AI-Linked Debt, Fed Cut Doubts Hit Stocks

For the week ending 14 November 2025

As of midday Friday, global equities were lower on the week amid concerns over the growing debt load associated with the buildout of AI infrastructure, as well as on doubts that the US Federal Reserve will cut rates again in December. The yield on the US 10-year note was unchanged on the week at 4.10%, as was the price of a barrel of West Texas Intermediate crude oil at $59.75. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), held steady at 21.2.

MACRO NEWS

Shutdown ends with a whimper

After a record 43-day standoff, there was no grand bargain to end the longest US government shutdown in history. On Sunday, eight Democratic Senators voted with 52 of the 53 Republicans to advance the continuing resolution, which funds the government through January 30, to a final vote. Democrats have been promised a vote later in the year on extending Obamacare subsidies, an offer that was on the table prior to the shutdown. After passing in the Senate on Monday, the resolution was approved by the House of Representatives on Wednesday with a vote of 222 – 209. It was then signed into law by President Donald Trump on Wednesday evening. With the shutdown ended, National Economic Council head Kevin Hassett confirmed on Thursday that October nonfarm payrolls will be released next week, he cautioned that officials will be unable to calculate the unemployment rate due to the lack of data collection during the shutdown. The Bureau of Labor Statistics is expected to release an updated data calendar in coming days. Flight restrictions put in place in recent weeks are expected to last into next week but are anticipated to be lifted before the Thanksgiving rush.

Kilts over gilts?

Scotland announced that it will soon issue sovereign bonds for first time in 300 years after Moody’s and S&P Global awarded the Scottish government investment-grade ratings of Aa3 and AA, respectively. These ratings align with those for the United Kingdom. The bonds have been nicknamed “kilts” to differentiate them from their gilt-edged UK counterparts. The first Scottish bonds are expected to be issued in the next fiscal year, beginning in April, with the proceeds slated to fund infrastructure projects.

US to exclude imported food from tariffs

Amid US consumer angst over elevated grocery bills, the Trump administration is preparing broad tariff exemptions in an effort to ease elevated food costs. Bananas, coffee and cocoa are among the foodstuffs that will be exempt from tariffs. The US this week also announced framework trade deals with Argentina, Ecuador, Guatemala and El Salvador as the administration pushes to improve affordability.

QUICK HITS

Amid hawkish comments from FOMC members who recently voted to cut rates, the odds of a further quarter-point cut in the Fed funds target dropped to around 50% late in the week.

President Donald Trump this week proposed a $2,000 per person “tariff dividend”, excluding people with high incomes, which he did not define. The Committee for a Responsible Federal Budget says the proposal would cost $600 billion, more than twice the expected annual tariff revenue.

Japanese Prime Minister Sanae Takaichi put forward a new, multi-year fiscal target. The shift is intended to allow for more flexible spending to cushion the blow from rising living costs and boost investment in areas like defense and growth industries. She also urged the Bank of Japan to move cautiously in raising interest rates.

UK Chancellor of the Exchequer Rachel Reeves said that her upcoming budget will require both spending cuts and tax hikes, citing the need to prioritize reducing debt, living costs and NHS wait times. On Friday, however, the government ditched deeply unpopular plans to raise income tax rates after a modestly upbeat outlook from the UK debt watchdog. Meanwhile, Prime Minister Keir Starmer is in the midst of fending off a potential leadership challenge.

On Saturday, US Federal Housing Finance Agency Director Bill Pulte said the Trump administration is working on a plan to introduce 50-year mortgages for home buyers. While such loans would marginally lower monthly payments, critics note that home buyers would build equity in their homes much more slowly than those with shorter mortgage terms.

The European Union is considering banning equipment from Chinese telecom companies Huawei and ZTE from its mobile networks.

Switzerland is said to be close to an agreement with the US to lower its tariff rate to 15% from 39%.

ADP reports that the US lost an average of 11,250 private sector jobs in the four weeks ending October 25.

Analysts at Bank of America said this week that the spread over comparable Treasuries of a basket of bonds issued by US hyperscalers rose to 78 basis points from 50 basis points in September amid a flood of recent issuance to fund the continued AI infrastructure buildout.

The UK unemployment rate rose to 5% in September — its highest level since early 2021 — from 4.8% in August.

Politico reported this week that the US is pressuring NATO allies, chief among them Turkey, to stop buying Russian oil. Turkey is the third-largest buyer of Russian oil, after China and India, and Russia is Turkey’s largest supplier of natural gas.

The Bundesbank admonished the German government to start dialing back its borrowing limits from 2029 to ensure solid public finances over the long term. Also this week, the German Council of Economic Experts warned that debt-funded investment funds are being used to pay for ordinary spending.

National Economic Council Director Hassett said Wednesday that he will stay in his current position if he is not nominated as Fed chair, a job he said he would accept if offered. Hassett spent five years as a senior economist at the Fed earlier in his career.

The US Supreme Court will hear oral arguments in the case of Trump v. Cook, regarding President Trump’s firing of Fed Governor Lisa Cook, on January 21.

The US Mint in Philadelphia struck its final penny on Wednesday. The coin has been phased out because it costs three times more to produce than its face value.

The minutes of the November Bank of Canada meeting show that its rate-cutting cycle is probably over. Officials said monetary policy was “likely close to the limits of what it could do to support the economy in the current circumstances.”

Germany's lower house of parliament passed two bills late on Thursday aimed at lowering electricity prices, which are among Europe’s highest.

Economic activity in China weakened in October as housing remains a significant drag on the country’s economy.

State data suggests that US weekly jobless claims remained rangebound and continuing claims dipped in the latest week.

THE WEEK AHEAD

Monday: Japan preliminary Q3 GDP, industrial production; US Empire State manufacturing index; Canada CPI

Tuesday: ADP weekly employment estimate, NAHB index

Wednesday: Japan trade balance; UK CPI; eurozone CPI; US FOMC minutes, Nvidia reports earnings.

Thursday: US Philadelphia Fed survey, Leading Economic Indicators, existing home sales

Friday: Global preliminary November purchasing managers indices, Canadian retail sales

Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your investment professional, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon and tolerance for risk. Diversification does not guarantee a profit or protect against loss.

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell or an indication of trading intent on behalf of any MFS product.

Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual or quarterly report. Full holdings are also available on the individual Fund Summary tab in the Products section of mfs.com.

The views expressed in this article are those of MFS and are subject to change at any time. No forecasts can be guaranteed.

Past performance is no guarantee of future results.

Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research.