Issue link: https://info.seic.com/i/1542859
Executive Summary • Equity markets closed out a strong year with a positive fourth quarter, as performance broadened beyond U.S. large-cap stocks. Small caps, healthcare, and financials posted solid gains, while international equities outpaced U.S. peers. Even fixed income delivered strong returns, adding to the year's overall strength. • Q3 2025 earnings were robust, with roughly 85% of U.S. companies beating estimates - one of the highest levels in recent years. Looking ahead, earnings expectations remain constructive, as all 11 sectors of the S&P 500 are projected to report year-on-year earnings growth. • U.K. inflation eased to 3.2% in November, down from October's 3.6% year-on-year rise, driven by lower transport and household goods costs. GDP grew 0.1% in Q3 2025, slightly below the 0.2% increase recorded in Q2. Economic Factors Interest Rates • The Bank of England cut rates once in Q4, while the Federal Reserve delivered two reductions. The ECB held policy steady as inflation hovered near its target. Inflation • Eurozone inflation held steady at 2.1% for the year to November, while U.S. inflation eased to 2.7% in November, the first update since September following the 43-day US government shutdown. Economic Growth • US GDP expanded at an annual rate of 4.3% in Q3 2025, significantly exceeding expectations driven by consumer and government spending and exports. Eurozone GDP increased 1.4%, down from the 1.6% year-over-year increase reported in Q2. Tactical Views Fixed Income • We remain broadly defensive in credit, steering clear of long-term fixed income amid debt concerns, while maintaining a focus on securitised sectors within the fixed income space. Global Equities • We maintain an underweight position in U.S. mega-cap technology stocks due to concentration risks, while favouring active management and positive exposure to global value, quality, and momentum factors. Pessimistic Optimistic Pessimistic Optimistic SEI Monthly Update Q4 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