Federated Hermes: Weekly Markets Wrap-Up 29 October 2026

Federated Hermes: Weekly Markets Wrap-Up 29 October 2026

29 oktober 2026

Opkomende markten Politiek Fed

In this week’s markets wrap-up, our investment experts discuss the Federal Reserve's latest policy decision to hold, and fiscal uncertainty in Brazil.

 

Karen Manna, Fixed Income Strategist at Federated Hermes

Federal Reserve Holds

By holding rates steady, the Federal Reserve has effectively deferred the debate on inflation rather than settled it. The market's attention now shifts to December, incoming economic data, and any signals that clarify the Fed's reaction function.

Beyond the near-term outlook, investors will increasingly focus on the work of the Task Forces and the composition of the 2027 FOMC, both of which could shape the trajectory of policy over the coming years.

 

Kunjal Gala, Head of Global Emerging Markets at Federated Hermes

Brazil Unnerves Markets

Brazilian President Luiz Inácio Lula da Silva’s new administration faces a tricky economic backdrop. His embrace of public spending boosted growth early in his third term, but growth has since slowed. The IMF forecasts Brazil’s gross domestic product to increase by 2.2% this year, before slowing to 1.9% next year.

Unless Lula provides clarity on the country’s fiscal issues, interest rates will likely remain high, the Brazilian real will depreciate, and GDP growth will be limited by the tight conditions.

A weaker Brazilian real should support exporters, as their US dollar revenues are worth more in local currency. Other clear winners will be hard to find. Financials will likely outperform the market, as higher rates help to widen lending margins, but non-performing loans are unlikely to fall unless rates come down meaningfully. The main loser will likely be levered domestic names, as the burden of interest payments will remain, while a weaker domestic environment will slow their top-line growth.

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