WeeklyWatch – Tough decisions amid data darkness

W.24822 Wellesley WeeklyWatch 04.11.25_1420 x 474

4^th November 2025

Stock Take

Congress stalemate causing limited visibility of key data

The US Federal Reserve opted to cut their interest rates by 0.25%, as worries about a stalling labour market surpassed inflation fears. However, the vote wasn’t unanimous: one member voted for a 0.5% cut, and another voted for no cut.

Despite the divisions, the outcome was widely anticipated and is the second consecutive month where the Fed have chosen to cut rates. Even though inflation remains a consistent pressure, a slowdown in the job market was the key driver.

Because the result was expected, investors were paying closer attention to Fed Chair Jerome Powell’s comments. The federal government is currently in a shutdown which has been going on for nearly six weeks. As such, the Fed aren’t able to access the flow of economic data they require to monitor the nation’s economic health.

When it came to key data points, Powell commented that the central bank was effectively “flying blind”. With an incomplete picture, he suggested the Fed would likely choose to move slower when it came to making decisions on future interest rate cuts. He stated:

“What do you do if you’re driving in the fog? You slow down.”

Regarding next month specifically, Powell said a December rate cut was “not to be seen as a foregone conclusion – in fact, far from it”.

Following his comments, the expectations of another interest rate cut to take place this year narrowed.

Tech stocks on the rise

Continuing to soar this week were tech stocks. The $4 trillion club received a new member in Apple, who joined the ranks of Microsoft and Nvidia. Despite this, Nvidia still stole the spotlight as their market cap reached $5 trillion for the first time. But with such a high value, it’s led to the question – is Nvidia approaching bubble territory?

The Equity Strategist at St. James’s Place, Carlota Estragues Lopez, said:

“On one hand, Nvidia’s elevated valuations seem justified by strong realised earnings growth. But on the other hand, the significant investment and energy for data centres required to keep up with high demand means that there is downside risk and puts into question the sustainability of this growth.

“The question is whether Nvidia is part of a long-lasting structural shift towards a new technology and how reliably can they keep beating earnings expectations to live up to the optimism that is priced in to the market.”

But these tech companies weren’t the only ones who enjoyed success this week. Amazon, Alphabet, Microsoft and Meta also posted strong third-quarter results, adding to the notion that the AI boom is continuing. Reuters reported that OpenAI were putting down the foundations for a trillion-dollar listing.

Having said this, there was a cloud on the horizon for tech’s time in the sun, due to concerns over the level of spending that’s required to sustain the AI revolution. OpenAI are set to lose billions by the end of the year, and Microsoft’s share price fell despite growing revenue and profits – it reflected investor concerns regarding spending on AI at the company.

Strength in Europe

In the eurozone, real GDP increased by 0.2% during the third quarter, surpassing the 0.1% that’s been the pattern in previous quarters and performing better than numerous analysts’ predictions. Unemployment remained level with the previous month.

The European Central Bank also voted to keep interest rates level on Friday. They remain at 2%, which is in keeping with expectations.

UK faces stormy conditions

The UK didn’t enjoy such good news this week. As the Budget draws ever closer, Chancellor Rachel Reeves continues to face challenging decisions.

The fresh productivity downgrade from the Office for Budget Responsibility last week will have made matters even more difficult. There was a 0.3% reduction to forecasts – larger than expected – meaning that Reeves will need to find more money while she finalises the Budget plans ready to be revealed on 26^th November.

Sitting right in the middle of these two events is the Bank of England (BoE) meeting to discuss interest rates – due to take place this Thursday. It’s expected that the BoE will keep rates as they are, even though there have been calls for a reduction. Whatever the choice, markets will be listening closely to BoE Governor Andrew Bailey’s comments after the announcement. Hints concerning more rate cuts this year will be of particular interest to investors.

Uncertainty didn’t hold back British equities, as they saw a rise. A few factors are responsible for this, including a possible interest rate cut before the end of 2025.

Estragues Lopez added:

“The UK equity rally has been driven in part by optimism surrounding interest rate cuts and in part by dollar weakness. It is very hard to tell whether the BoE’s rate cut will have any impact on the November budget.”

There was a bitter taste in the mouth as the week drew to a close. On Sunday, the Telegraph reported that the UK’s national debt grew at the quickest rate of any advanced economy between 2005 and 2025 which will only add more pressure on Reeves, as the cost of servicing it continues to mount.

Wealth Check

Beginning the conversation

Talking about money is a great way to help people make better-informed decisions about their finances, both now and in the future. This is the key message from Talk Money Week – run by the Money and Pensions Service (MaPS), a UK public body.

MaPS want to encourage people to be more open about their finances and highlight the benefits of discussing money. As well as improving decision making, they identify how these conversations can have further benefits including reducing stress and even deepening and developing stronger relationships.

UK families are set to pass on trillions over the next three decades which has already been titled “the great wealth transfer”; therefore, starting those important conversations is going to become more and more pertinent.

Much is expected to change in the next few years – and short term with the upcoming Autumn Budget – so planning ahead for the future while having honest financial conversations will be highly beneficial for many people. One of the ways in which they’ll help is to ease the transfer of wealth across families.

Many people are hesitant to discuss money and fear potential conflict as a result, which is why having a close friend or trusted financial adviser alongside you to guide these discussions could be extremely valuable.

In the Picture

The latest IMF forecasts show that the US will have a higher debt/GDP ratio than Italy or Greece by the end of the decade – unless checked. For those who recall the eurozone debt crisis, this pending inversion goes further than symbolism. Interest payments in the US are one of the fastest-growing categories of government spending – could this prove to be unsustainable long term?

Conversely, Japan is often spotlighted as an example of even higher national debt/GDP ratios. But it’s worth remembering that most of their debt is held domestically and is therefore less sensitive to external economic conditions and Japanese interest rates are significantly lower than the US’s.

The information contained is correct as at the date of the article. The information contained does not constitute investment advice and is not intended to state, indicate or imply that current or past results are indicative of future results or expectations. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.

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SJP Approved 03/11/2025