Quarterly Outlook
Q4 Outlook for Investors: Diversify like it’s 2025 – don’t fall for déjà vu
Jacob Falkencrone
Global Head of Investment Strategy
Investment and Options Strategist
Markets swung sharply through the week as optimism over trade and earnings early on was replaced by renewed fears about U.S. regional banks and fragile global growth. The VIX jumped above 25 mid-week before retreating, while gold hit fresh records above USD 4,200 on haven demand. Tech and banks dictated U.S. moves, Europe steadied on earnings and politics, and Asia lagged as China’s slowdown deepened. By Friday, investors were positioning for CPI data and major earnings from Tesla, Netflix, and Intel.
Market pulse: A volatile but revealing week underscored the market’s sensitivity to trade, politics, and banks.
The week began with a tech-led rebound (13 Oct), driven by optimism around trade de-escalation and strong AI headlines—Broadcom +9.9%, Oracle +5.1%, Nvidia +2.8%. Gains faded as bank earnings triggered turbulence. By mid-week, Wells Fargo +7.1% and Citigroup +3.9% buoyed the Dow, but regional lenders later reversed sharply. On Thursday, Zions −13% and Western Alliance −10.8% reignited credit concerns, dragging the S&P 500 −0.6% into week’s end. Europe fared better as Nestlé +3.5% and LVMH +12.2% lifted sentiment, while Asia remained choppy amid China’s ongoing slowdown.
Market pulse: From AI euphoria to banking stress, rotation defined the week’s rhythm.
The VIX started near 19 on Monday, slid briefly, then spiked above 25.3 (+22%) on Thursday as U.S. bank fraud headlines hit. Short-term measures surged over 30%, showing panic hedging before easing Friday to around 20.8 (−17.9%). Despite calmer closes, futures curves stayed inverted, signalling caution into earnings and CPI data. The SPX’s expected weekly range widened from ±38 points early week to ±120 points by Friday, underscoring shifting sentiment.
Market pulse: Volatility remains elevated but more tactical than fearful.
Bitcoin traded between USD 108k and 116k, mirroring equity volatility. Early-week recovery faded as risk-off sentiment returned, dragging ETH below USD 3,900. ETF flows showed mixed signals: IBIT attracted inflows early, while ETHA saw persistent outflows. Altcoins diverged—SOL −4.5%, XRP −3.9%, while miners like CIFR +19.9% outperformed early on before fading. By Friday, the Fear & Greed Index hit 22, marking extreme fear even as dip-buyers reappeared.
Market pulse: Caution rules crypto, yet long-term adoption signals persist beneath the noise.
Midweek, investors fled to safety as banking stress deepened: the 2-year Treasury yield fell below 3.4%, its lowest since 2022, while the 10-year dipped to 3.95%. Credit spreads widened late week, reversing early tightening. European debt rallied as French political tensions eased—France–Germany 10Y spread fell to 77 bps, lowest in weeks. By Friday, yields rose again, with the U.S. 10-year back above 4.00% as calm returned.
Market pulse: Bond markets whipsawed between panic buying and cautious unwinding.
Gold and silver extended their rally, reaching USD 4,242 and USD 53, respectively, before consolidating. The “debasement trade” stayed dominant as deficits and political turmoil lifted haven demand. Meanwhile, oil slid for a third consecutive week, with Brent near USD 60 on oversupply fears and softer Chinese data. Agricultural commodities steadied after steep drops earlier in the month.
Market pulse: Havens glittered as crude cracked under global uncertainty.
The Japanese yen outperformed as political shifts pointed to a new LDP-led coalition under Sanae Takaichi, pushing USDJPY below 150.00. The USD softened midweek after Powell’s dovish remarks, while EURUSD climbed above 1.17 by Friday. The AUD weakened on disappointing labour data and trade tensions, marking a local low below 0.65 before stabilising.
Market pulse: Policy shifts and politics, not rate differentials, steered FX this week.
The spotlight turns to a packed earnings calendar and the delayed U.S. CPI inflation report. Tesla’s Wednesday release could shape sentiment across EV and AI-linked names, while Netflix’s results on Tuesday will reveal the impact of recent price hikes. Intel’s Thursday report is key for semiconductor momentum after TSMC’s upbeat guidance. CPI data on Friday will be the week’s pivotal macro event, likely guiding expectations for the Fed’s October rate decision.
Trade remains the dominant macro driver ahead of the Trump–Xi meeting, with rare-earths and tariff policies under scrutiny. Europe faces another wave of corporate results and lingering fiscal concerns in France, while Japan’s new coalition will test market confidence. Emerging market currencies could stay volatile as investors reposition around Fed and ECB narratives.
Market pulse: Earnings and inflation will dictate tone—a test of resilience after a week of recovery and nerves.
After a turbulent stretch marked by sharp rotations and shifting sentiment, markets closed the week steadier but uneasy. Investors balanced optimism about earnings with renewed caution over credit and trade. The coming week offers a critical temperature check: if inflation cools and corporate guidance holds, stability may return; if not, volatility could easily reignite. For now, discipline and diversification remain the watchwords as markets navigate policy noise and fragile confidence.
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