.

The UK budget generated headlines for fixed income market moves. What were the main takeaways? 

• Both equity and bond markets initially reacted positively to the UK government budget last Thursday, as the release showed the government to have more ‘fiscal headroom’ than previously anticipated. Fiscal headroom refers to the amount of money the government can spend before it breaks its own fiscal rules. Put another way, it is the amount or space available before the government is assumed to have deviated from the prospect of achieving a balanced budget by 2029/2030.
• Whilst fiscal headroom of £22bn initially elicited a positive reaction, the credibility of the budget came into question relatively quickly, due to the back-loaded nature of many of the budget tightening measures. Tax rises will not take effect until the final two years of the forecast, whereas planned welfare increases will be implemented immediately. Therefore, UK borrowing will be increasing over the next three years, before reducing in time to meet fiscal constraints by 2029. In effect, markets are being asked to trust that although the UK government will be spending more money now, the budget will balance in the longer term.

The week ahead: what to watch out for

This week brings a busy calendar of economic data. We will see the major business reports from the US (ISMs) and from the euro area the PMIs. We will also receive industrial production data from the US. The euro area will release inflation and retail sales data.

Also on Thursday this week we will be holding our Investment Outlook 2026. Register here to listen to our expert panel on what we can expect next year.