Market Week in Review digital banner

US Economy GDP Growth Spike

2025-09-26

BeiChen Lin, CFA, CPA

BeiChen Lin, CFA, CPA

Director, Head of Canadian Strategy




Economic insights Market insights
Hello everyone. This is market weekend review for the week of September 26, 2025. My name is Brian Lynn. I'm a senior investment strategist and head of Canadian strategy here at Russell Investments. Today, we'll be discussing three major topics. First, the ongoing resilience in the US economy. Next, no negative interest rates just yet in Switzerland. And finally, we'll wrap up with a discussion of the risk of a government shutdown next week. So let's begin. This week we got more economic data. We got the third set of GDP numbers for the second quarter in the US and those data points suggested as the US economy grew at a pace of 3. 8% annualized in the second quarter. Now to put that number into perspective in general economists estimate that trend GDP growth is around 2%. So for GDP to have expanded at nearly double the pace of trend in the second quarter that suggests that the US economy is still in a very resilient situation. Meanwhile, when we look at other economic data points like initial jobless claims, those are still at relatively low levels and also suggest that the US economy is doing well. Now, as we think about what might happen to the US economy over the next 12 months, we do expect that the US economy might see a little bit of a cooling, but that cooling will likely be towards a soft landing rather than towards a recession. Outside of the US, we think it might be a little bit of a different story where economic risks might be a little bit higher than in the US. So for example in Canada, we do think that the risk of the Canadian economy potentially dipping into contractionary territory in the third quarter like it had been in the second quarter is still quite elevated. However, when we look at the equity valuations outside of the US, whether it's Canadian equities, whether it's European equities, we do believe that equity valuations outside of the US are more compelling than US equity valuations. And that's one of the reasons why we've been relatively neutral in terms of our asset allocation across different geographies. In fact, even with the strong performance of non US stocks relative to US stocks in the third quarter, we still believe that there's a valuation discount between non- US stocks as compared to US stocks. Second, let's talk about Switzerland. The Swiss National Bank held their latest monetary policy meeting this week. they decide to leave interest rates at 0%. So in other words, no negative interest rates for Switzerland just yet. We know that Switzerland does face some ongoing economic headwinds, particularly as they are confronted with this 39% tariff against their exports to the US. Ultimately, the Swiss National Bank has said they do have a high bar for taking interest rates into negative territory, but they'll continue to be data dependent and adjust interest rates as needed to be able to maintain their mandated goals in terms of the economic environment. Finally, I want to wrap up by talking about the potential risk for a government shutdown next week. According to betting markets, as of September 25th, 2025, markets expect a roughly 3/4 chance for a government shutdown to take place starting October 1st, next week. Now, the historical experience suggests that government shutdowns are usually short-lived with the longest government shutdown so far being only 35 days in length. And historically speaking, markets tend to look through these government shutdowns. Although there's always the risk that with equity the with equity valuations being on the high side for the US, we could see a little bit of return to market volatility if we do get a government shutdown. But once again believe that investors would benefit from staying disciplined, focusing in on the long-term and sticking close to their strategic asset allocation instead of focusing too much on some of the short-term market volatility and market movements. That's all for us this week. We'll see you next time on Market Week Review. >> Hi, I'm Sophie Antaly, head of portfolio and business consulting at Russell Investments. If you liked what you just saw and heard, consider subscribing to our YouTube channel or check us out on LinkedIn. Thanks for tuning in.

Key Takeaways

  • Second-quarter GDP revised higher 
  • Switzerland stands pat on rates
  • Markets may shrug off shutdown

On this week’s edition of Market Week in Review, Senior Investment Strategist and Head of Canadian Strategy, BeiChen Lin, assessed the health of the U.S. economy. He also explained why the Swiss National Bank held the line on monetary policy and discussed the potential market impacts of a U.S. government shutdown.

Doubling Up

Lin began by noting the U.S. economy expanded at a faster pace last quarter than previously estimated. GDP (gross domestic product) growth in the April-to-June period was revised from 3.3% to 3.8%, he said, driven by a sharp rise in consumer spending.

“To put this into perspective, most economists believe the trend—or long-term—growth rate is around 2%. For GDP to increase at nearly double this pace really underscores the resilience of the American economy,” Lin stated. He added that other measures of economic health, including initial jobless claims, also remain at relatively low levels.

Still, Lin expects the U.S. economy to cool off over the next 12 months, although he sees a recession as unlikely. The story is different to the north, however, with the Canadian economy already struggling. “Economic growth in Canada actually shrank during the second quarter, and may do so again this quarter,” Lin explained.

However, he stressed that stock valuations outside the U.S.—even in places like Canada—still look more compelling than those in the U.S. This is despite the recent outperformance of non-U.S. stocks compared to U.S. stocks, Lin noted. 

Zero Negativity

Switching to monetary policy, Lin said the Swiss National Bank (SNB) decided to leave interest rates unchanged at 0% this week. While Switzerland is facing some economic headwinds—particularly due to the 39% tariff on exports to the U.S.—bank officials have stressed the bar for lowering rates into negative territory is high.

“Clearly, the SNB doesn’t believe this threshold has been met yet. I do expect the central bank to remain data-dependent, however, which means rates may be adjusted if the Swiss economy sours further,” Lin said. 

Funding Fumble

Pivoting back to the U.S., Lin discussed the possibility of a government shutdown next week. He noted betting markets see a 75% chance of this happening on Oct. 1 due to a lapse in funding.

Fortunately, U.S. government closures are usually short-lived, with the longest one lasting 35 days, Lin said. Because of this, they’re typically not a big deal for investors, he remarked.

“Historically, markets tend to look through shutdowns, although with today’s stock valuations so high, a pickup in volatility is possible if one occurs. Even then, however, I think investors would be better served by focusing on the long term instead of short-term market movements,” Lin concluded. 

This publication may contain forward-looking statements. Forward-looking statements are statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as or similar to, "expects," "anticipates," "believes" or negative versions thereof. Any statement that may be made concerning future performance, strategies or prospects, and possible future fund action, is also a forward-looking statement. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to, among other things, risk, uncertainties, and assumptions about economic factors that could cause actual results and events to differ materially from what is contemplated. We encourage you to consider these and other factors carefully before making any investment decisions, and we urge you to avoid placing undue reliance on forward-looking statements. Russell Investments has no specific intention of updating any forward-looking statements, whether as a result of new information, future events, or otherwise.

These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.

Please remember that all investments carry some level of risk, including the potential loss of principal invested.

Indexes are unmanaged and cannot be invested in directly.

Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.

Diversification and strategic asset allocation do not assure a profit or guarantee against loss in declining markets.

This site uses cookies to offer you a better browsing experience. A cookie is a small text file that a website places on your computer or mobile device when you visit the site. It enables the website to remember your actions and preferences, so you do not have to keep re-entering them whenever you come back to or browse this site. Click here for a list of cookies and a description of how they’re used. The cookie-related information is not used to identify you personally. These cookies are not used for any purpose other than those described here.

Nothing in this publication is intended to constitute legal, tax securities or investment advice, nor an opinion regarding the appropriateness of any investment nor a solicitation of any type. This is a publication of Russell Investments Canada Limited and has been prepared solely for information purposes. It is made available on an "as is" basis. Russell Investments Canada Limited does not make any warranty or representation regarding the information.

We will provide our publications in alternative formats, upon request, in a timely manner, depending upon document specifications (e.g. length of document, format required).

Russell Investments is the operating name of a group of companies under common management, including Russell Investments Canada Limited.

Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.

Russell Investments' ownership is composed of a majority stake held by funds managed by TA Associates Management, L.P., with a significant minority stake held by funds managed by Reverence Capital Partners, L.P. Certain of Russell Investments' employees and Hamilton Lane Advisors, LLC also hold minority, non-controlling, ownership stakes.

On July 2, 2026, Russell Investments Group, Ltd. (“Russell Investments”) entered into a definitive agreement and plan of merger (the “Transaction”) pursuant to which Russell Investments will be acquired by a consortium led by B Capital Group Management, L.P. that includes California Public Employees Retirement System. The Transaction is expected to close by the end of Q1 2027, subject to the receipt of regulatory approvals and other customary closing conditions.

Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.

Products and services described on these websites are intended for Canadian residents only. Information on these sites should not be considered a solicitation to buy or an offer to sell a security to any person.

© Russell Investments Canada Limited 1995-2026. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.

CORP-12874