Global Economy & Markets, Weekly Roundup 03/11/26
US “mid-term” elections and geopolitical risks are top of mind for investors
Investors will keep a close eye on the US “mid-term” elections (November 3rd), as they could have meaningful implications, inter alia, for economic and fiscal policy, as well as for AI investment.
Regarding the federal legislature (Congress), which is bicameral, polls overwhelmingly suggest that the majority in the House of Representatives will flip in favor of the Democratic party, with a somewhat above 75% chance for such an event also in the Senate.
Global equity markets were mixed in the past week (MSCI ACWI: -0.3% wow) ahead of the US Elections, with the S&P500 down by -0.6% wow, followed by a decline of -0.5% on November 2nd.
Sharp volatility for tech-heavies was particularly evident, in view of mixed results for Q3:2026, refueling some concerns regarding the sustainability of strong returns on massive (and fast-growing) capital investment, particularly regarding Artificial Intelligence. Nasdaq100 has shed -10% from its record high on October 6th, entering correction territory, albeit still at c. +150% during the current four-year-old equity market rally.
International prices of major energy commodities also demonstrated sharp volatility. Brent crude oil prices eased below $105/barrel, on hopes for diplomatic progress between the US and Iran, albeit respective uncertainty remains high (media reports on November 3rd of US strikes on Iran’s Qeshm island in the Persian Gulf).
On monetary policy, the US Federal Reserve remained on hold, awaiting for further economic data, with the Federal Funds Rate (FFR) at a range of 3.75% - 4.00%, as anticipated. Notably though, 2 out of 12 voting members were in favor of a +25 bps hike. The Fed announced that the meetings associated with rate decisions will be reduced to 7 in 2027 instead of 8 and possibly to 6 in 2028.
In all, for the next meeting on December 9th, according to pricing in FFR futures, investors continue to assign a c. 75% probability for a +25 bps hike.
The European Central Bank also stood pat on October 29th, maintaining the Deposit Facility Rate at 2.50%, in anticipation of further economic data and considering the tightening of financial conditions since the September meeting. The decision was widely expected.
The tightening of financial conditions poses downside risks for economic growth. Note that Euro area real GDP rose by +0.4% qoq (+1.3% yoy) in Q3:2026 from +0.6% qoq (+1.2% yoy) in Q2:2026. Excluding the erratic -- due to the activities of large-sized multinational corporations – Irish figures, euro area real GDP growth was still resilient, up by +0.2% qoq (+1.2% yoy) from +0.3% qoq (+1.3% yoy) in Q2:2026, despite the large energy shock.
For the next meeting on December 17th, as President Lagarde also suggested, the chances of another rate hike are high, bearing surprises in economic data. According to Overnight Index Swaps (OIS), markets price-in a c. 70% chance for a +25 basis points (“bps”) hike.
President Lagarde also announced that she will step down as of February 7th, ahead of the scheduled end of her term (October 2027). The succession process has effectively commenced, with Mr. Klaas Knot and Mr. Pablo de Cos currently appearing as front-runners.
Investors will keep a close eye on the US “mid-term” elections (November 3rd), as they could have meaningful implications, inter alia, for economic and fiscal policy, as well as for AI investment.
Regarding the federal legislature (Congress), which is bicameral, polls overwhelmingly suggest that the majority in the House of Representatives will flip in favor of the Democratic party, with a somewhat above 75% chance for such an event also in the Senate.
Global equity markets were mixed in the past week (MSCI ACWI: -0.3% wow) ahead of the US Elections, with the S&P500 down by -0.6% wow, followed by a decline of -0.5% on November 2nd.
Sharp volatility for tech-heavies was particularly evident, in view of mixed results for Q3:2026, refueling some concerns regarding the sustainability of strong returns on massive (and fast-growing) capital investment, particularly regarding Artificial Intelligence. Nasdaq100 has shed -10% from its record high on October 6th, entering correction territory, albeit still at c. +150% during the current four-year-old equity market rally.
International prices of major energy commodities also demonstrated sharp volatility. Brent crude oil prices eased below $105/barrel, on hopes for diplomatic progress between the US and Iran, albeit respective uncertainty remains high (media reports on November 3rd of US strikes on Iran’s Qeshm island in the Persian Gulf).
On monetary policy, the US Federal Reserve remained on hold, awaiting for further economic data, with the Federal Funds Rate (FFR) at a range of 3.75% - 4.00%, as anticipated. Notably though, 2 out of 12 voting members were in favor of a +25 bps hike. The Fed announced that the meetings associated with rate decisions will be reduced to 7 in 2027 instead of 8 and possibly to 6 in 2028.
In all, for the next meeting on December 9th, according to pricing in FFR futures, investors continue to assign a c. 75% probability for a +25 bps hike.
The European Central Bank also stood pat on October 29th, maintaining the Deposit Facility Rate at 2.50%, in anticipation of further economic data and considering the tightening of financial conditions since the September meeting. The decision was widely expected.
The tightening of financial conditions poses downside risks for economic growth. Note that Euro area real GDP rose by +0.4% qoq (+1.3% yoy) in Q3:2026 from +0.6% qoq (+1.2% yoy) in Q2:2026. Excluding the erratic -- due to the activities of large-sized multinational corporations – Irish figures, euro area real GDP growth was still resilient, up by +0.2% qoq (+1.2% yoy) from +0.3% qoq (+1.3% yoy) in Q2:2026, despite the large energy shock.
For the next meeting on December 17th, as President Lagarde also suggested, the chances of another rate hike are high, bearing surprises in economic data. According to Overnight Index Swaps (OIS), markets price-in a c. 70% chance for a +25 basis points (“bps”) hike.
President Lagarde also announced that she will step down as of February 7th, ahead of the scheduled end of her term (October 2027). The succession process has effectively commenced, with Mr. Klaas Knot and Mr. Pablo de Cos currently appearing as front-runners.