Issue #41 - Emerging Markets Surge, Global Policy Diverges & TikTok’s US Future Is Settled?

What’s in this issue;

Global markets finished the week mixed as softer US inflation and cooling jobs data boosted growth sentiment, while geopolitical oil risks and diverging central bank policies kept volatility elevated.

We break down why emerging markets outperformed the U.S., what the Fed’s actions mean for tech and gold, and why TikTok’s regulatory resolution signals a new era for US tech.

Plus: key earnings winners and losers, record-high commodities, and what to watch in a holiday-shortened week.

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What Moved Markets This Week

📊 Market Snapshot

S&P 500: +0.1%

Nasdaq Composite: +0.5%

Dow Jones: -0.7%

Global markets ended the week mixed, as softer US inflation data lifted sentiment but was offset by lingering uncertainty around economic data quality, central bank policy paths, and renewed geopolitical risks tied to energy markets.

Key Drivers

US data supports rate-cut expectations, cautiously

The delayed November nonfarm payrolls report showed stronger-than-expected job growth at face value, but a sharp slump in October employment pointed to a cooling labour market. This narrative was reinforced by November CPI printing well below expectations. However, economists flagged issues with data collection, limiting market conviction and keeping volatility elevated.

Equities react unevenly across regions

In the US, tech stocks outperformed, pushing the Nasdaq higher as lower inflation expectations supported long-duration assets. In contrast, the Dow slipped as more cyclical and industrial names lagged.

UK equities were largely flat following retail sales and government borrowing data, while European stocks ended higher after a heavy week of central bank rate decisions.

Oil prices driven by geopolitics, not demand

Crude prices moved higher after President Trump ordered a blockade of sanctioned oil tankers entering and leaving Venezuela and designated the Maduro regime as a foreign terrorist organisation. The move raised concerns about potential supply disruptions rather than changes in underlying demand.

Global monetary policy remains in focus

Outside the US, the Bank of Japan raised interest rates to a 30-year high and signalled further hikes ahead, reinforcing the theme that global policy paths are diverging even as US markets price in easing.

What This Means for Investors

Rate expectations continue to favour growth — for now

Softer US inflation and cooling labour market signals are supportive for equities, particularly technology and other rate-sensitive sectors, explaining the Nasdaq’s relative outperformance.

Confidence in economic data is becoming fragile

Delays and quality concerns around key US releases increase the risk of sharp market reactions as investors reassess each data point, making position sizing and risk management more important.

Energy shocks remain a latent inflation risk

Rising oil prices driven by geopolitical action — not demand — could quickly feed back into inflation expectations if tensions escalate, potentially complicating the Fed’s easing trajectory.

Diverging global policy paths create selective opportunities

With the US leaning towards cuts while Japan tightens and Europe remains cautious, currency moves and regional equity dispersion are likely to increase.

Strategic clarity still matters at the company level

In corporate news, Warner Bros’ decision to prioritise Netflix over Paramount highlights where scale, distribution, and balance-sheet strength are becoming decisive factors — a broader reminder that industry consolidation will continue to reward clear strategic positioning.

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🌍 Emerging Markets: From “Risky Bet” to 2025’s Standout Winner

As we close out 2025, Emerging Markets (EM) have quietly gone from being seen as high-risk allocations to leaders of global returns.

While U.S. markets wrestled with concentration risk and shifting policy expectations, EM equities are on track to finish the year up 25–30%, marking their strongest performance in nearly a decade.

Here’s what’s driving the move — and what investors should be watching into 2026.

1️⃣ The Reversal of “U.S. Exceptionalism”

The dominant theme in late 2025 has been a rotation away from U.S. mega-cap tech and toward better-valued emerging markets.

What’s driving it

Where the money is going

Why it matters

The MSCI Emerging Markets Index has outperformed most developed markets this year, suggesting a structural shift rather than a short-term bounce.

2️⃣ The AI Trade’s “Backdoor” Winners

While headlines focus on U.S. software and AI models, the physical backbone of AI sits squarely in emerging markets.

The trend

Taiwan and South Korea have become indispensable to the global AI supply chain.

Looking ahead

As AI moves from training to real-world deployment in 2026, demand for semiconductors and specialised hardware is expected to remain strong — even if U.S. software stocks cool.

3️⃣ Resilient vs Fragile EM: The Gap Is Widening

“Emerging Markets” is no longer a single trade. The divergence between countries is becoming clearer.

The resilient

India: Long-term growth engine remains intact

China: Recovery is gaining traction, with domestic valuations increasingly attractive

The fragile

Highly indebted nations across parts of Developing Asia and Africa

With global debt above $324 trillion, some EM governments are now spending 10%+ of revenue servicing dollar-denominated debt.

Key watchpoint

Interest rates. If EM central banks continue cutting ahead of the Fed, it could unlock a significant wave of local bond market inflows.

4️⃣ Trade Barriers & the New Geopolitical Playbook

Geopolitics remains the wild card.

The pivot

Countries like Mexico and Vietnam are evolving into critical connectors between East and West as supply chains diversify.

The risk

“Green protectionism” is rising. Policies such as the EU’s Carbon Border Adjustment Mechanism (CBAM) could pressure EM exporters that fail to meet efficiency and emissions standards.

🎄 Looking Ahead: Holiday-Shortened Week

Markets will observe a holiday-shortened trading week, with markets closed on Christmas Day. Despite the light schedule, investors will have key economic data and major M&A activity to monitor.

Highlights this week:

Monday: Shareholders of Electronic Arts (EA) vote on a proposed acquisition by a Saudi-led consortium. If approved, it would become the largest leveraged buyout in history.

Tuesday: The delayed Q3 U.S. GDP report and the Core PCE Price Index — the Fed’s preferred gauge of inflation will provide insight into the economy’s trajectory.

Seasonal sentiment: Traders will watch for a potential Santa Claus rally, a historical trend where the S&P 500 posts gains during the last five trading days of the year and the first two of the next year.

💼 Earnings Calendar

Monday, Dec 22

Tuesday, Dec 23

🌍 Key Economic Events

Monday

🇬🇧 UK GDP YoY (Q3) — Previous: 1.3%

➡️ Weak growth keeps recession risks alive and supports expectations for future BoE rate cuts. Positive for equities, but may weigh on GBP.

Tuesday

🇺🇸 Durable Goods Orders MoM (Oct) — Forecast: -0.3% | Previous: 0.5%

➡️ Pullback signals cooling business investment, reinforcing expectations for Fed rate cuts next year.

🇺🇸 GDP Growth Rate QoQ (Q3, 2nd Estimate) — Forecast: 3.2% | Previous: 3.8%

➡️ Slower growth supports the soft-landing narrative, potentially equity-friendly and consistent with easier policy ahead.

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📰 ICYMI

The third week of December brought a flurry of central bank activity and a historic resolution to one of tech’s longest-running geopolitical sagas.

What Else is Happening?

The Global Central Bank Divergence: While the Fed is in "digestion mode" after its recent cut, other central banks moved the needle this week.

Bank of England (BoE): Cut rates by 0.25% to 3.75% in a tight 5-4 vote, citing established disinflation (CPI fell to 3.2%).

Bank of Japan (BoJ): Stunned markets by raising rates to 0.75%, a 30-year high, signaling a definitive end to its ultra-accommodative era.

European Central Bank (ECB): Held rates steady at 2%, taking a more "wait-and-see" approach compared to its peers.

The TikTok "Deal of the Century": After years of uncertainty, ByteDance officially signed a Trump-backed deal to hand majority control of TikTok’s US operations to a joint venture. Oracle, Silver Lake, and Abu Dhabi’s MGX will lead the consortium.

Investor Impact: Oracle (ORCL) shares surged nearly 7% on the news. This deal removes a massive "regulatory overhang" from the tech sector and sets a new precedent for how foreign-owned platforms operate in the US.

Inflation Cooler Than Expected: US CPI (Consumer Price Index) for November landed at 2.7%, well below the 3.1% forecast. This was the first major data release following the record-long government shutdown.

Investor Impact: The "inflation miss" suggests the Fed’s recent rate cuts were well-timed, fueling a recovery in tech shares (Nasdaq) and a rally in Gold, which touched a historic all-time high of $4,400/oz.

Corporate Winners & Losers: Micron (MU) shares soared 10% after quarterly earnings "blew past" estimates, signaling that AI hardware demand remains robust.

Conversely, Nike (NKE) tumbled over 10% due to a weak sales outlook in China.

Useful Links

Bank of England Rate Summary: Official Dec 2025 Minutes

Why it matters: It confirms the UK’s shift toward a "neutral" rate environment, which is typically a tailwind for the UK housing market and dividend-paying stocks.

TikTok’s US Future Settled: TikTok signs deal to avoid US ban

Why it matters: It shifts the narrative from "geopolitical risk" to "business as usual." For investors, it signals that Oracle is now a major player in the social media infrastructure and algorithm licensing space.

5 Investing Surprises From 2025: Morningstar UK Analysis

Why it matters: A great retrospective for the year-end. It highlights how Gold and International Stocks outperformed expectations, reminding investors of the power of diversification outside of US Tech.

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