A colourful quarter for investors as we head into 2026
The somewhat ambiguous “Cloud Dancer” (Pantone 11-4201) takes the prize this year, apparently representing “a billowy white imbued with serenity”. With such favourites as Mocha Mousse, Peach Fuzz and Viva Magenta having won the crown in previous years, it’s interesting to analyse what colour the last three months would have been for financial markets, with investors certainly experiencing the full spectrum of emotions.
Read more:
It was the US tech sector that was in the pink during the first part of the fourth quarter, with October seeing the so called “Magnificent 7” (Alphabet, Amazon, Apple, Microsoft, Meta, Nvidia and Tesla) leading the way and now accounting for 36% of the S&P 500’s total market capitalisation. The continuing AI boom, strong earnings reports and a welcome rate cut by the US Federal Reserve all helped to push American equities higher.
In geopolitical news, China and the US did reach a truce over trade when US President Donald Trump and Chinese President Xi Jinping met in South Korea at the end of the month, although both failed to add a little colour of their own when asked for actual details of the agreement.
Indeed, the standout performer for October was Asia, led by South Korea rallying by a staggering 23%. Technology stocks were again the primary driver, with household names such as Samsung Electronics enjoying strong gains.
Read more:
On domestic shores, the Bank of England’s (BoE) dovish signals also led to a notable rally in the gilt market with the 10-year government bond yield falling to circa 4.5%, the largest monthly drop since December 2023, as many market observers took it as a green light for a rate cut.
With the Black (the very opposite of “Cloud Dancer”, one imagines) Friday shopping extravaganza now a permanent fixture in the UK calendar, retail data released in November showed that consumers are forcibly holding back on flashing their green, compared to earlier in the year.
In separate data Barclays, which enjoys a 40% share of card transactions in the UK, said spending on its credit and debit cards fell by 0.8% in the year to October, as expenditure on essentials contracted sharply. “Consumers and businesses alike appear to have adopted a ‘wait and see’ approach ahead of the autumn budget,” the bank commented.
Gross Domestic Product (GDP) data released also highlighted that Britain’s economy barely expanded in the third quarter. Slowing from growth of 0.3% for the second quarter, the economy grew at just 0.1% for the third, below expectations of 0.2%, after a rocky September.
Read more:
Such mixed data actually aided the performance of UK blue chips during November, benefiting from a pullback in gilt yields and a weaker pound, all bolstered by increased expectations of a BoE rate cut in December.
Remaining in the UK, the Chancellor’s famous red Dispatch Box received an airing during November and although perhaps considered politically divisive, it was well received by financial markets. Measures allowing for greater-than-expected fiscal headroom and lower projected gilt issuance helped to stabilise market sentiment, with very few exaggerated moves in the stock or fixed income markets on the day of the announcement.
Such relative serenity wasn’t felt amongst technology investors who were left rather black and blue after a brief mid-November selloff, despite optimism following a strong earnings report from AI darling Nvidia.
Read more:
A raft of moderate US data released after the government shut down came to an end did soothe worries somewhat, allowing investors to ramp up expectations that the Federal Reserve would move to cut rates before the end of the year.
The mixed news towards the end of the year allowed that most sought-after colour – gold – to continue its outperformance. However, gold’s advance was more measured after its strong run throughout the earlier parts of the year as investors perhaps booked profits.
It’s easy to argue that it’s been a colourful quarter for investors in a number of ways, and navigating the markets is certainly not always black and white. A well-researched and robust investment approach is key to achieving financial goals, especially in an environment where what the future holds can be something of a grey area, or “Dark Slate” (Pantone 19-4220) if you’re that way inclined.
Alan Colquhoun is a relationship manager at Julius Baer.
