Q3 Macroeconomic Update
THE WEIGHT OF EXPECTATIONS
When Expectations Carry the Market, Even Small Shifts Matter
While the backdrop for risk assets remains constructive in the near term due to easing financial conditions and targeted fiscal measures, late-cycle markets don’t reward complacency. Advisors need to be aware of elevated valuations, tight credit conditions and the heavy lifting the AI is doing for equity markets. When expectations are carrying market momentum, even small shifts can tip the balance.
Where the pressure is building beneath the surface
Growth Tailwinds vs. Structural Friction | Fiscal and monetary support are driving momentum into 2026, but structural challenges like tariffs, labour softness, and persistent inflation, could slow the pace of expansion.
Equities: Strength Built on a Narrow Base | Equities remain resilient; however, performance is concentrated among a few mega-cap and AI-linked names. Elevated valuations leave markets sensitive to any shift in the narrative.
Credit: Supported by Policy, Priced for Perfection | Rate cut expectations and strong inflows continue to support credit, but tight spreads and rising fiscal risks mean that market strength now depends on policy staying favourable.
Short-Term Caution: Innovation Meets Friction | AI optimism is driving investment, yet sticky inflation and policy uncertainty could challenge near-term resilience and heighten market sensitivity to negative surprises.
This material has been published by Picton Mahoney Asset Management (“PICTON Investments”) on October 27, 2025.
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