This blog was written by Irish Life staff based on content produced by Irish Life's investment managers (ILIM). 

The final quarter of 2025 was shaped by easing US-China trade tensions, resilient (if uneven) economic data, and further monetary easing from the Federal Reserve. 

Key takeaways from Q4 2025

Global equities posted gains during the quarter, underpinned by optimism around AI, robust earnings growth and signs of stabilising inflation. However, bond yields rose later in the period as expectations for future policy easing were scaled back and growth prospects for 2026 improved.

US economic performance

The US economy delivered mixed signals in Q4, largely due to the government shutdown in October, which delayed official data releases and created uncertainty around the true pace of growth. Despite this, consumption remained supportive and trade developments were broadly positive.

• The government shutdown acted as a drag on Q4 growth, expected to reverse in early 2026.
• Labour market data showed subdued job growth, with the three-month average increase in non-farm payrolls at 22,000 and unemployment rising to 4.6% in November.
• Inflation moderated, with headline CPI at 2.7% year-on-year in November, though data quality issues added uncertainty.
• Q3 GDP surprised positively, growing 4.3% annualised, driven by strong consumer spending.

Eurozone challenges

Economic activity in the Eurozone remained resilient but slowed towards year end, particularly in manufacturing. Inflation stayed close to target, allowing the European Central Bank to pause its rate-cutting cycle.

• Q3 GDP rose by 0.3% quarter-on-quarter, or 1.4% year-on-year.
• Composite PMI peaked in October before easing in subsequent months.
• Headline and core inflation were 2.1% and 2.4% year-on-year in November.

The ECB left interest rates unchanged and suggested that the rate-cutting cycle may have ended, citing an improved growth outlook for 2026 and fiscal stimulus in Germany.

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Investment outlook 2026: cautious optimism in a new world order

Despite ongoing uncertainty around US policy, the fundamental backdrop for global markets remains supportive heading into 2026. 

Trade deals and a pause in tariff escalation have reduced policy uncertainty, while resilient growth, easing inflation, further monetary support and strong corporate fundamentals underpin a constructive outlook, particularly for equities. 

The US is expected to remain the primary engine of global growth, supported by fiscal stimulus, AI-driven investment and an improving labour market, although divergence across regions and income groups is likely to persist. 

Elevated valuations and a more fragmented geopolitical environment leave markets vulnerable to bouts of volatility, but fading policy shocks, supportive earnings growth and easing financial conditions point to continued opportunities over the year ahead.

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