The Economy
Growth Convergence Between the U.S. and the EU?
- The latest IMF report points to positive growth in 2026, highlighting a new development: the narrowing gap between U.S. and EU growth.
- The EU finds itself at a crossroads, needing to accelerate growth —primarily in Germany— while also addressing a deregulation process (or, as some call it, simplification) advocated by the Letta Report.
- U.S. growth is largely driven by investment in AI, while the government’s anti-immigration policy weakens job creation. Meanwhile, to the surprise of many, consumption remains strong.
- In the EU, inflation hovers around 2%, similar to the U.S. However, in the latter, service inflation remains above 3%.
- On the monetary front, the U.S. Federal Reserve has cut the official rate by another 0.25%, but keeps its options open for December: surprises ahead? In contrast, the ECB maintains official rates for the Eurozone.
Markets
Stock Markets Soar
- Investors in listed assets (equities) have embraced the optimistic narrative tied to astronomical investments in AI, which are expected to be profitable and accelerate growth. This has impacted all markets (+5.61% MSCI World EUR – year-to-date through October), but has been especially intense in the U.S.
- Concerns about overvaluation risk in tech companies —mainly the “Magnificent 7”— persist: their market capitalization now exceeds 30% of the S&P 500 index.
- Sovereign fixed income yields show no significant changes this month, while credit (IG/HY) continues to offer attractive absolute returns, although the spread over sovereign debt is historically low.
- After a sharp rise, gold has undergone a correction, but still delivers a spectacular performance this year (+51.5% Gold – year-to-date through October). For many, this reflects global geopolitical concerns and uncertainty surrounding the unpredictability of the current U.S. administration.
- Conversely, the dollar reflects doubts about the trajectory of accumulated debt and U.S. trade policy (-12% USD – year-to-date through October).
Investment Policy
The Economy and the Stock Market Are Not the Same
- No one knows whether we are already in a valuation bubble, as these are only identified after they burst.
- Bubbles occur when market prices far exceed the present value of expected future returns (profits, dividends, interest).
- For now, we do not see the excesses of 1999/2000 during the internet bubble, but the key lies in the trajectory of future earnings.
- Currently, there is a wide divergence of opinions. These are now linked to the profitability of multi-billion-dollar investments in AI (data centers, energy, semiconductors, connectivity). For now, opinions remain highly divided.
- Meanwhile, we note strong Q3 2025 earnings reports, which this month have fueled a rebound in the share prices of companies whose business models appear more predictable and therefore more defensive — these are the majority of our investments.
- Although the performance of tech stocks dominates investor sentiment in the U.S., we are very interested in the slow but clear recovery of the European industrial sector.
- In fixed income, we remain primarily invested in short durations, patiently waiting for credit (private fixed income) to offer greater opportunity.
- We therefore maintain a cautious investment stance, exercising prudence while waiting to seize an opportunity to reinforce growth assets, whose long-term returns depend critically on purchase prices.
LEGAL CONSIDERATIONS
1) This information is intended for advertising and informational purposes only. It does not constitute and should not be considered investment advice or legal opinion, nor is it intended to replace the necessary advice in these matters or constitute an offer to sell or a solicitation of an offer to buy.
2) All opinions and estimates provided are based on sources considered reliable. However, EDM Gestión, SAU, SGIIC cannot guarantee their accuracy or completeness and assumes no responsibility for any direct or indirect loss that may result from the use of the information provided in this document.
3) EDM Gestión, SAU, SGIIC warns that past performance is not a reliable indicator of future results.
4) EDM Gestión, SAU SGIIC is a Spanish public limited company registered in the Special Register of Management Companies of Collective Investment Institutions of the CNMV under number 49 and in the Madrid Commercial Registry, volume 36,739, folio 52, sheet M-658.326, with tax ID: A-58.217.175. Its activities include, among others, the representation, management, and administration of Funds and Investment Companies domiciled and regulated in Spain, as well as discretionary portfolio management.
