Financial Forecasts November 2025: Europe resists, the ECB stops here.

Europe is performing better than expected with a growth of 0.2% in Q3, driven by Spain at +0.7% (again) and France at +0.5% (a pleasant surprise). Meanwhile, the IFO index is at its highest since 2022, PMI figures are up for the first time in 17 months, and car sales have risen for the third consecutive quarter by over 11% (+30% for electric vehicles). We are witnessing a strong rebound in industrial orders, and there are 79,000 fewer young people unemployed compared to last year in Europe.France surprises particularly, despite the comedia del arte of French politics, showing a growth of 0.5% after +0.2%, marking its strongest growth in two years thanks to the industry (+0.8%) and exports (+2.2%), along with business investment (+0.9%) and a slight increase in consumption (+0.1%). Additionally, unemployment fell by 1% in Q3 after the creation of 52,000 jobs in Q2, and business formations increased by 2.7% year-on-year. Overall, we are revising French growth forecasts upward from 0.7% to 0.9%.We are changing our scenario for the ECB, now expecting a status quo in December. Very bad macro surprises would be needed (which we do not see in our leading indicators at this time). The ECB appears more confident about growth (risks have decreased), while inflation risks are considered equally possible to rise or fall, with inflation close to the target (2.1% in October). In short, the burden of proof has shifted, and the highest probability, 70/30, favors a status quo.The interest rate differential is less influential (and the probability of a cut in December in the US has decreased, although it remains our central scenario) than the dynamics of growth and flows, leading us to slightly revise the EUR/USD down to 1.18.In the United States, the policy mix remains very different. Growth is holding up better, boosted by AI and the deficit (still the highest recorded in peacetime at around 7%), and is expected to reach 1.8% (vs. 2.8% in 2024, still confirming the slowdown). Concerns about employment continue to dominate, weighing on consumer confidence, which has declined for the third consecutive month, allowing the Fed, despite rising inflation now reaching 3% in September, to proceed with its second cut this year.We continue to favor another 25bps cut in December, although the probability has slightly decreased. J. Powell stated that there is nothing definitive at this stage, and he may want to show some resistance before the appointment of his successor, who, if named too far in advance, will make his task difficult and weigh on the risk premium and the dollar (less so if it's Waller, more if it's Kevin Hassett, or even more so Scott Bessent).China, currently a major winner in the trade war (with over 5% growth), has announced plans to boost domestic demand over the next five years while reiterating its mantra of becoming a technology leader, eliminating fossil fuels, calming the excesses of "involution" in manufacturing, and promoting the digital yuan and the role of the RMB... in short, to increase China’s influence internationally. Meanwhile, numerous challenges remain: growth is still mainly driven by exports,, and the agreement with the US appears more like a truce, failing to address the growing decoupling between the United States (with the share of exports to the US below 10% compared to 21% in 2016).The return of Abenomics in Japan, with the arrival of Ms. Takaichi, would signal more inflationary growth, thus favoring the repatriation of capital flows into domestic stocks. We slightly revise our growth forecasts for 2025 and 2026 to 1% and 0.8%, respectively.While the valuation of US stocks continues to raise questions with unprecedented concentration on a few stocks (with 10 stocks making up nearly 50% of the S&P), and the top 1% of the wealthiest individuals holding nearly 50% of the total (US stocks are 60% larger than all European and Asian indices combined, representing over 50% of the MSCI, etc.), the scenario of better growth resilience, solid earnings, and forthcoming cuts in discount rates by the Fed still leads us to anticipate the S&P reaching 7000 points by the end of the year. The punch bowl remains on the table, the music continues, even if we spot a few unsightly cockroaches, if not concerning, under the table here and there...