Quarterly Outlook
Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally
Jacob Falkencrone
Global Head of Investment Strategy
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London QT – 10 July – Nvidia, Nasdaq, Bitcoin ATHs: Bubble?
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
Nvidia hit the $4tn market cap level as shares rallied past $164, making it easily the world’s most valuable company. It took 24 years for Nvidia to reach a valuation of $1 trillion, but just nine months to double in size and little over 3 more to take it to $3 trillion last year. It's been a more up-and-down journey since then to get north of $4tn - we’ve had DeepSeek, sweeping and unsettling restrictions on chip exports, and of course the topsy-turvy journey of Trump’s tariffs. But investors have seen through all this to ride the AI wave. Revenues are forecast to hit $200bn this year, with over $100bn in net income. A major moment for the market – the question for everyone is does this mark the top? Until austerity kicks we could see further to run.
The S&P 500 rose as Nvidia led gains among tech giants with gains also for the Nasdaq and Dow Jones...the market is still shrugging off tariff threats even as Trump sent more letters out slapping big tariffs on a number of countries, including 50% on Brazil and made good on his 50% copper tariff. Volatility continued to ease, as the VIX fell 5.2% to 15.94, and short-term gauges like VIX1D dropped below 10 for the first time this month. Looks like a 2018 rehash with Mar/Apr trough, summer melt-up and tougher run into the end of the year? SPX at 22x forward earnings, Buffett indicator at record, concentration and breadth way too narrow...earnings season is going to get interesting.
Germany’s DAX rallied over 1.4% to exceed 24,500, hitting a record high, boosted by defensive stocks as trade negotiation updates are awaited. The FTSE 100 was up again to tap on 8,900, near its ATH, before kicking on 0.77% to 8,939 this morning. 9000 seems likely now in this melt-up phase.
Tesla shares fell – X boss Linda Yaccarino is stepping down as CEO after two years...tough times at the old Twitter...will Musk take over the reins again? TSLA shareholders, already concerned about a new foray into politics, will be watching. Pharma stocks were mixed on the looming 200% drug tariffs, Palantir gained 2.5%, and Verona Pharma soared 20% on a $10bn takeover from Merck. Microstrategy and Coinbase were both +5% on Bitcoin rally.
Fed minutes showed policymakers are concerned that tariffs will cause “persistent inflation”, in a sign that they are further away from enacting cuts that the market expects, whilst also underlining the split on the committee between hawks and doves over the impact of tariffs on inflation and growth. Ten members expect two rate cuts this year, while seven expect none. Two forecast one cut.
Ahead of the release of the minutes Trump had some more words of wisdom on Fed chair Jay Powell: “Our Fed Rate is AT LEAST 3 Points too high. “Too Late” is costing the U.S. 360 Billion Dollars a Point, PER YEAR, in refinancing costs. No Inflation, COMPANIES POURING INTO AMERICA. “The hottest Country in the World!” LOWER THE RATE!!!”
Basis trade worries – the Bank of England said hedge funds’ leverage in the gilt market is raising the risk of destabilising selloffs. Basis trades, which exploit the difference between cash bonds and gilt futures, has been talked about a lot regards the US Treasury market but now the BoE is also seeing the problems in the UK. Last week’s gilt selloff was likely a case in point. A “small number of hedge funds” accounted for 90% of net gilt borrowing, said the BoE, which is consulting on ways to reduce financial stability risks in repo markets. Watch this regards fiscal problems in the UK.
Sterling came off a more-than-two-week low to attempt to recapture 1.36 against the US dollar. Now in descending wedge after the rising wedge broke down...looking for break higher but GDP figures tomorrow could show slowing. UBS lowered its pound forecast, citing fiscal/economic risks.
Finally, oil slipped off a two-week high after the largest inventory build since January. EIA data showed a 7-million-barrel rise in crude stocks, despite a 1.3mn drop in imports.
London Quick Take – 10 July – Nvidia, Nasdaq, Bitcoin ATHs: Bubble?
Key Points
- Nvidia hit $4tn market cap, first company to do so, Bitcoin hits ATH
- S&P 500 rallies, Nasdaq Composite hits record high as investors focus on AI, not tariffs
- Fed minutes showed split between hawks and doves over tariff impact
- Gilt markets at risk from hedge fund leverage, says the Bank of England
Zeitgeist: We’re so back...Nvidia, Nasdaq, Bitcoin ATHs, Vix at 15, yields down...summer bubble risks seem elevated as positioning is lighter than at start of the year... melt-up in risk suggests first ramp then choppier Q3/4 ahead.
Nvidia hit the $4tn market cap level as shares rallied past $164, making it easily the world’s most valuable company. It took 24 years for Nvidia to reach a valuation of $1 trillion, but just nine months to double in size and little over 3 more to take it to $3 trillion last year. It's been a more up-and-down journey since then to get north of $4tn - we’ve had DeepSeek, sweeping and unsettling restrictions on chip exports, and of course the topsy-turvy journey of Trump’s tariffs. But investors have seen through all this to ride the AI wave. Revenues are forecast to hit $200bn this year, with over $100bn in net income. A major moment for the market – the question for everyone is does this mark the top? Until austerity kicks we could see further to run.
The S&P 500 rose as Nvidia led gains among tech giants with gains also for the Nasdaq and Dow Jones...the market is still shrugging off tariff threats even as Trump sent more letters out slapping big tariffs on a number of countries, including 50% on Brazil and made good on his 50% copper tariff. Volatility continued to ease, as the VIX fell 5.2% to 15.94, and short-term gauges like VIX1D dropped below 10 for the first time this month. Looks like a 2018 rehash with Mar/Apr trough, summer melt-up and tougher run into the end of the year? SPX at 22x forward earnings, Buffett indicator at record, concentration and breadth way too narrow...earnings season is going to get interesting.
Germany’s DAX rallied over 1.4% to exceed 24,500, hitting a record high, boosted by defensive stocks as trade negotiation updates are awaited. The FTSE 100 was up again to tap on 8,900, near its ATH, before kicking on 0.77% to 8,939 this morning. 9000 seems likely now in this melt-up phase.
Tesla shares fell – X boss Linda Yaccarino is stepping down as CEO after two years...tough times at the old Twitter...will Musk take over the reins again? TSLA shareholders, already concerned about a new foray into politics, will be watching. Pharma stocks were mixed on the looming 200% drug tariffs, Palantir gained 2.5%, and Verona Pharma soared 20% on a $10bn takeover from Merck. Microstrategy and Coinbase were both +5% on Bitcoin rally.
Fed minutes showed policymakers are concerned that tariffs will cause “persistent inflation”, in a sign that they are further away from enacting cuts that the market expects, whilst also underlining the split on the committee between hawks and doves over the impact of tariffs on inflation and growth. Ten members expect two rate cuts this year, while seven expect none. Two forecast one cut.
Ahead of the release of the minutes Trump had some more words of wisdom on Fed chair Jay Powell: “Our Fed Rate is AT LEAST 3 Points too high. “Too Late” is costing the U.S. 360 Billion Dollars a Point, PER YEAR, in refinancing costs. No Inflation, COMPANIES POURING INTO AMERICA. “The hottest Country in the World!” LOWER THE RATE!!!”
Basis trade worries – the Bank of England said hedge funds’ leverage in the gilt market is raising the risk of destabilising selloffs. Basis trades, which exploit the difference between cash bonds and gilt futures, has been talked about a lot regards the US Treasury market but now the BoE is also seeing the problems in the UK. Last week’s gilt selloff was likely a case in point. A “small number of hedge funds” accounted for 90% of net gilt borrowing, said the BoE, which is consulting on ways to reduce financial stability risks in repo markets. Watch this regards fiscal problems in the UK.
Sterling came off a more-than-two-week low to attempt to recapture 1.36 against the US dollar. Now in descending wedge after the rising wedge broke down...looking for break higher but GDP figures tomorrow could show slowing. UBS lowered its pound forecast, citing fiscal/economic risks.
Finally, oil slipped off a two-week high after the largest inventory build since January. EIA data showed a 7-million-barrel rise in crude stocks, despite a 1.3mn drop in imports.
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