• Near term, US inflation is likely to remain above the Fed’s objective of 2.0% growth in core PCE.
• US corporates delivered strong earnings growth with consumers still spending in a somewhat elevated inflation regime.
• Higher-income consumers—who account for the bulk of spending—continue to benefit from the wealth effect (rising equity markets and home values).
• Lower-income consumers are under some financial pressure. That said, commentaries from the largest US financial institutions suggest credit and debit card spending trends are intact.
• The Quarterly Census of Employment and Wages reported a substantial downward revision to payrolls, which painted a weaker picture of the US labor market. Notably, companies continued to grow earnings with fewer new employees.
• Slipping labor force participation, paired with less hiring, can keep the unemployment rate stable.
• Outside the US, we believe a pick up in global growth, and a slightly weaker US dollar, would support global credit and equity markets.

Profit growth drives the credit cycle, and profits could boom during 2026.
Companies are unlikely to lay off employees while profits are growing. This should continue to support consumer borrowing and spending across economies.

Source: MSCI, Bloomberg, as of 23 September 2025.
Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof ), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling, computing or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent.
The chart presented above is shown for illustrative purposes only. Used with permission from Bloomberg. Some or all of the information on this chart may be dated, and, therefore, should not be the basis to purchase or sell any securities. The information is not intended to represent any actual portfolio. Information obtained from outside sources is believed to be correct, but Loomis Sayles cannot guarantee its accuracy. This material cannot be copied, reproduced or redistributed without authorization.
Past performance is no guarantee of future results.

Government Debt & Policy

Central banks seek to ease policy rates toward neutral without disrupting the global economic expansion or reigniting inflation. 

• Government debt burdens are large but manageable for most countries. Markets seem to understand fiscal policy risks, which should preclude long-term yields from spiking.
• Several developed market interest rates have been moving higher at the 10-year and 30-year points on respective yield curves year to date. Steeper curves typically coincide with economic expansion.
• Year over year, yields are lower across the US Treasury curve, even though it steepened.
• We foresee global yield curves retaining their steepness, and see potential for further steepening through 2026.
• We think the Fed will likely deliver two more 25-basis-point rate cuts (late October and early December 2025). We anticipate one more cut in March 2026, before another pause to examine rate proximity to the neutral rate.
• The European Central Bank has seemingly reached a near-neutral policy rate. Relative to the Fed, the Bank of England is closer to its neutral rate. However, it’s likely to make further cuts by summer 2026.
• We prefer emerging market local-currency and sovereign bonds are preferred over developed market duration. Several countries have yield advantages relative to US Treasurys.

The Fed could cut twice more in 2025, while Japan and European central banks appear on hold.
The Bank of Japan may hike again by mid-2026, counter to its peers. 

Source: Bloomberg, as of 24 September 2025.
The chart presented above is shown for illustrative purposes only. Used with permission from Bloomberg. Some or all of the information on this chart may be dated, and, therefore, should not be the basis to purchase or sell any securities. The information is not intended to represent any actual portfolio. Information obtained from outside sources is believed to be correct, but Loomis Sayles cannot guarantee its accuracy. This material cannot be copied, reproduced or redistributed without authorization.

Global Equities

We foresee a global bull market powered by high-growth artificial intelligence (AI) themes with help from interest-rate-sensitive areas of the market.

• We believe the Russell 2000 Index is likely to join other global indices at new 52-week highs in the months ahead as profitability within the index finally broadens out.
• AI-driven capital expenditure is a lasting theme that should help propel equity markets and domestic investments for years to come.
• We see opportunities outside of large-cap tech and the AI theme. Despite lower relative fundamentals, the Russell 2000 Index has been outperforming the capitalization-weighted S&P 500 Index since the April 2025 lows.
• The financial sector is also rallying and showing very steady uptrends across small-through-large cap indices. A healthy financial sector is a positive indicator for the credit cycle’s direction.
• We believe the global bull market has staying power. Of the global equity indices we monitor, 80% are within 2% of their 52-week or all-time high levels.ⁱ
• We are optimistic about global equity markets. We believe strong performance can be delivered even if robust earnings estimates prove a little too optimistic.

Global equities are in an uptrend across the board with the bulk of indices above respective 200-day and 50-day moving averages.
The Dow Jones Transportation Average underperformance is notable but not disastrous. The US economy is more closely linked to technology than shipping and hauling.

Source: Bloomberg, as of 23 September 2025. 
The chart presented above is shown for illustrative purposes only. Used with permission from Bloomberg. Some or all of the information on this chart may be dated, and, therefore, should not be the basis to purchase or sell any securities. The information is not intended to represent any actual portfolio. Information obtained from outside sources is believed to be correct, but Loomis Sayles cannot guarantee its accuracy. This material cannot be copied, reproduced or redistributed without authorization.
Indices are unmanaged. It is not possible to invest directly in an index.
Past performance is no guarantee of future results.