Issue link: https://info.seic.com/i/1540103
Executive Summary • Q3 saw renewed focus on international trade policy, as ongoing negotiations between major economies led to further postponements and adjustments in tariff schedules. While the US, UK, and Eurozone continued to navigate complex trade relationships, the overall environment remained supportive for markets, though investors continue to monitor the impact of tariffs on supply chains and corporate earnings. • Equity markets rallied broadly, with gains extending beyond the U.S. large cap "Magnificent Seven" technology stocks, which benefited from increased investment in Artificial Intelligence. The rally was supported by strength across wider sectors, including small caps, following the Federal Reserve's rate cut. • U.K. inflation was 3.8% in August, unchanged from July. However, GDP growth slowed to 0.3% in Q2, reflecting weaker consumer spending. The Bank of England left rates unchanged, citing the need to balance inflation risks with fragile growth prospects. Economic Factors Interest Rates • While the BOE and ECB held rates steady during the quarter, the Federal Reserve reduced interest rates by 0.25%, marking the first rate cut since December 2024. Inflation • Inflation in the U.K. and U.S. remained above the central banks' target of 2%. However, Eurozone core inflation came in at the ECB's 2.0% target, down from 2.1% in August. Economic Growth • Despite ongoing geopolitical uncertainty, Q2 U.S. GDP growth came in above estimates and ahead of Q1 GDP growth. In contrast, Eurozone GDP growth slowed considerably, highlighting diverging economic momentum between the two regions. Tactical Views Fixed Income • We continue to stay defensive in credit and hold a neutral stance on duration, while remaining positioned for a continued steepening in U.S. and European yield curves. U.S. Large Cap Equities • Globally diversified equity exposure across geographies remains a focus, despite continued strength in U.S. large-cap equities during the quarter. Pessimistic Optimistic Pessimistic Optimistic SEI Quarterly Update Q3 2025 This is a marketing communication Pessimistic Optimistic Pessimistic Optimistic Pessimistic Optimistic Legend SEI's Current View: Direction of movement from previous: For use by advisers of regulated intermediaries in the UK in acceptance with all applicable laws and regulations