MARKET STATUS
ECONOMIC SITUATION - NOVEMBER 2025
November has been marked by a global economic environment that continues to oscillate between signs of resilience and episodes of uncertainty, in a context where politics, geoeconomics, and financial markets remain deeply intertwined. A year after Donald Trump's electoral victory, it is evident that the world economy has managed to absorb the turbulence caused by the politicization of trade and finance. Despite the succession of tariff measures, trade renegotiations, and temporary interruptions in US public statistics, global economic activity has maintained a dynamism greater than initially predicted, driven by favorable financial conditions and a remarkable adaptive capacity of economic agents. In the United States, attention has focused on Washington's strategy of political consolidation in the trade domain. The decision, taken a few days ago, to reduce some of the tariffs applied to Chinese products introduced an additional element of détente in a bilateral relationship usually marked by unpredictability. The average decrease of approximately ten percentage points on the tariff universe applied to Chinese imports reflects an effort to moderate the inflationary effects that accumulated tariffs have been producing, especially during a period in which the Federal Reserve is consolidating the cycle of cuts initiated in September. In November, the Fed maintained its cautious communication, reiterating that further rate reductions will depend on the evolution of price and employment indicators, particularly after the administrative shutdown that delayed the release of several official data. The market has reacted with some volatility, but maintained the expectation that the easing cycle will continue gradually throughout 2025.
The trade truce between the United States and China is not limited to tariffs. November extended the trend of strategic rapprochement evident at the end of October, with the resumption of some Chinese agricultural purchases from the US, the possibility of easing US restrictions on the export of advanced chips, and the suspension of more severe measures against certain Chinese technology companies. Beijing, for its part, opted to postpone the implementation of controls on exports of rare earths and critical materials, preserving a minimum channel of predictability in a sector essential to the artificial intelligence value chain. The combination of these elements has allowed for a softening of global financial conditions, contributing to a partial recovery in risk appetite in developed markets.
Europe is experiencing uneven performance in November, largely dependent on domestic factors. The German economy continues to stagnate, with activity levels remaining weak and sensitive to the global industrial slowdown. In contrast, France benefited from more favorable exports of aeronautical equipment, allowing it to maintain a trajectory slightly above the Eurozone average. Spain continues to stand out as the most resilient case among the countries involved.
The bloc's major economies are experiencing growth close to 3%, while Italy maintains a pattern of near stagnation. Sentiment indicators show signs of improvement: the services sector PMIs have recovered, and the Economic Sentiment Indicator has reached its best level since the first quarter of 2023. This data reinforces the perception that the European economy may be stabilizing, albeit at a low level and heavily constrained by budgetary uncertainties, internal tensions between Member States, and the need to reconcile strategic autonomy with the sustainability of public debt. European monetary policy has entered a deliberately extensive pause. The ECB kept rates unchanged in November and reaffirmed that any future decision will depend exclusively on the data, rejecting the provision of advance indications on the trajectory of interest rates. Markets have not substantially altered their projections: they expect the deposit rate to remain at 2% until the end of the year, with an increasing probability of a decrease in the first half of 2026. Sovereign debt yields exhibited a downward trend, particularly in longer maturities, in line with the slowdown in inflation in most countries of the bloc. In peripheral markets, including Portugal, risk premiums continued to narrow, supported by the continuity of budget surpluses, the consistent reduction of public debt, and the perception that national accounts are sound even in an unfavorable geoeconomic environment.
In Asia, China entered November with a more balanced economic tone, although still far from a robust expansion cycle. Stimulus measures targeting the construction, automotive, and technology sectors have produced gradual effects, but the recovery remains incomplete. Diplomatic and commercial rapprochement with the United States has eased pressure on the yen, the yuan, and most emerging Asian currencies. Japan maintains a very flexible monetary policy, which continues to penalize the currency but has benefited large exporting companies, contributing to stronger corporate results.
Financial markets advanced positively, albeit with significant episodes of volatility. North American and European stock exchanges reached new all-time highs, supported by the momentum of the technology and financial sectors, and by expectations that investment in artificial intelligence will continue to be a driver of productivity in the coming years. Despite this, the dispersion of valuations within the technology sector increased, reflecting greater investor caution in the face of very demanding multiples and growing uncertainty about the effective pace of return on investment in AI. In commodities, the month was characterized by asymmetrical dynamics: industrial metals advanced clearly, supported by demand from the energy transition and Chinese stabilization; in contrast, oil retreated due to expectations of oversupply and upward revisions of global stock levels.
In Portugal, the economy maintained its path of mild deceleration in November, while preserving solid fundamentals. The year is expected to end with growth close to 2%, supported mainly by private consumption and a robust labor market, although the contribution of external demand continued to deteriorate. Public finances reinforced their favorable profile: the country maintains budget surpluses, historically low financing costs, and a downward trajectory of public debt that should rapidly approach 90% of GDP. However, structural concerns persist regarding the rigidity of some expenditure items – namely social benefits and wages – whose accumulated growth since 2019 raises sustainability questions in the event of an adverse economic shock. Public investment, fueled by the Recovery and Resilience Plan (PRR), is expected to grow in 2026, although recurring execution gaps remain, limiting the potential impact of these funds.
Overall, November confirms that the global economy continues to advance, supported by successive truces, sometimes commercial, sometimes geopolitical, which have allowed activity to remain at a reasonable level despite structural tensions. The balance between these truces and the risks that remain latent will define how the year ends and, above all, the ability of advanced economies to enter 2026 with a sufficient degree of financial, budgetary, and political stability. Geoeconomic unpredictability, combined with an accelerating technological cycle and the need for profound structural adjustments in Europe and China, will continue to be the determining variable for the economic outlook in the short and medium term.
Sources: INE, BdP, BPI research, Eurostat, yahoo finance; ECB, OCDE, Eurostat, IMF, turismo de Portugal
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REAL ESTATE MARKET CYCLES: A COMPREHENSIVE ECONOMIC ANALYSIS
The real estate market is neither static nor linear. Over time, it oscillates between phases of growth and contraction, reflecting deep economic forces, agent behavior, and institutional responses. Understanding this dynamic, the so-called real estate cycles, is fundamental for all stakeholders (namely: investors, politicians, and managers), especially in a global context of economic uncertainty and frequent adjustments. A real estate cycle describes the periodic fluctuations in real estate sector activity, including prices, transactions, construction, and occupancy rates, resulting from the interaction between supply, demand, financial conditions, and macroeconomic factors. These oscillations are influenced by variables such as interest rates, access to credit, economic growth, and demographic changes, among others.
Although there are several ways to conceptualize a real estate cycle, most analyses identify four main phases, which tend to repeat themselves over intervals that, on average, can vary from 6 to 10 years.
Recovery: After a period of recession or slowdown, the market begins to stabilize. At this stage, prices tend to stop falling and transaction levels show signs of a modest recovery. The vacancy rate is high and new construction is limited as developers remain cautious. However, economic indicators such as employment and income begin to show gradual improvements. From an economic point of view, this phase is characterized by a return to confidence: the overall economy begins to grow and financing conditions slowly improve, although excessive idle capacity remains.
Expansion: In this phase, the demand for real estate grows more rapidly than the supply. Low interest rates, greater access to credit, and a positive economic environment stimulate the purchase of residential and commercial properties. Occupancy increases, prices rise, and the construction sector intensifies, often with a natural delay given the time required to develop new projects. From a macroeconomic perspective, this phase is driven by factors such as increased disposable income for families, higher employment, and growth in Gross Domestic Product (GDP), all of which stimulate consumption and real estate investment.
Oversupply: As expansion continues, the supply of real estate, especially new construction, can exceed actual market demand. The vacancy rate increases, and prices begin to stabilize or grow more slowly. At this point, investors and developers face the risk of excess inventory, which squeezes margins and can stagnate new construction initiatives. The oversupply phase is often the prelude to a broader correction; signs of saturation are usually clear before prices begin to fall consistently.
Recession or Contraction: This occurs when supply persistently exceeds demand and economic conditions deteriorate. Often due to credit restrictions, rising interest rates, or a drop in confidence, the market enters a recession. At this stage, prices tend to fall, construction activity slows dramatically, and many assets remain vacant for extended periods. Conservative investors and those with liquidity tend to find buying opportunities here, as prices reflect weaker fundamentals.
The real estate market is deeply linked to the real economy. Among the main factors influencing the direction and duration of real estate cycles are interest rates and the availability and access to credit. Interest rates play a central role in the sector's dynamics. Low rates reduce the cost of financing, making mortgages and development projects more accessible, which can accelerate demand and construction. On the other hand, higher rates make credit more expensive and tend to reduce buying and building activity, contributing to a slowdown. The availability and rigidity of credit criteria also shape the cycle. More flexible lending standards broaden the base of potential buyers, while restrictions such as higher down payment requirements or stricter solvency criteria can moderate demand.
Another factor influencing the duration of real estate cycles is economic growth and employment. The overall state of the economy directly influences the real estate market. During periods of economic expansion, with job growth and increased income, the demand for residential and commercial properties tends to rise. Conversely, economic recessions reduce the financial capacity of families and businesses, which is reflected in lower demand for properties. Another factor to consider is demographics and mobility. Demographic changes, such as population growth, internal migration, and the formation of new households, shape the demand for housing. For example, a growing or urbanizing population tends to increase the demand for properties, stimulating the expansion of the real estate cycle. Obviously, government policies and regulations also influence the cycles. Public measures to encourage housing or regulatory changes in land use and urban planning can alter supply and demand. Social housing policies, tax benefits, and construction incentives encourage activity, while credit restrictions or tax increases can have the opposite effect.
For analysts and investors, certain indicators serve as early signals of the phase of the cycle. Vacancy rates and absorption rates, where a continuous drop in the vacancy rate indicates a recovery or expansion phase, while persistent increases point to oversupply and recession. Price and income trends, where strong price and income growth suggests expansion; stabilization or decline is typical of late phases and recession. The construction and licensing sector, where the issuance of new building permits serves as a barometer of developer confidence and tends to anticipate future supply, is subject to systemic risks and potential real estate bubbles. Recent economic history shows that real estate cycles can generate bubbles (periods where property prices rise far above economic fundamentals), driven by excessive credit and irrational expectations. The 2007-2008 global financial crisis is a classic example, where the combination of credit, high leverage, and inflated prices created a deep correction in the global market. Even in more rigorously regulated markets, the accumulation of household debt and high levels of financing can still make the sector vulnerable to external shocks, such as sharp increases in interest rates or economic deterioration.
Understanding real estate market cycles goes beyond simply observing house prices. It requires an integrated analysis of macroeconomic conditions, credit flows, demographic trends, and public policies. For investors and managers, recognizing which phase of the cycle the market is in allows them to adjust risk strategies, optimize buying or selling decisions, and anticipate profitability trends. In a global economic context marked by changes in interest rates, geopolitical uncertainty, and demographic evolution, the ability to interpret real estate cycles is not just a competitive advantage, it is a necessity for making informed and sustainable long-term decisions.
Nuno Santos, Asset Manager
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December 2025