In our latest Weekly Comment, Head of Fixed Interest Research Richard Carter, CFA provides his insights into the most recent market developments, from Central Bank moves and upbeat Eurozone forecasts to record-breaking Initial Public Offerings, tech sector twists and what these signals could mean for 2026.
Market overview – Richard Carter, Head of Fixed Interest Research
It’s that time of the year again. Christmas yes, but it’s also when analysts and commentators turn to their crystal balls to come up with stock market targets for the year ahead. But for those who do not have access to a crystal ball, there is an alternative: keep a beady eye out for comments and market signals that could set the tone for the year ahead, or at least the early months of the year ahead. And the week ended Friday 19 December had its fair share of potential signals to get stuck into.
Take last week’s trifecta of central bank interest rate decisions: the Bank of England (BoE), 25 basis point cut; the Bank of Japan (BoJ), 25 basis point increase; and the European Central Bank (ECB), hold - a full house! Decisions from all three were in line with expectations but what caught the eye were accompanying comments from ECB boss Christine Lagarde, specifically on how resilient the economy has been.
The ECB went on to upgrade its 2025 eurozone growth forecast to 1.4% from 1.2%; 2026 was revised higher to 1.2% from 1% too. The central bank also upped its 2027 and 2028 figures — they must have a powerful crystal ball in Frankfurt. There is a narrative here though. The Eurozone economy has weathered the tariff storm better than expected. What’s more, Europe is set to receive a huge fiscal boost in the years ahead in the form of a significant step-up in defence and infrastructure spending. So, could European stock markets, which have been among the strongest performers in 2025, be the ones to watch in 2026 once again?
Secondly, IPOs (Initial Public Offerings). Last week Medline Industries, a medical supply group raised US$6.3bn on IPO, giving it a US$54bn market capitalisation. That makes Medline, the biggest private equity-backed IPO on record, according to LSEG data. Private equity has struggled to exit investments via IPOs in recent years. Could Medline herald the reopening of the IPO route? Medline was not the only company to IPO last week. Consultancy group Andersen Group, scion of accounting firm Arthur Andersen that collapsed following the Enron blow-up at the turn of the millennium, went public too. After raising US$176m, and following a 47% spike in the share price, Anderson finished its first day as a publicly traded company with a US$2.6bn market cap.
And could there be some new year cheer for London’s IPO market? Elliott Management is preparing to bring its bookselling businesses, Barnes & Noble and Waterstones, to market in 2026 with London actively being considered as a home, according to the Financial Times. A multibillion-pound flotation could be just the shot in the arm needed to get the London IPO market going again. Another one to watch out for in 2026.
Finally, tech. Talk of a tech bubble has been on the rise in recent months, coinciding with concerns over the ambitious spending plans of the so-called AI (artificial intelligence) hyperscalers. The increasing use of debt for funding is a potential red flag, and Oracle is attracting unwanted attention in this regard, with its shares falling by almost half since September. But while Oracle had another tricky week – its shares fell 5.4% last Wednesday - not all tech names struggled. Shares in Micron, supplier to tech poster child Nvidia, were up almost 4% after indicating expected revenues of US$18.7bn for the current quarter, significantly above the previous consensus estimate of US$14.5bn. Takeaway? The market may be becoming a little more discerning when it comes to tech stocks. If it is, that would not be a bad thing and could go some way towards assuaging tech bubble concerns in the coming year.
So, there you have it, a potentially stronger than expected Eurozone economy, a possible pick up in IPOs, and a more balanced, less frothy tech sector - three potential positives for markets going into 2026, and not a crystal ball in sight.
Weekly economic announcements:
The MSCI All Country World Index (MSCI ACWI) was largely unchanged leaving the year-to-date (YTD) gain of approximately 22% intact.
United States:
A week of two halves for US equities. First half of the week, sentiment was weighed down by ongoing valuation concerns in the tech sector and a mixed set of labour market data: on the positive side, November’s nonfarm payrolls report estimated a 64,000 increase in jobs, comfortably ahead of the 45,000 expected; on the negative side, the unemployment rate ticked up to 4.6%, the highest it has been in over four years.
The second half of the week saw markets rebound thanks to a better-than-expected inflation report and Micron’s consensus-beating earnings. Markets choosing to ignore the suspicion that the lower-than-expected 2.7% consumer price index (CPI) reading (expectations were for 3.1%) was likely down to data-collection issues following the recent government shutdown. Put the two halves of the week together and perhaps it was no surprise that the main US stock index finished the week just fractionally higher. With just a few trading days to go, the index boasts a 16.2% YTD gain.
US Treasuries had a modestly positive week — the soft inflation data a source of support here. The yield on the 2-year Treasury finished the week four basis points lower at 3.48% (down 76 basis points YTD), while the yield on the 10-year Treasury edged down four basis points to end the week at 4.15% (down 42 basis points YTD).
United Kingdom:
UK large caps added 2.57%, while mid caps put on 2%. Economic data came in on the soft side: inflation dropped sharply to 3.2% in November from 3.6% in October; while the unemployment rate rose to 5.1% in the three months through October, the highest it has been in four years.
The 5–4 vote split in favour of a 25 basis point cut showed how finely balanced the BoE’s rate-setting committee is at present. Hawkish accompanying comments may also explain why yields were largely unmoved with the 10-year Gilt yield ending the week at 4.536%, fractionally lower than the previous week’s 4.54% (down four basis points YTD). Sterling was unchanged against the dollar, ending the week at US$1.34.
Europe ex UK:
European equities had another positive week with the MSCI Europe ex-UK up 0.9%, building on the already sizeable YTD gains. At the national level, Italy’s main index was the standout, up +2.86%; French stocks were up 1.03%; while Germany’s main benchmark eked out a 0.42% gain.
Like sterling, the euro ended the week unchanged against the US dollar at US$1.17. The yield on the 10-year German Bund rose three basis points to 2.89% (up 53 basis points YTD).
Approver: Quilter Cheviot 23 December 2025
