U.S. Economy Flexes Muscle With GDP Spike

Hello everyone. Here is the summary of the market weekend for the week of September 26, 2025. My name is Brian Lynn. I am a senior investment strategist and responsible for Canadian strategy at Russell Investments. Today we are going to cover three topics major. First, the continued resilience of the U.S. economy. Then there is no still negative interest rate in Switzerland. Finally, we will end with a discussion on the risk of a government shutdown the next week. So let's get started. This week we received more economic data. We have received the third set of second quarter GDP figures in the United States and these data points suggest that the U.S. economy grew at an annualized rate of 3.8% in the second quarter. To put this number In perspective, economists estimate that trend GDP growth is around 2%. Thus, the fact that GDP grew at a rate almost twice as high as the trend second quarter suggests that the US economy is still in a difficult situation very resilient. Meanwhile, when we look at other economic data, like initial applications for unemployment benefits, these remain at levels relatively low and also suggest that the US economy is doing well. Now, when we think about what might happen to the U.S. economy in Over the next 12 months, we expect the U.S. economy to experience a slight slowdown, but this slowdown will probably result in a landing smoothly rather than through a recession. Outside of the United States, we believe that the situation could be slightly different, because the economic risks could be slightly higher than in the United States. So in Canada, for example, we think that the risk of the Canadian economy potentially plunging into contraction territory in the third quarter, as was the case in the second quarter, remains quite high. However, when we look at stock valuations outside the United States, it whether Canadian or European stocks, we believe that stock valuations outside the United States are more attractive than those of American stocks. And this is one of the reasons why we have been relatively neutral in terms of asset allocations between different geographies. In fact, despite the strong performance of non-US stocks relative to US stocks in the third quarter, we still believe there is a valuation mismatch between non-US stocks and US stocks. Second, let's talk about Switzerland. The Swiss National Bank held its final monetary policy meeting this week. She decided to leave interest rates at 0%. In other words, there is no rate yet of negative interest for Switzerland. We know that Switzerland is facing difficulties persistent economic problems, notably due to its 39% customs duties on its exports to the United States. Ultimately, the Swiss National Bank said it was setting the bar very high high to push interest rates into negative territory, but that it would continue to depend on the data and adjust interest rates if necessary to be able to maintain its mandated objectives in terms of the economic environment. Finally, I would like to conclude by discussing the potential risk of a government shutdown next week. According to the Paris markets, as of September 25, 2025, the markets predict a probability about three quarters that a government shutdown takes place from October 1 next week. Historical experience shows that government shutdowns are generally short-lived, with the longest government shutdown to date lasting only 35 days. And historically speaking, markets tend to ignore these government shutdowns. Although there is always a risk that with high stock market valuations in the United States, we will see a slight return of market volatility in the event of a government shutdown. But again, I think investors would be wise to stay disciplined, focus on the long term, and stick to their strategic asset allocation rather than focusing too much on some of the short-term volatility and market movements. That's all for this week. We'll see you next time in Market Week Review. to focus too much on some of the short-term volatility and market movements. That's all for this week.