Capital Markets Outlook
Expert Insights on the economy, markets, and the critical impacts to investments
Your Guide to Market Trends and Opportunities
Get ahead with quarterly insights from leading experts on key drivers of economics and market shifts. From macro trends to investment strategies, we equip you with actionable insights and perspectives to cut through the noise and seize emerging opportunities.
Your Guide to Market Trends and Opportunities
Get ahead with quarterly insights from leading experts on key drivers of economics and market shifts. From macro trends to investment strategies, we equip you with actionable insights and perspectives to cut through the noise and seize emerging opportunities.
Kicking the Can Down the Tightrope
In the third quarter, solid market returns masked signs of economic softening, with tariffs driving up prices in trade-sensitive sectors and the labor market cooling. This precarious economic landscape presents challenges for the Fed, as opposing macroeconomic forces create uncertainty and stretched valuations. While caution is advised, the underlying economic foundation remains strong. AB's strategists and investment experts explored:
The State of the "Trinity"
Shifts in the delicate balance between inflation and labor and their potential impact on future growth.
Magnificent Seven vs. Others
Recent swings in equity returns between concentration and diversification, and which sectors may surprise us next.
Bonds and the Road to Normalization
Implications of the Fed's recent rate cuts and emerging questions about the pace of cuts and the ideal terminal rate.
What We'll Discuss
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The State of the “Trinity”
While the aggregate growth level remains relatively stable, albeit noisy, the dynamics of the balancing act between inflation and labor have been shifting. We will examine the Fed’s likely path forward and potential outcomes.
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Magnificent Seven vs. the Others
Over the last year, equity returns have narrowed, broadened and narrowed once again. Although the pendulum has swung back to highly concentrated, that doesn’t mean it will remain this way indefinitely. We will examine which areas of the equity market we prefer and why.
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Bonds and the Bumpy Road to Normalization
As one question has been answered, two more have appeared; now that the Fed has been given clearance to cut rates in September, markets are grappling with the correct pace of cuts and the proper terminal rate. We will examine both questions in greater detail as well as what this means for bonds.
Explore Our Outlook
Despite the stop-and-go of policies and sentiment, the macro picture and markets have been resilient.
What We Discussed
The State of the “Trinity”:
All eyes remain fixed on inflation, growth and labor—and their net effect on interest rates. Though these three variables have not reflected the impact of fiscal policy so far, we expect that to change over the coming months.
The Magnificent Seven versus the Others:
Equity returns have continued to broaden, but questions remain around how long this trend will last. When volatility reigns, selectivity becomes crucial, particularly given the frothy valuations and high concentration levels of market indices.
Bonds and the Road to Normalization:
Although the focus has largely shifted from the Fed to the White House, the rate discussion should retake center stage as policy effects become clearer. Markets may be grappling with the “right” start date for rate cuts, but the pace of cuts and terminal rate demand more focus.
Explore the 4Q25 Capital Markets Outlook:
Kicking the Can Down the Tightrope
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Webcast Replay
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Blog
- Webcast Replay
- Blog
What We Discussed
The State of the “Trinity”:
Shifts in the delicate balance between inflation and labor and their potential impact on future growth.
The Magnificent Seven versus the Others:
Recent swings in equity returns between concentration and diversification, and which sectors may surprise us next.
Bonds and the Road to Normalization:
Implications of the Fed's recent rate cuts and emerging questions about the pace of cuts and the ideal terminal rate.
The market offers opportunities, but investors should do their homework and be selective.
Key Takeaways
- Opposing macro forces are creating a tightrope for the Fed to balance on as signs of economic softening emerge. Investors should be highly selective and somewhat cautious.
- Despite elevated equity valuations and market concentration, better earnings outlooks have benefited many segments. We see high-conviction opportunities among quality businesses.
- In fixed income, a global approach makes sense. Yields remain compelling even with credit spreads tight, and a higher-quality high-yield market offers compelling return potential.
- High yields, a steep yield curve with cheap long bonds and a supportive technical picture create what we see as an attractive entry point to the municipal bond market.
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Economic Perspectives
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Fixed-Income
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Equity
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Global Macro
- Fixed-Income
- Equity
- Global Macro
Position portfolios now to seize opportunities as they ripen.
Overview
The Fixed Income Outlook outlines six actionable strategies, including actively managing duration, focusing on high-quality credit, and adopting a balanced investment approach that combines government bonds with growth-oriented assets. By emphasizing the importance of diversification and systematic investment strategies, the outlook equips investors with the tools to seize opportunities and prepare for potential challenges in the evolving fixed-income landscape.
As riskier stocks fuel global equity gains, investors should stay focused on durable businesses with staying power.
Key Takeaways:
- Markets may be rallying, but investors are increasingly chasing speculative assets while ignoring warning signs like slowing growth and unresolved trade tensions. Staying grounded in fundamentals is key.
- As global supply chains shift and regional market correlations decline, international diversification is becoming more important. Investors can tap into new growth pockets—especially in emerging markets like China.
- From AI-driven healthcare innovations to resilient dividend growers, the next wave of equity opportunities lies in quality businesses with consistent earnings. Active strategies can help uncover hidden value across sectors and geographies.
Global growth may slow as tariffs start to force up prices. We also see systemic fragilities for the longer-term.
Key Takeaways:
- The environment remains somewhat uncertain—but the tail risks around our central scenario for the next few quarters have diminished.
- On top of obvious fiscal vulnerabilities throughout the developed world, the threat to US Fed independence has massive long-term economic and market implications.
- We expect businesses to slog through a few quarters of sluggish demand without having to substantially cut jobs while consumers withstand higher prices, provided they remain employed.
Meet Our Experts
Get Caught Up on Last Quarter's Outlook
Explore our topics from 3Q 2025 Capital Markets Outlook: Red Light, Green Light...Yellow Light?
What We Discussed:
What We Discussed:
Bonds and the Road to Normalization:
The focus has shifted from the Fed to the White House, as fiscal policy complicates macro trends. While markets were skeptical about rate cuts earlier this year, they’ve been pricing in more reductions as uncertainty grows. However, the pace and endpoint are anything but firm.
Get Caught Up on Last Quarter’s Outlook
October 8, 2024 / 66 min
Presented by Walt Czaicki, CFA, Eric Winograd, Matt Sheridan, CFA, and Daryl Clements
4Q:24 Capital Markets Outlook— Normalization: Endgame
Although the pandemic has grown increasingly distant in the rearview mirror, many of its economic ramifications have lasted well into 2024. As we look ahead to the final quarter of the year, and into 2025, we expect the US economy to shake off the lingering effects of the pandemic and officially start a new chapter. This chapter will notably include lower rates and a new president in the White House. However, with change typically comes a degree of discomfort and uncertainty. Fortunately, a strong foundation has afforded the Fed time and flexibility to ease the US economy into a soft landing.
More for You
AB's Capital Markets Committee discuss opportunities across asset classes and market segments our quarterly outlook webcast.
With growth moderating and inflation cooling, the US seems on track for a soft landing—as markets digest a stream of incoming information.