Last week: “4 witches” expiry; Micron’s earnings; ECB / BOE / BOJ rate decisions; US Core CPI eased; US job report
WEEKLY TRENDS
The earnings from Micron tech were good and promising for stocks after the recent AI Capex debt debacle (led by Oracle/Blue Owl), stock indices also boosted by lower Core US inflation (CPI) and on Friday boosted by the record $7.1trn “4 witches” quarterly options expiry (index futures and index options, added to single stocks and index futures options)
The ECB was first to decide on its rate last Thursday (unchanged, with officials declaring the cycle of rate cuts was most likely over), while widely expected the BOE cut by 25bps its base rate to 3.75% (the fourth time this year), followed by the BOJ on Friday (raised by 25bps to 0.75%, a level not seen in 30 years, hurting the Nikkei)
The long awaited US statistics arrived, with the CPI inflation data and the job report both for November (lower inflation and mixed job reports that included better Nov job creations than expected, but with revisions down for Aug and Sep)
Else, year-end adjustments continued (minor adjustments in rates and indices, but larger adjustments in single stocks) and investors will digest the last US statistics this coming week (Oct PCE on Monday, and Q3 GDP on Tuesday).
HY corp. spreads mixed with US higher at +295bps ; EU lower at +270
Commodities
Oil price lower (-1.5%) despite the US blocking oil tankers from Venezuela towards China mainly
Gold price higher (+1%) - Silver higher at $66 (a new ATH)
Crypto
BTC lower (-2%) back below the $90k mark. ETH -3%, SOL -2.5% and XRP at -6%. The US Senate confirmed Michael Selig (a keen supporter of the Crypto assets) as Head of the CFTC.
US
Nov CPI (+2.7% vs 3.1% expected and 3.0% in September) Core index at +2.6% (energy index at +4.2% while food index at +2.6%)
Job report: Nov Non-Farm Payrolls (+64k vs +50k expected and +105k in Oct) with a revision for August (-22k) from -4k to -26k and -11k revision for September (from +119k to +108k)
Under the watch
S&P Tech sector PER at x29 (unchanged since Jan 1, x21 low in March)
Nota Bene
Fund managers cash allocations at 3.3% (BofA survey) lowest ever
Investors see AI bubble risk as highest, followed by FED’s independence loss and a looming private credit crisis (DB survey)
CALENDAR
Coming up this week
Markets closed: 24-25-26 DecUK, EU 25 DecUS 1 JanUS, UK, EU 29-31 JanChinese New Year
Macro releases: US Oct PCE inflation (22 Dec), Q3 GDP (23 Dec)
Central Bank rate decisions: FED/FOMC (28 Jan)
WHAT ANALYSTS SAY
DWS: 10 themes for 2026
UBS: AI, between optimism and worries
Rothschild: the end of the prologue
DWS, 17 December 2025
Author: Vincenzo Vedda, Global Chief Investment Officer
European Infrastructure as an important foundation of sovereignty (energy, digitalisation, transport)
Europe is undergoing a major economic and political realignment. Infrastructure, the green transition and defense are at the heart of big new investment programs. Policymakers are focusing on growth, strategic autonomy and competitiveness.
China as relative beneficiary of US trade policy
After the hesitant restart following the difficult Covid period, the Chinese government had to recognize that private companies provide most of the innovations and new jobs. At the same time the private sector also benefits from Beijing's policy decisions. Some of the best performing stocks are from the “official” strategic sectors (AI, EVs, semiconductors, renewable energies, and biotechnology).
Stablecoins have the potential tro transform the payment infrastructure
Stablecoins exemplify the transformation of the financial system by combining stability with innovation, as well as efficiency with security. They are opening up new ways for investors to participate in the digital transformation.
Digitalisation meets sustainability
Innovations are needed to meet rising energy demand. Key solutions include renewable energies, liquid cooling and energy-efficient chip designs. Power supply chips and new grid technologies are helping to shape electricity distribution and usage.
Could Europe’s demographics raise interest in stocks?
Europe’s pay-as-you-go pension system should be supplemented by a funded system. This could also help foster public financial literacy and support Europe's economy.
Europe’s rearmament is a project for decades
Europe's limited defense capabilities may remain so for some time. This is not a comforting realization, but it means funds could be flowing into the defense sector for a long time.
Industrial policy in transition - from global to local
By establishing their own structures, countries are attempting to protect themselves against potential disruptions to international trade.
US dollar under pressure, but that’s not the end
The greenback remains the backbone of the global financial system, it is involved in almost 90% of all FX transactions and the IMF has confirmed that the dollar’s share of global currency reserves remains stable at around 57%.
Diversification today
Goldilocks phase should continue in 2026 and favor equities, IG corporate bonds. European small caps may help mitigate equity concentration risks and could benefit from the German infrastructure program. Structural alpha themes too, focusing on infrastructure, cheaper AI names accessed via Asian tech stocks.
Artificial Intelligence
AI is reshaping winners and losers, active selection may be key in what we think could be a boom, not a bubble.
UBS GWM, 19 December 2025
Authors: James Mazeau, Economist, Chief Investment Office
Investors who are under-exposed to this theme should consider diversified exposure across the entire Artificial Intelligence value chain.
About ten days ago, market confidence swung towards caution after announcements by Artificial Intelligence (AI) leaders Oracle and Broadcom disappointed investors' optimistic forecasts.
Will market sentiment improve in the final weeks of trading for 2025?
Market sentiment has been oscillating for some time between optimism fuelled by growing demand for AI services and concerns about excessive capital expenditure, fuelling fears that the technology sector has become too expensive.
Strong structural drivers for AI.
Without commenting on specific stocks, UBS Research believes that the structural drivers of AI and technology remain strong.
Beyond the recent pullbacks, positive signals have also emerged on the political front, after President Trump indicated that he would allow Nvidia to sell its latest generation of H200 chips to China.
This announcement has eased fears of tighter US restrictions on semiconductor exports to its main strategic rival, although some press reports suggest that the Chinese authorities are still considering limiting access.
While capital expenditure in the sector has risen significantly, there are no signs of a bubble, as these investments continue to be supported by strong cash flows.
This spending is also benefiting from sustained demand for AI-related products and services.
In addition, adoption rates among US companies have jumped. According to the Ramp AI Index, nearly 45% of US companies now have paid subscriptions to AI models, platforms or tools, compared with around 25% at the beginning of the year.
Focus on the application layer of AI
All of these factors reinforce UBS Research's belief that the long-term potential of AI remains underestimated.
Investors who are under-exposed to this theme should consider diversified exposure across the entire AI value chain.
Edmond de Rothschild AM, 19 December 2025
Author: Jacques-Aurélien Marcireau, Big Data strategy Portfolio Manager
The year 2025 will go down in history as an incredible year in the literal sense.
The Trump administration's anti-immigration measures, the erection of unprecedented customs barriers and the progress of Deepseek – the ‘Chinese algorithm’ – did not have the desired effects :
There was no inflation, no recession and no slowdown in AI investment spending. The markets, for their part, overcame the obstacles to post strong gains in (almost) all regions. Speaking of geography, 2026 promises to be a year in which new secular trends will take hold, allowing investors to position themselves with conviction for the end of the decade.
Indeed, in the United States, the political balance of power will become clearer after the mid-term elections, the impact of tariffs will be definitively annualised, and as for AI, the main driving force behind the world's leading power, it will have provided enough indications about its monetisation to calibrate the sustainable level of investment more precisely.
In Europe, the effects of the German recovery plan will be more tangible, as will the bloc's ability to unite or disintegrate in the face of pressure from China and the United States.
Expectations remain low, but if Europe gains momentum and the ability to defend its economic space and interests, it will be a big winner not only politically, but also on the stock market. The reward : a continued return of investment flows to the region, which in many ways could be a new Florence, whether for researchers, entrepreneurs or investors.
As for China, its intentions towards Taiwan will have become clearer by the end of 2026, as will its place in the world : will it launch a strategy of isolation from the United States and reconciliation with the rest of the world, or will it sink into a confrontation (almost) alone against all? Once again, the fate of the markets is in the hands of its leader Xi Jinping, which continues to give China a unique status among the major investment areas. Its risk is idiosyncratic and political in nature, because when it comes to the quality of Chinese entrepreneurship and its technological champions, there has long been no debate on the world stage.
Other emerging countries, with the possible exception of India, which has a unique and attractive dynamic, are reacting to the blocs mentioned above. For these three major regions, the outcome will be binary: a reversal of one of these turning points will result in significant and lasting underperformance in the region concerned. Rather than taking a risk that is difficult to control, this may make it desirable to equalise investments.
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