A Less Restrictive Fed: Ahead of a New Rate Cut and the End of QT

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The U.S. Federal Reserve (Fed) faces its monetary policy meeting with the latest headline CPI data for September still resonating, highlighting a further slowdown in underlying price pressures. The index rose 0.3% month-on-month—compared to the previous 0.4%—while core inflation slowed to 0.2%—down from the previous 0.3%.

The report revealed that core CPI inflation increased by 0.2% in September, aligning with the Fed’s 2% inflation target. “Specifically, while tariffs pushed up goods prices, core services and housing prices continue to moderate. Owners’ equivalent rent—the most significant and sticky component of core CPI inflation—recorded its lowest monthly reading since January 2021. The moderation in core inflation, along with continued labor market weakness, supports the possibility of another rate cut by the Fed at this week’s FOMC meeting,” explains Payden & Rygel.

Looking ahead to 2026, in their view, as tariff-related price pressures fade over the next 12 months and service inflation continues to cool, we can anticipate a scenario in which core CPI inflation reaches the Fed’s 2% target by late summer 2026. And, as the Fed governor noted in his latest speech, inflation on track toward 2% will not pose “an obstacle to a more neutral monetary policy.”

“The Fed officials will not be going into the October FOMC meeting completely blind, though they will be navigating through an uncomfortable haze. Since the federal government shutdown began earlier this month, there has been a scarcity of U.S. macroeconomic data releases, particularly regarding the labor market, and we don’t yet know when this data drought will end. At least, the Fed received the September CPI data on Friday, for which a slight uptick is expected,” notes the latest report by Ebury, the global fintech specialized in international payments and currency exchange.

According to the experts, the Fed could rely on this data to restart the cycle of rate cuts. If this happens, it would be the second consecutive cut and would confirm that the Fed is now more concerned about the labor market slowdown than about potential inflation spikes.

A New Cut

Experts agree that the communication received from the Fed ahead of the October FOMC meeting suggests that the lack of available data will not prevent central banks from cutting rates by another 25 basis points. “Which seems odd, considering we are flying blind due to the absence of new official data caused by the government shutdown. However, it is reasonable to assume that labor market conditions have not changed significantly since last month,” says Christian Scherrmann, chief U.S. economist at DWS.

He adds that renewed concerns about the health of the financial system, stemming from weaknesses in certain credit sectors, could provide final support for a 25 basis point rate cut and the end of quantitative tightening. “So far, so good, and markets appear well-positioned in terms of expectations for the upcoming meeting. However, beyond the October meeting, it would be unwise to become complacent. While another cut in December is consistent with the current dot plot, the median of Fed members only marginally supports this outcome. Not everyone favors rapid cuts, and some have voiced concerns about potential inflationary pressures,” Scherrmann argues.

“Historically, precautionary cuts have rarely been one-off measures. A new round of easing would not only mirror last year’s sequence of three consecutive cuts—totaling 100 bps between September and December—but also align with previous ‘insurance cycles.’ In three out of four cases since 1980, the Fed cut rates again within 90 days of the first reduction. Given the limited visibility in the current economic, political, and trade environment, as well as the ‘curious balance’ observed in the labor market—where both labor supply and demand have significantly moderated over the year—monetary policy decisions remain highly data-dependent. Although it would take considerable positive surprises in growth and inflation to avoid a new cut, upcoming price and employment data (with the September jobs report still unpublished due to the shutdown) could decisively influence the FOMC’s decision,” says Michael Krautzberger, global CIO for fixed income at Allianz Global Investors.

In the opinion of Guy Stear, head of developed market strategy at the Amundi Investment Institute, the Fed is expected to cut rates not only in October but also in December and two more times in the second quarter of 2026. “The market expects this as well, and the more interesting question is whether the Fed’s press conference will support the very aggressive cuts already priced into the curve through early 2027. Equally important will be understanding how the Fed plans to address shrinking liquidity at the short end, given the large volume of Treasury issuance in recent months. We could see a slight increase in two-year yields in the U.S. if the Fed disappoints the market’s aggressive expectations for rate cuts, but yields could also be supported if the Fed starts increasing system liquidity,” Stear explains.

What We Know

Experts have been trying to find clues about the Fed’s upcoming narrative from Chair Powell’s speech on monetary policy outlook at the National Association for Business Economics last Tuesday in Philadelphia. Specifically, Powell confirmed to markets that the October rate cut, which the Fed had already hinted at in its previous meeting, remains on the table. In the same speech, he expressed concern over lower hiring levels, which could pose a real risk to the U.S. economy. He also explicitly stated that, based on the available data, the labor market outlook had not changed since the September meeting, when the Fed’s dot plot outlined two additional cuts for 2025.

“Powell focused on the Fed’s balance sheet and stated that the reduction could be concluded in the coming months. The speech did not introduce any new elements, and the Fed appears on track to reduce rates by 25 basis points at its upcoming meeting on October 28 and 29. The odds of easing at each of the next two meetings have risen above 100%, so the momentum for a 50-basis-point easing cycle is starting, though it remains unlikely in our view,” says Karen Manna, fixed income client portfolio manager at Federated Hermes.

This month’s meeting will not include updated macroeconomic projections or a new dot plot. Therefore, in Ebury’s opinion, markets will scrutinize the tone of the bank’s statement and Powell’s press conference. “Given the absence of new economic releases, we believe the bank’s statement will be practically the same as in September. The Fed will likely once again highlight downside risks to employment, possibly noting that they have increased, and that the federal shutdown has made the decision-making process more difficult. However, the upside risks to inflation remain a headache for the Fed and should warrant a cautious response, despite the belief that the inflationary impact of tariffs will be transitory,” the fintech argues in its report.

More Accommodative Liquidity Conditions?
Cristina Gavín Moreno, head of fixed income at Ibercaja Gestión, agrees with this view and adds what she sees as the most relevant aspect of the meeting: “The end of the quantitative tightening (QT) process and the optimal size of the Fed’s balance sheet are additional points of discussion that are on the table, and this meeting could shed more light on them.”

Florian Späete, senior bond strategist at Generali AM, part of Generali Investments, notes that although the language is vague, Powell’s remarks suggest that quantitative tightening (QT) could end as early as this year. “This measure had previously been expected in the first quarter of 2026. It would represent a shift toward more accommodative liquidity conditions, easing pressure on funding markets. Improved liquidity and downward pressure on the term premium would offset the increasingly pronounced steepening trend in yield curves. However, overall, we assume that global yield curves still have room to steepen, given the higher inflation environment and rising public debt levels,” he states.

According to his analysis, since QT was already expected to end in early 2026, the impact on risk assets and the U.S. dollar is likely to be limited. “The easing of financial conditions, further interest rate cuts by the Fed, and relatively modest investor positioning are also favorable factors. The depreciation of the U.S. dollar, which we had already anticipated, should also be supported by the end of QT. The possible end of QT by the Fed is consistent with the idea of a less restrictive monetary policy in the United States,” he concludes.

“Many of the Fundamentals of American Exceptionalism Remain Intact”

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John Lamb, Equity Investment Director at Capital Group, analyzed the effects of Trump’s policies, the role of Europe, and highlighted attractive opportunities in the healthcare sector. He affirmed that there is a shift in the global balance, anticipated “some additional weakness” in the U.S. economy, and noted that the “inflationary rebound resulting from tariffs” has yet to materialize. However, the United States remains “resilient” thanks to strong investment in technology and data centers, and its exceptionalism continues to hold beyond the short term.

He also commented that by 2026, the ECB may need to consider raising rates “two or three times,” and that the euro could reach 1.30 against the dollar next year in a context of U.S. dollar weakness. Regarding emerging markets, he noted that China faces the challenge of structurally lower growth, while Indian companies appear overvalued.

This was shared during an in-person meeting with Funds Society, during a stop on the roadshow the specialist conducted in Miami to present Capital Group’s New Perspective Strategy, the global equity strategy the firm has been managing for over 50 years, investing flexibly in quality multinational companies driving global change.

Trump’s Impact and U.S. Economic Resilience

While acknowledging certain challenges stemming from the Trump administration’s policies, Lamb stated that the so-called “American exceptionalism” has not come to an end. “We take a balanced stance. We’re not fully on one side or the other. There are arguments both for and against,” he said.

Lamb expanded on Trump’s tariff policies, which in his view have created short-term difficulties for the U.S. economy. Still, he emphasized the resilience of U.S. companies and the economy as a whole, which have adapted to the trade tension environment.

According to Lamb, the full impact of the tariffs has yet to show up in the data. “We believe we haven’t yet seen the entire effect on the U.S. economy. Our short-term growth and inflation forecasts are less optimistic than the consensus,” he stated.

In that regard, he anticipated “some additional weakness” and warned that the inflation rebound linked to tariffs “has not yet materialized.” However, beyond the short term, Lamb argued that many of the fundamentals of American exceptionalism remain in place, driven by a combination of factors: “deep and liquid capital markets, a strong entrepreneurial spirit, and the rule of law… Many of those components remain intact,” he stated.

He also noted that growth has been supported by robust investment in tech infrastructure, particularly in data centers. While there may be risks of overenthusiasm in that segment, Lamb does not foresee a recession.

Diverging Monetary Policy

In this global context, Lamb said that Europe has performed better than expected. He considers it reasonable for the market to be pricing in three to four rate cuts by the Federal Reserve, but expects the European Central Bank to face the opposite challenge.

“The shift in Europe’s fiscal regime, with strong public spending—especially in Germany—could boost growth while also generating inflationary pressures,” he explained. In his view, the eurozone could potentially see two to three rate hikes.

Lamb also projected that the euro could reach 1.30 against the dollar next year amid U.S. dollar weakness. However, he added that “in the long term, the U.S. will likely benefit from a productivity boost driven by investment in artificial intelligence.”

Healthcare: Targeted Opportunities

Speaking about equities, Lamb pointed to the healthcare sector, where he sees attractive opportunities.

“It’s been a challenging time for the sector,” he admitted, citing negative factors tied to U.S. government policies on drug pricing and reimbursement, as well as tariffs. “But valuations are now near historic lows in relative terms.”

The expert believes political risks have diminished and that the sector combines “attractive valuations with an exciting innovation pipeline.” He cited specific examples such as Eli Lilly, which is about to present clinical trial results for a new oral version of its weight-loss drugs—a development that could “significantly open up the market and expand its reach.”

Capital Group’s New Perspective Strategy does not make “large macro bets by region,” he explained. “We focus on finding the right companies, regardless of where they are domiciled,” he concluded.

China’s Advantage in Trump’s Tariff Game

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Since last Friday, Malaysia’s capital (Kuala Lumpur) has been the setting for the fifth round of trade negotiations between China and the U.S., following a staged escalation in tensions last week. According to experts, these meetings have aimed to ease the atmosphere ahead of the face-to-face meeting between Xi Jinping and Donald Trump, which will take place in three days.

At DWS, they emphasize that the Asian giant is better prepared to face the trade and tariff challenges posed by the U.S. Firstly, as explained in the latest report by its CIO, the situation is not new. “China was already a key focus of U.S. foreign policy under President Biden. Moreover, although China remains one of the main targets of the United States’ tariff policy, its impact was diluted in April, when Washington imposed punitive tariffs on multiple countries worldwide. China also responded quickly to Trump’s return, adopting economic policy measures aimed at stability. And finally, the share of Chinese exports destined for the U.S. has halved over the past eight years, now standing at around 10%. Ultimately, China’s economy today is much less dependent on international trade than is commonly assumed: in 2024, exports accounted for less than 20% of GDP, compared to 36% in the case of the European Union,” they point out.

Just last week, China announced its new five-year plan, which largely signals a continuation of recent policy priorities—under the umbrella of “high-quality development”—placing increased emphasis on accelerating technological self-sufficiency and scientific capabilities. In the opinion of Robert Gilhooly, senior economist specializing in emerging markets at Aberdeen Investments, this will be seen as a continuation of the effort to improve and expand domestic manufacturing capabilities, as outlined in the ‘Made in China 2025’ plan, though it is unlikely the name will be renewed, as it has irritated key trade partners.

“Recently, policy has attempted to boost consumption, but geopolitical pressure is likely to keep priorities tilted toward the supply side of the economy, which will make it harder to eliminate deflationary pressures—even if authorities focus on sectors with well-known overcapacity issues, such as automobile manufacturing, solar energy, and batteries,” Gilhooly notes.

The Secret of Tariffs


In addition to China’s stronger position at the negotiating table, Philippe Waechter, chief economist at Ostrum AM (a firm affiliated with Natixis IM), argues that, at its core, the U.S. tech sector cannot fully decouple from the Asian country. “Trump’s response, with tariffs on China 100% higher than those already in place, is a reaction born of helplessness, as the United States cannot do without many Chinese products. Chinese advances are harming the U.S. tech and defense industries. What’s new is the shortage this could cause on the other side of the Atlantic. It is no longer a matter of prices, but of a break in the value chain. It’s not comparable, and the consequences for U.S. industry could be far greater than the mere application of customs duties,” Waechter states.

As the Ostrum AM expert recalls, “The U.S. economy is strong, but artificial intelligence plays a major role: it explains 92% of growth in the first half of the year. Without it, GDP would have grown just 0.1%. The U.S. economy is likely not as robust as it appears.”

For Sandy Pei, senior portfolio manager at Federated Hermes, despite the renewed escalation of the trade war, the risks facing China’s economy are well understood and already priced in. “We expect supportive policies to stimulate the economy, particularly for high-tech industries, especially in areas where China currently lags behind global leaders. However, financial support is likely to taper off quickly, as the government prefers a market-driven approach: only the most competitive companies will come out ahead,” she argues.

Chinese Equities


For now, no other country is subject to as intense a burden of tariffs and sanctions from the United States as China. However, the Asian giant also appears to be the best-prepared country for a second Trump term, and DWS believes Chinese equity markets may be benefiting from this. “Sometimes, equity markets can be ironic. Chinese stocks began to rebound roughly at the time Trump returned to the presidency in January 2025,” notes the latest report from its CIO.

The document points out that the factors driving the Chinese stock market are primarily internal rather than external. And, prior to the rebound seen this year, they were far from favorable. “Since 2021, the Chinese market has lagged behind the U.S. and Europe. The problems are well known and, in part, remain unresolved: an oversaturated real estate market, an aging population, high levels of local government debt, power concentrated in the party, weak consumer confidence and high savings rates, inconsistent data quality, and overcapacity in numerous sectors. The government’s ‘anti-involution’ strategy aims to address some of these issues,” it notes.

From the asset manager’s perspective, after adjusting its economic policy, the MSCI China index has gained nearly 40% so far this year, and they consider valuations to have returned to the average of the past fifteen years. “The deterioration of confidence in other regions is boosting China’s position, where the likelihood of a gradual recovery is increasing. Even if a broad-based recovery does not occur, opportunities in the technology sectors could continue to offer solid upside potential, despite the recent valuation reassessment,” says Sebastian Kahlfeld, head of emerging markets equities at DWS.

Federated Hermes Acquires a Majority Stake in Asset Manager FCP Fund Manager

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Federated Hermes Acquires 80% Stake in U.S. Real Estate Investment Firm FCP Fund Manager

Federated Hermes, Inc., specialists in active investment management, has reached an agreement to acquire 80% of FCP Fund Manager, L.P., a U.S.-based private real estate investment manager headquartered in Chevy Chase, Maryland.

FCP specializes in investing across the U.S. multifamily residential asset class, deploying capital through predominant equity and various debt vehicles. Since its inception, FCP has invested, operated, and/or financed more than $14.6 billion in gross asset value, including over 75,000 multifamily residential units.

Upon completion of the transaction, FCP and its team of over 75 members will continue managing investment portfolios and other business operations from their current locations. FCP has six offices in the U.S., including its headquarters in Chevy Chase, Maryland, and local coverage in 19 U.S. markets, providing significant local knowledge and capabilities in high-growth areas of the country.

The total purchase price of up to $331 million includes $215.8 million in cash and $23.2 million in Federated Hermes Class B common stock, which will be paid and issued at closing, along with opportunities to receive additional contingent payments of up to $92 million over several years following the closing.

The transaction strengthens Federated Hermes’ goal of enhancing and growing its offerings in Private and Alternative Markets, where it already has a well-established mix of businesses operating primarily outside the U.S. in private equity, private credit, infrastructure, and real estate, as well as market-neutral strategies, with assets totaling $19 billion as of September 30, 2025.

The transaction will introduce additional expertise as Federated Hermes seeks to develop product solutions for its clients at a time of increasing demand for the private markets asset class. It will also expand Federated Hermes Real Estate’s capabilities in the U.S. market and complement its existing real estate operations in the United Kingdom, established in 1983, with $5.5 billion in assets under management as of September 30, 2025.

J. Christopher Donahue, President and CEO of Federated Hermes, said:
“We are delighted to announce today the signing of the purchase agreement for this transaction. Upon closing, this transaction will allow Federated Hermes to enter the U.S. real estate market at a time when the multifamily residential sector is enjoying strong fundamentals and significant growth opportunities. FCP brings a long-standing track record of real estate investment performance, driven by risk-adjusted returns, deep knowledge of local and regional markets, and strong relationships with the communities in which it operates.

An additional attraction is the complementary experience and knowledge in the residential sector, which are vital to continuing to grow our real estate businesses in both the U.S. and the U.K.”

Esko Korhonen, Founding Managing Partner of FCP, said:
“At Federated Hermes, we have identified a company with shared values and a strong commitment to building a private markets business. FCP is uniquely positioned to lead the expansion of the private market with Federated Hermes in U.S. residential sector assets. This transaction provides an opportunity to strengthen our institutional platform, enhance our growth trajectory, and provide expanded resources, improving our position as a leading national real estate firm.”

Federated Hermes was represented by K&L Gates LLP and advised by KPMG LLP and Hodes Weill & Associates. FCP was represented by Goodwin Procter LLP and advised by Berkshire Global Advisors.

The transaction was approved by the board of directors of Federated Hermes, Inc. and the executive management of FCP, and is expected to close in the first half of 2026, subject to certain conditions, including obtaining third-party consents and the expiration or termination of the waiting period under the Hart-Scott-Rodino Act of 1976. This transaction will be Federated Hermes’ second Private Markets acquisition since early 2025, following its acquisition of Rivington Energy Management Limited, a U.K.-based infrastructure developer, in April 2025.

Not All Is Smooth Sailing: Gold Correction and Isolated Credit Defaults in the U.S.

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Complacency has been one of the most repeated words by investment managers and experts to describe the market in recent months. While stock markets—especially the S&P 500—remain at record highs, experts are now placing less emphasis on the idea that markets are in a “complacent” state, given two sharp movements that occurred over the past week.

Instead, the two words that seem to remain valid in describing the current market are resilience and volatility. “The global outlook reflects a confluence of factors that are keeping markets in a state of fragile stability. In the U.S., corporate strength contrasts with political and trade uncertainty, while in Europe, regulatory pressure and energy dependency remain latent risks. Asia shows resilience thanks to expectations of stimulus and trade agreements, although Japan faces the challenge of balancing monetary and fiscal policy in a high-tariff environment,” says Felipe Mendoza, market analyst at ATFX LATAM.

Gold Adjustment

The headline this week was the sharp 5% correction in gold, after reaching October highs near $4,400 per ounce. According to experts, the strength of the dollar this week put pressure on precious metals, triggering one of the most pronounced drops in years for both gold and silver, as investors looked to lock in profits following a bullish streak.

“From a technical perspective, gold broke through key intraday support levels, which accelerated algorithmic selling and deepened the decline. However, the underlying context remains solid. Central banks continue to buy at a steady pace, and physical demand in Asia remains strong, particularly in China and India. These factors continue to serve as structural buffers against short-term speculative moves,” adds ATFX LATAM.

According to Claudio Wewel, FX strategist at J. Safra Sarasin Sustainable AM, the recent correction is due to broad-based profit-taking driven by a combination of factors. “Although the coming days will likely be marked by volatility, we believe the fundamentals supporting a renewed increase in gold prices remain strong in the medium and long term. Geopolitical uncertainty remains very high, and gold is still underweighted in portfolios. Therefore, we expect investors who had previously stayed away from the metal to continue turning to it and increasing their positions. Finally, the growing interest from stablecoin issuers and an uptick in outflows from crypto assets represent additional upward drivers for gold,” says Wewel.

Simon Jäger, portfolio manager on the multi-asset team at Flossbach von Storch, adds another factor to explain the situation: “Due to ongoing geopolitical conflicts, the central banks of China and Russia in particular have massively increased their gold reserves in recent years. We believe this trend will likely continue. As a result, this year gold has replaced the U.S. dollar (or U.S. Treasury bonds) as the largest investment within central banks’ foreign exchange reserves globally.”

Credit Stumble

The other key topic was U.S. credit. It began last week when regional U.S. banks came under pressure after several lenders reported loan write-downs linked to a bankrupt real estate investment trust (REIT).

As Axel Botte, Head of Market Strategy at Ostrum AM (a Natixis IM affiliate), explains, Tricolor (a subprime auto lender) and First Brands (a leveraged auto parts company) have become the first casualties of accumulated delays in auto loan payments and the sharp increase in tariffs on auto parts.

“Two regional banks are now reporting they were victims of fraud related to loans to credit funds with unfavorable exposure to commercial mortgage-backed securities. The opacity of private credit funds has long been recognized as a risk factor. It’s difficult to assess the systemic risks tied to their activities, but once you spot one cockroach, there are likely more hidden. While the credit minefield may remain contained, reports from the main regional banks are not raising alarms for now; however, credit quality will remain a focal point. The Fed’s announcement to pause balance sheet reduction suggests Jerome Powell is particularly attentive to liquidity conditions,” he argues.

“A senior executive from a major U.S. bank warned that spotting ‘a cockroach’ usually signals there are more, reflecting concern that isolated defaults could foreshadow a broader wave of bankruptcies. To make matters worse, wholesale funding rates have climbed above normal levels, which historically signals a shortage of reserves in the banking system,” adds Benoit Anne, Senior Managing Director and Head of the Market Intelligence Group at MFS Investment Management.

Anne calls for calm, explaining that her team at MFS IM sees no reason for panic. “To begin with, recent remarks by Fed Chair Jerome Powell suggest a review of quantitative tightening at upcoming FOMC meetings. This should ease downward pressure on bank reserves. As for the recent defaults, our investment team considers them isolated, relatively small, and unrelated, which reduces the likelihood of a systemic credit event. In fact, broader markets—including asset-backed securities (ABS) and collateralized loan obligations (CLOs)—have not shown significant spread increases related to these episodes. Overall, it’s worth noting that continued disruptions could create mispricings, offering active managers the chance to deploy capital at attractive valuations,” she explains.

End of the Private Credit Cycle?

Lale Akoner, Global Markets Strategist at eToro, takes a broader view: “We see the credit events in October as idiosyncratic blowups, not systemic fractures. Both companies operated in narrow, high-risk segments of the market—subprime loans with high leverage. The losses were real but concentrated. Crucially, most regional banks showed limited or fully provisioned exposure, with no signs of widespread credit deterioration. This was a wake-up call on layered credit risk, but not a repeat of SVB or 2008 in our view. That said, the opacity of financing structures, the increasing use of PIK interest, and interconnections between funds require closer monitoring through 2026. The good news is that we are in a falling interest rate environment, not in a tightening cycle.”

In this broader reading of the private credit market, Francesco Castelli, Head of Fixed Income and Portfolio Manager of the Euro Bond Fund at Banor SICAV, believes that credit markets are approaching an inflection point in the credit cycle. He notes that “Private Credit markets are behaving like Telecoms in 2000 or Banks in 2007—they were the triggers for major crises in the credit cycle.”

In his view, private credit markets have grown exponentially in recent years due to the high returns they offered, despite not being publicly traded and therefore not pricing in market value on a daily basis. This, in his opinion, makes it harder to detect stress phases, although there are tangible warning signs.

“The main red flag is the behavior of Business Development Companies (BDCs), publicly traded vehicles providing access to private lending, which have entered bearish territory after years of strong gains. This sharp reversal reflects growing investor concern over whether high dividends will continue as borrowers’ cash flows deteriorate and defaults rise. The sudden $10 billion default of First Brands has fueled investor concerns and could be a potential trigger for a broader market reassessment. Combined with the persistent underperformance of CCC-rated bonds compared to higher-quality high yield over the past six months, the message is clear: investors are increasingly distinguishing based on credit quality,” concludes Castelli.

JP Morgan AM Anticipates That Europe Will Outpace the United States in Growth Over the Next Decade

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JP Morgan AM anticipates that Europe will outpace the United States in growth over the next decade

“It has been a good year for risk assets and another demonstration that staying invested long-term eventually pays off,” summarized Lucía Gutiérrez-Mellado, Head of Strategy for JP Morgan Asset Management in Spain and Portugal, during the press breakfast where the firm presented its market outlook for the final quarter of 2025 and its projections for 2026.

During the event, the firm also commented on the publication of its new Long-Term Capital Market Assumptions report, a document in which it analyzes long-term forecasts. According to the study, European equities are expected to deliver an 8.5% return over the next decade, compared to 6.7% forecast for the United States and 7.2% for emerging markets.

“The growth differential between regions is significant and supports our more constructive outlook on Europe,” Gutiérrez-Mellado emphasized. She pointed out that the continent is undergoing an economic mindset shift, with increased investment in defense, infrastructure, and energy transition.

A positive year for markets, despite uncertainty


Despite 2025 being marked by uncertainty stemming from tariffs and global slowdown, the Strategy Director described the year as “surprisingly solid” for risk assets.

Emerging markets outperformed developed ones, the growth style beat value, and Japan stood out as one of the year’s top performers thanks to export momentum. Europe, by contrast, lost some traction compared to Asia and the U.S., where expectations of rate cuts by the Federal Reserve boosted investor confidence.

“It has been another year that proves selling at the worst moments is usually a mistake. Those who stayed invested have recovered their losses and are now gaining even more.” Gutiérrez-Mellado stressed the importance of maintaining global and diversified portfolios, noting that even after sharp declines, a balanced strategy tends to outperform cash over one- to three-year horizons.

Europe: more constructive, but with caveats


The firm believes Europe is at a turning point after years of weaker growth compared to the U.S. The continent “is changing its economic philosophy,” driven by a more active fiscal policy, the still-pending use of Next Generation EU funds, and increased spending on defense and energy.

However, the firm warns that the region remains exposed to risks such as a strong euro and global trade tensions.

In addition, the savings accumulated by European households in recent years could become an extra driver of consumption. “Unlike in the United States, European families were more cautious during the energy crisis,” the expert noted.

United States: solid earnings, but ‘not everything goes’


The U.S. economy is showing signs of moderation. Inflation hovers around 3%, the labor market is cooling slightly, and the Fed has begun a rate-cutting cycle after a nine-month pause. The firm expects two additional cuts before year-end, which would ease financial conditions and support consumption and small businesses.

On the corporate front, “companies have delivered positive surprises, demonstrating strong adaptability and efficiency.” In fact, the U.S. has recorded nine consecutive quarters of earnings growth, three of them above 10%.

However, in the expert’s view, the period of absolute dominance by the U.S. market may be peaking: “We remain exposed to the U.S., but we are more selective and believe other regions will offer better opportunities in the coming years,” she added. Currently, the firm maintains a neutral stance between the U.S. and Europe within its global portfolios.

China and emerging markets: two speeds, one opportunity


Regarding China, the country’s economy is “moving at two speeds”: while the real estate crisis and weak consumption persist, the technology and artificial intelligence sectors have seen rapid growth. “China’s technological leadership is undeniable and will be one of the main points of contention with the United States over the next decade.”

“Regional diversity is no longer a luxury, it’s a necessity,” said the expert, highlighting the importance of global portfolios that combine exposure to both developed and emerging markets.

Strategy: slight overweight in equities and active management


As for current positioning, the firm maintains a slight overweight in equities compared to fixed income. “The environment remains constructive for risk assets, although we maintain duration in portfolios in case growth disappoints,” she explained. Following spread compression, the firm has reduced its overweight in credit and maintains tactical exposure to sovereign debt.

By sector, JP Morgan AM shows a preference for high-quality technology, healthcare, and renewable energy—segments with structural growth potential. In commodities, the firm manages exposure in a diversified manner across both precious and industrial metals, while maintaining a neutral view on the dollar, with a medium-term expectation of slight depreciation.

The New Challenge for Asset Managers: Competing Internationally Without Multiplying Costs

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market ahead of Argentina elections
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In an environment where international expansion demands complex structures and high regulatory costs, asset managers are seeking more agile ways to scale their strategies. Asset securitization, especially through listed and Euroclearable exchange-traded products (ETPs), has become an effective way to compete internationally without replicating corporate infrastructures across multiple jurisdictions, according to FlexFunds.

Launching a conventional investment fund involves establishing local management entities, complying with diverse regulatory frameworks, and undergoing lengthy registration and distribution processes. These requirements can take months and consume legal, tax, and operational resources that erode profitability.

Furthermore, custodian banks and institutional platforms require products with full operational compatibility — ISINs, automated reconciliations, standardized reporting, and recurring audits. When a vehicle does not meet these standards, its integration into private banking or wealth management networks becomes slow and costly.

Securitization and ETPs: A modern distribution architecture

Through securitization, a managed strategy is converted into a structured vehicle with an ISIN and international custody (Euroclear / Clearstream), without the manager losing control of the portfolio. This format enables the repackaging of specialized strategies — such as private credit, real estate, fixed income, or alternative assets — into instruments that are easily integrated into institutional systems, reducing entry barriers and improving transparency.

The III Annual Report of the Asset Securitization Sector 2025 – 2026, prepared by FlexFunds in collaboration with Funds Society, highlights the role of Ireland as a preferred jurisdiction for structuring securitized ETPs. Thanks to its Section 110 of the Taxes Consolidation Act, supervision by the Central Bank of Ireland, and connectivity with Euroclear, the country offers a robust and internationally recognized infrastructure.

FlexFunds’ ETPs leverage this framework by being structured through Irish Special Purpose Vehicles (SPVs), which combine tax efficiency, operational standardization, and global distribution. According to the report, over 70% of surveyed managers view this model as a key tool for internationalization, citing its low operational cost and fast launch timeline — 6 to 8 weeks, compared to several months for a conventional fund.

Additionally, the Irish SPV Report Q2-2025 confirms Ireland’s leadership in this field, with 3,724 active SPVs and total assets of €1.18 trillion, driven by structured debt vehicles such as CLOs and private securitizations. Financial Vehicle Corporations (FVCs) hold €689 billion in assets, while Other SPEs total €490.7 billion, reflecting the maturity of Ireland’s securitization ecosystem.

The growth of the securitized model is occurring alongside the record expansion of the global ETP market. According to ETFGI’s September 2025 report, assets under management in ETFs and ETPs reached $18.81 trillion, the highest level on record. This increase reflects a sustained trend towards institutionalization and standardization of listed structures, driving demand for efficient, transparent, and easily distributed products.

Advantages of ETPs for asset managers

  • International scalability: Access multiple jurisdictions without creating new subsidiaries.
  • Efficiency and speed: Standardized structures allow launches within weeks.
  • Institutional compatibility: ISINs and international custody ease integration with banks and platforms.
  • Control retention: Managers maintain decision-making over assets and risks.
  • Transparency and credibility: Independent valuation, auditing, and reporting enhance investor confidence.

The report by FlexFunds and Funds Society highlights securitization as a lever for innovation and diversification, particularly for strategies seeking institutional capital without losing operational flexibility.

Securitization has evolved into a strategic tool enabling portfolio managers to expand their global reach with efficiency and control. Far from being a product reserved for large institutions, these investment vehicles now offer a practical, regulated, and competitive path for internationalizing portfolios, improving governance, and connecting with investors worldwide.

For more information, please contact our specialists at info@flexfunds.com.

Brookfield to Acquire Remaining 26% of Oaktree for Approximately 3 Billion Dollars

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Brookfield to Acquire Remaining 26% of Oaktree Capital Management for $3 Billion

Brookfield has announced that it will acquire the remaining 26% of Oaktree Capital Management that it does not yet own for approximately 3 billion dollars, enabling it to take full ownership of the Los Angeles–based firm specializing in credit and distressed debt. The deal will also strengthen Brookfield’s position as a major force in the alternative credit space, according to a Bloomberg report.

The agreement, which values Oaktree at around 11.5 billion dollars, is set to close early next year and will contribute to Brookfield’s revenue. The company first acquired a majority stake in Oaktree six years ago, accelerating the growth of its credit business, which has since become one of its fastest-growing divisions. Once the transaction is completed, the United States will become Brookfield’s largest market, representing more than half of its 550 billion dollars in assets and revenue.

CEO Statements and Strategic Vision

Following the announcement, Brookfield CEO Bruce Flatt stated:
“When we partnered with Oaktree six years ago, we joined forces with one of the most respected credit investors in the world, and the results have exceeded our expectations. Our partnership has created significant value for both companies. It has fueled the rapid expansion of our private credit platform, supported the growth of our wealth solutions business, and contributed to a 75% increase in Oaktree’s assets under management. Taking this next step will allow us to expand our credit franchise, enhance collaboration across our businesses, and strengthen our ability to continue delivering long-term value to our investors.”

Howard Marks, Co-Chairman of Oaktree, commented:
“Our partnership with Brookfield has been a great success, built on shared values of disciplined investing, long-term thinking, and integrity. Together, we have proven our ability to work seamlessly and deliver the best of both firms to our clients. Becoming a full part of Brookfield is a natural evolution that will allow Oaktree to continue thriving as part of one of the world’s leading investment organizations. With this closer alignment, Oaktree will remain central to Brookfield’s credit strategy, and we see significant opportunities to grow the franchise and expand what we can offer together to our clients.”

Transaction Terms

According to the proposed terms, Brookfield Asset Management Ltd. (BAM) and Brookfield Corporation (BN) will acquire all remaining equity interests in Oaktree for a total consideration of approximately 3 billion dollars. Under the terms of the transaction, Oaktree shareholders will have the option to receive a cash consideration, shares of BAM, or, subject to certain limitations, shares of BN.

The BAM and BN shares issued as consideration will be subject to sale restrictions of two and five years, respectively. This structure provides Oaktree holders the opportunity to participate in the future growth and earnings of the combined business while further enhancing long-term alignment.

Both BAM and BN intend to repurchase an amount of their own shares equivalent to those issued under the transaction. These repurchases will be conducted in the open market or, in BAM’s case and subject to regulatory approvals, from BN, which has agreed to make such shares available. This ensures that the transaction will have minimal or no dilutive impact on current BAM and BN shareholders.

The deal marks a significant increase in Oaktree’s valuation, as its assets under management have grown by 75% since Brookfield’s initial investment. It also follows a broader wave of consolidation among alternative asset managers, including BlackRock’s acquisition of Global Infrastructure Partners for 12.5 billion dollars.

The Industry Confirms Its Formula for Growth: ETFs, Private Markets, Retail, and Pensions

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In 2024, assets under management reached a record 135 trillion dollars, representing a 13% year-over-year increase. However, according to the latest report by Morgan Stanley and Oliver Wyman, by 2029, global assets in the asset management industry could reach 200 trillion dollars, implying an annual growth rate of around 8% and a cumulative increase of 48%. In addition, they estimate that average annual net flows will be around 2.7% through 2029.

These projections are based on the assumption that markets will maintain strong performance and that we are in an environment with lower interest rates, which are redirecting funds from guaranteed deposits back into capital markets. They also consider a context in which there is an ongoing shift from collective pension plans (defined benefit) to individualized retirement plans (defined contribution). All of this, they argue, could further sustain flows in the future.

Passive Management and Private Markets

In this global overview of what asset growth will look like, the report identifies several trends that will shape the evolution of the industry and asset managers’ business models. First, it notes that, for the first time globally, passive equity will surpass active equity. “Passive equity management continues to expand, especially in established markets like U.S. retail and in underpenetrated regions such as Europe and Asia-Pacific. In contrast, active equity funds are facing persistent outflows at the industry level, sustained only by a few managers delivering top-quartile performance,” the report states.

Notably, the fixed income segment shows a similar trend: “Although passive fixed income assets are expected to grow twice as fast as active assets, they will remain a relatively small segment of the market by 2029.”

Regarding Private Markets, the report considers that we are currently in a “plateau” phase following the boom from 2019 to 2022 and the stagnation of 2024. “This plateau masks a growing disparity between leading firms and smaller players. The top 10 private asset funds by assets captured 14% of fundraising in 2024, compared to 10% in 2020, a figure that rises to 48% and 58% of the capital raised in 2024 for private debt and infrastructure, respectively,” the report notes.

Their interpretation is that larger firms, benefiting from proprietary capital and deal generation, continue to outperform their competitors, securing the bulk of new capital flows and charging premium fees. “Smaller managers face fundraising challenges and often compete by offering fee discounts—a divide that is likely to intensify as wealth distribution channels (where most of the growth is expected) increasingly favor larger and more recognized brands,” they argue. Looking ahead, however, they expect significant growth across all private markets, driven by their increasing penetration into retail client portfolios.

Growth Drivers

Regionally, the report identifies Asia-Pacific as standing out for its higher organic net flows into both retail and institutional markets, particularly in China. It explains that, despite recent slowdowns, a significant portion of household wealth remains in low-yield deposits, highlighting untapped potential—especially in Japan.

In addition, global retail channels are projected to grow at twice the rate of institutional segments, which are experiencing net outflows except in certain niches such as general insurance accounts and some defined benefit pension markets (e.g., Japan, Australia). “Asset growth in Europe is expected to benefit from regulatory efforts encouraging retail participation and from the ongoing shift toward individualized retirement plans, through new vehicles and incentives (France, Germany) or mandatory auto-enrollment in defined contribution plans (United Kingdom),” the report states.

In this context, asset managers have found a path to continued growth, specifically through solution-based offerings. “These are becoming a key growth area, with the segment expected to expand at an annual rate of 11% through 2029,” the report notes.

The document explains that asset managers are increasingly adopting solutions in the form of model portfolios, sub-advisory mandates, and retirement-focused products to differentiate themselves. According to the analysis, this growth is being driven by rising demand for retail retirement investment products (e.g., target-date funds, target-maturity funds, decumulation products), with average organic growth over the past three years of 12% in APAC, 15% in Europe, and 7% in the Americas, as well as by the expansion of institutional solutions in the Americas, particularly outsourced chief investment officer (OCIO) mandates, which have grown organically by 7% since 2021.

Margins and Business Sustainability

In terms of revenue, the report concludes that the asset management industry will generate more than 650 billion dollars by 2029, in line with the estimate that assets will grow at an annual rate of around 8%. According to the report, alternatives are expected to claim an increasingly larger share, representing 44% of total revenue, while the share of active equity and fixed income funds declines.

This positive news is accompanied by a very clear warning: fee compression persists, though it is being offset by the shift toward higher-margin private markets and retail growth. “Asset managers’ operating margins improved in 2024, particularly among alternatives, which reached a record 51%. However, traditional managers continue to face structural profitability challenges amid ongoing fee pressure and cost-control demands—especially those using hybrid operating models (combining traditional and alternative asset management) who struggle to efficiently integrate distribution and product development,” the report concludes.

Finally, the report notes that, in this growth context, asset managers must address four themes that are reshaping the industry and present both challenges and opportunities.

First, leaders are facing increasing pressure to demonstrate value for money in Europe and APAC. Second, they must organize their product and distribution forces to serve a growing retail market that increasingly demands institutional-quality coverage. Third, they need to deploy operating models capable of blurring liquidity boundaries to address the burgeoning semiliquid product space. Finally, they must think beyond the active/passive dichotomy and build investment engines suited to address the full spectrum of tracking error.

The Market Ahead of Pivotal Elections in Argentina

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The Spotlight Is More Than Ever on Argentina


The government led by Javier Milei heads into the midterm elections this Sunday, October 26, in a completely unprecedented situation: with the United States Treasury committed to providing financial assistance to the country of up to 40 billion dollars, intervening in the foreign exchange market to calm volatility, and promising trade agreements.

The U.S. aid became effective after the ruling party lost by 13 points in the early September elections in the province of Buenos Aires, which accounts for nearly 40% of the national electorate. Therefore, these upcoming national legislative elections will be key for the government, which needs to expand its parliamentary representation and build consensus with the opposition to pass structural reforms.

Funds Society consulted with experts from international asset managers. Most agreed that the U.S. economic rescue is a temporary relief rather than a structural solution and that it is not enough to define a credible medium-term investment framework. They also pointed out that after October 26, the exchange rate should float and that the country should accelerate the pace of reserve accumulation.

WSJ and FT: Critical Editorials


Under the suggestive title “Argentina: Right Country, Wrong Bailout,” the Wall Street Journal stated in an editorial that “dollarization is the right and now essential political alternative” for the South American country, after warning that “this bailout is likely to throw good dollars after bad pesos without monetary reform in Buenos Aires.”

The paper also emphasized that “no one is sure how long this era of reforms will last” and mentioned that Economy Minister Luis Caputo “is opposed, as are some funds that benefit from a currency carry trade that would disappear with dollarization.” The conclusion was damning: “The default remedy is always devaluation” for Argentina.

According to the WSJ, “after the elections, Scott Bessent will waste dollar assets on this bailout if he doesn’t pressure Milei to restore sound money through dollarization.”

The Financial Times also published a harsh editorial, describing the partnership between Bessent and Milei as a “risky venture,” suggesting that the U.S. official “should understand the madness of defending” the current dual-band exchange rate system in Argentina, and stating that the U.S. is “throwing money at a serial defaulter” that even threatens competition with soybean producers.

“If madness is repeating the same action and expecting a different result, then a central pillar of Argentina’s economic policy borders on insanity,” the British newspaper wrote. The South American country needs “less anarchy and more capitalism,” the article concluded, referencing the Argentine president’s self-description as an anarcho-capitalist.

The View of International Asset Managers


On October 9, the U.S. Treasury confirmed direct purchases of Argentine pesos and a 20-billion-dollar swap framework with the Central Bank of Argentina. Interventions in the foreign exchange market continued, and on October 15, Bessent said he was in talks with banks to coordinate a debt facility of 20 billion dollars (in addition to the swap), raising potential support to 40 billion dollars. The institutions involved would be JP Morgan, Bank of America, Goldman Sachs, and Citigroup, according to media reports.

“The size and scope of the U.S. Treasury’s financial assistance program are remarkable, but its legitimacy will depend on Milei maintaining veto power in the upcoming midterm elections,” assessed Jason DeVito, senior portfolio manager of emerging markets debt at Federated Hermes.

According to DeVito, if the result is favorable to the government, “we will see momentum toward further deregulation and additional fiscal discipline.” In that scenario, Federated Hermes expects a move toward a more flexible exchange rate and an improvement in current account indicators.

Carlos Carranza, senior manager of emerging markets debt funds at M&G Investments, pointed out that after the elections, volatility will likely decrease “as the focus returns to fundamentals.”

The expert logically noted that President Milei will remain in office for at least two more years, “regardless of the electoral outcome. Meanwhile, it is worth noting that Argentina’s macroeconomic outlook remains largely constructive.”

On the fiscal front, the government continues to maintain a balanced budget (that is, with no primary fiscal deficit), “which is an uncommon achievement in both emerging and developed markets,” he indicated. Moreover, inflation remains largely anchored and, although monthly figures have persistently hovered around 2–3%, year-on-year measurements still show a slowdown.

Among the fundamentals, Carranza also highlighted that the South American country’s GDP growth “remains on track to register a solid 4.3% in 2025, even despite some downward revisions in recent months.”

Short-Term Support


Meanwhile, Alejo Czerwonko and Pedro Quintanilla-Dieck, from the Chief Investment Office at UBS, emphasized in a special report dedicated to Argentina that the U.S. intervention acts as a short-term “circuit breaker,” by strengthening the Central Bank’s reserves and reducing the risk of uncontrolled inflation.

The report highlights that this maneuver improves the chances of Javier Milei’s government regaining some political capital in the elections, although doubts persist regarding the sustainability of the exchange rate system and the pace of reserve accumulation.

UBS considers the package a temporary relief rather than a structural solution and maintains a neutral view on Argentine bonds, awaiting greater clarity on stabilization policies.

From the asset manager Payden & Rygel, Alexis Roach, emerging markets analyst, stated that “a landslide victory does not seem necessary to guarantee the country’s governability: a balanced outcome, in which the ruling party outperforms the Peronists, would be enough.”

Roach considered that “the financial support from the United States, although significant, is not enough to define a credible medium-term investment framework. After the elections, the market’s attention will focus on the government’s ability to reach agreements with centrist forces to secure a parliamentary majority, as well as on the strategy to regain access to markets.”

The fact is that the Argentine president showed a shift after being defeated in the Buenos Aires provincial elections. In addition to the U.S. economic bailout, he added a more moderate tone to his rhetoric, attempted to begin a dialogue with the more rational opposition, and showed an effort to connect with voters who have been enduring an adjustment that, although it helped reduce inflation, has yet to translate into improvements in the microeconomy.

Household delinquency in the South American country rose for the tenth consecutive month in August, reaching 6.6% of total credit—marking a new record in at least 15 years, according to the Central Bank’s banking report. Meanwhile, interest rates for overdrafts—one of the most common ways for small and medium-sized enterprises to finance working capital—increased from around 80% to 190% nominal annual last week, reaching the highest level in at least 17 years.

On top of all this, the dollar—the eternal social barometer of pre-election Argentina—recorded its biggest daily increase in nearly six weeks on Friday, October 17, while financial dollars (MEP and CCL) surpassed 1,500 pesos, despite the firepower implied by the interventions from the U.S. Treasury.