Trade tensions, renewed geopolitical negotiations, mixed signals from the banking sector, and the U.S. government shutdown are creating noise around the Q4 market outlook. Meanwhile, the prospect of near-term Federal Reserve rate cuts and resilient corporate earnings are balancing sentiment.
Credent’s Investment Policy Committee (IPC) continues to monitor this complex global backdrop. Below are six headlines and how they are shaping our Q4 market and economic outlook as we approach the end of 2025.
1. Trade Tensions & Tariffs
Trade policy has reemerged as a market-moving force. China, which controls roughly 70% of global rare earth mining and nearly 90% of processing, is restricting access to these critical materials. The move has broad implications for industries reliant on rare earth inputs — including semiconductors, defense, automakers, and renewable energy.
Investors should anticipate elevated input costs and supply chain adjustments across these sectors as global manufacturers seek diversification outside China. Even still, the risk premium in the news cycle is largely driven by political rhetoric from the White House and Chinese leadership. This leads us to believe the tide could turn overnight, and investors should remain anchored to their financial plans and disciplined investing principles.
2. Geopolitics
On the geopolitical front, continued dialogue between Russia and Ukraine and ongoing efforts to preserve the Gaza peace framework between Israel and Hamas provide cautious optimism. Even modest progress can reduce headline risk and support investor sentiment across risk assets.
3. Regional Bank Credit Worries
Credit concerns resurfaced among regional banks, triggering the largest pullback in a regional banking index since April’s tariff-driven selloff. While stress at small lenders could spill into large institutions, last week’s earnings reports from several systemically important financial institutions (SIFIs) showed strong results, suggesting the issues may be idiosyncratic rather than systemic.
As a point of reference, recall the failure of Silicon Valley Bank in March 2023. The bank was highly concentrated in loans to only one subset of clientele (tech companies), which caused serious credit concerns. When the bank failed, the fear that cascaded across the industry was completely unfounded. We believe we’re witnessing the same thing in the current media cycle. Even still, Credent’s IPC is closely monitoring credit conditions across the banking system.
4. Government Shutdown
The U.S. government entered its latest shutdown on October 1st when partisan divisions over healthcare provisions stalled a spending bill. While shutdowns often generate headlines, history shows they rarely disrupt markets for long.
In fact, equity returns during shutdowns are typically neutral, and 70% of the time, the S&P 500 posts gains in the three months following a resolution. Credent’s IPC views this shutdown similarly — as a political rather than economic event.
5. Monetary Policy
As outlined in the September Summary of Economic Projections, Federal Reserve Chair Jerome Powell signaled that the central bank remains on track for two more rate cuts this year, noting that neither inflation nor employment trends have shifted meaningfully since the last FOMC meeting.
Markets are pricing in rate cuts of 25 basis points at both the October and December meetings, with easing expectations helping to support valuations amid renewed volatility. We want to reiterate that risks within bonds remain slightly more elevated than long-term risks in global equities.
6. Earnings Season
The third-quarter earnings season began with encouraging results. Thus far, 84% of companies have reported positive surprises, outpacing preseason forecasts and supporting the view that corporate fundamentals remain strong.
Estimates for the third and fourth quarters continue to trend higher. However, the return of volatility, as reflected by the CBOE Volatility Index (VIX) reaching its highest level since April, suggests markets are adjusting to higher uncertainty even as earnings provide a meaningful tailwind.
Credent’s Response to the Q4 Market Outlook
Collectively, these headlines reflect the competing forces of solid fundamentals and heightened policy uncertainty shaping today’s markets. Credent’s IPC remains focused on balancing opportunity with disciplined risk management — favoring high-quality balance sheets, diversified factor, sector, and regional exposures, and defined-outcome strategies such as structured assets.
Within equities, Credent employs an equal-weight approach to position sizing, ensuring no single company’s market capitalization dominates portfolio risk. As the year ends, we see the potential for volatility to persist but, should trade tensions stabilize and resilient earnings and rate cuts materialize, we also recognize a constructive setup. Historically, such conditions have favored disciplined investors who stay aligned with long-term objectives despite short-term noise.
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