In the eyes of many commentators, the momentum currently seen in equity markets rests on four pillars :

  • The US economy is expanding, helped by significant productivity gains
  • Employment is slowing in an orderly fashion
  • Consumption is resilient
  • The Fed remains accommodative

In detail, the ISM services index pleasantly surprised investors, rising to 54.4 versus 52.6 previously. New orders are solid, output is robust and employment has moved back into expansion territory, while price pressures are easing. In short, the services sector - the heart of the US economy - is still clearly expanding, and is not slowing. At the same time, productivity surged in the third quarter, posting a 4.9% gain, which could extend the current economic expansion, delay the next downturn and support the bull market. This is one of the key factors for 2026.

In the labor market, the slowdown seems orderly, with no real sign of a break. The job-openings-to-unemployed ratio is hovering around 1 , signalling balance rather than a sharp contraction. The main concern is the mismatch between companies’ needs and jobseekers’ skills.

In addition, consumption remains robust (+3%) despite pockets of stress. Difficulties are concentrated amongst low-income households, although are offset by strong spending by the top 50% of households—very wealthy retired baby boomers—who are spending actively and supporting their descendants. The key condition for a recession (a broad-based drop in consumption) has not been met.

Finally, the US Federal Reserve is in accommodative mode, even though the risk of a policy mistake is significant. The Fed is cutting rates in response to a labor market that is deemed less robust. However, rate cuts will do nothing to address the aforementioned skills mismatch. On the contrary, an overly accommodative monetary policy in an economy running above potential will mainly fuel financial-asset inflation rather than real employment.

Technically, the EUR/USD has broken below its support at $1.1695/55, undermining our scenario of a return to the highs at $1.1920. The USD/JPY is trying to clear 157.90 to open the way to 158.88–159.25. USD/CAD is testing 1.3880, with 1.3940 as an overshoot, to stay in a bearish dynamic, ideally with fresh lows ahead toward 1.3535. The aussie remains well supported above 0.6600, with 0.6870/0.6940 in its sights. Finally - for now - the kiwi has successfully, tested its support at 0.5730/10. We remain positive with a first target at 0.5900, or even 0.6010.