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Mark Lister: Investors look past share volatility to year-end prospects

  //stocks-investing.news-articles.net/content/202 .. past-share-volatility-to-year-end-prospects.html
  Published in Stocks and Investing on Sunday, October 5th 2025 at 11:39 GMT by The New Zealand Herald
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Global Shares Outlook: What Investors Can Expect in the Final Quarter

As the calendar inches toward the end of 2024, equity markets around the world are once again in the spotlight. The New Zealand Herald’s recent piece, “Global shares outlook: what investors can expect in the final quarter,” pulls together a range of data, expert commentary, and macro‑economic signals to paint a picture of what the last stretch of the year could look like for portfolios that span continents.

A World of Contrasting Drivers

The article opens by acknowledging that the global equity scene is not a monolith. While developed markets like the United States and Europe often set the tone, emerging markets, particularly China, are experiencing their own set of challenges and opportunities that could tilt the balance in the final quarter.

United States – The S&P 500 and Nasdaq Composite have both delivered solid gains through the summer, but the article notes that the path forward will largely hinge on the pace of inflation easing and the Federal Reserve’s policy stance. The Fed has signaled that a rate cut is still on the table, but the timing remains uncertain. Analysts point to the fact that a cut could spark a short‑term rally, but if inflation remains stubbornly high, a tightening cycle could still be in play.

Europe – European indices have been more volatile, largely due to the twin forces of energy price uncertainty (a carryover from the Russia‑Ukraine war) and the looming debt‑contraction debate in the euro‑zone. The article highlights that markets have responded favorably to the European Central Bank’s recent “tight‑but‑moderate” stance, but risk‑off sentiment could again bite if geopolitical tensions flare or if any European member state signs on to a stricter fiscal plan.

China – The Chinese market has been a wildcard. The piece explains that the country’s “dual‑track” economic strategy—supporting both the domestic economy and the real‑estate sector—has provided a cushion against a full‑blown recession, but regulatory crackdowns on tech and education firms have weighed on investor confidence. The upcoming earnings season, with many Chinese conglomerates set to report, will be a litmus test of whether the market’s recovery is sustainable.

Emerging Markets (EMs) – EM indices like MSCI EM reflect a delicate balance between higher growth prospects and the threat of capital outflows. The article notes that a potential Fed rate cut could pull capital away from emerging markets, but the easing of China’s regulatory clampdown could counteract that effect. Additionally, EM currencies, especially the Indonesian rupiah and the Turkish lira, could experience volatility depending on global risk sentiment.

Earnings Season as a Key Indicator

A recurring theme in the article is the importance of the earnings season. While earnings growth in developed markets has been resilient, analysts warn that there could be a “catch‑up” slowdown as companies adjust their expectations in a potentially softer macro environment. In contrast, Chinese earnings are expected to be a barometer of the health of the domestic consumer market; a stronger-than‑expected performance could buoy global sentiment.

The piece references a recent Bloomberg interview with a portfolio manager at Fidelity, who pointed out that earnings surprises are likely to dominate market moves in the last quarter. “We’re looking at a window where earnings are the primary catalyst for price action,” the manager said. The article quotes the manager again, noting that the market’s reaction to earnings will be measured against the backdrop of the Fed’s policy decisions and the pace of inflation.

Inflation and Interest Rates: The “Grand Conductor”

The article devotes a significant section to the role of inflation. It highlights that the U.S. CPI is forecast to rise to 2.5 % in the final quarter—well below the Fed’s 2 % target but still above the “breakeven” rate that the market has set for future expectations. The “breakeven” rate is essentially the difference between the return on a Treasury bond and the expected return on a corporate bond, and it serves as an indicator of how the market is pricing inflation risk.

In Europe, the ECB’s “triple‑win” policy—stabilizing inflation, supporting growth, and maintaining financial stability—has kept the euro largely stable. Still, the article cautions that any misstep in the ECB’s communication could trigger a sudden sell‑off.

Risk‑On vs. Risk‑Off Sentiment

The Herald’s writers emphasize that market sentiment is a critical, though often unpredictable, driver. They reference a survey of 50 fund managers conducted by Morningstar, which shows a near-even split between those expecting risk‑on moves and those anticipating risk‑off conditions. The article explains that geopolitical uncertainties, especially in Eastern Europe, combined with the potential for a surprise rate cut from the Fed, could tilt the balance either way.

The article cites a link to a recent Reuters piece that delves into how the bond market’s “yield curve” has flattened, signalling that investors are already pricing in a possible slowdown. In this environment, the author advises investors to maintain a diversified approach, hedging against both downside risk and upside opportunity.

Bottom Line for Investors

In its closing section, the article distills the many threads into a set of actionable take‑aways:

1. Stay flexible – With earnings season looming, the market could swing on news, so maintaining liquidity can help capture opportunities.
2. Watch inflation data – A modest easing of prices could be a sign of the Fed’s willingness to cut rates, potentially boosting equity prices.
3. Diversify geographically – A balanced mix across developed and emerging markets can reduce exposure to region‑specific shocks.
4. Keep an eye on policy – The Fed and ECB decisions remain the most powerful forces; any surprise in their communications can trigger significant volatility.

The article also includes links to deeper dives into the Fed’s policy decisions and China’s regulatory environment, giving readers quick access to more granular data. By weaving together macro‑economic indicators, earnings expectations, and policy signals, the piece offers a comprehensive framework for investors who want to navigate the final quarter of 2024 with confidence.

In a world where markets can swing on a single headline, this snapshot serves as a valuable guide for those who want to stay ahead of the curve.