Quarterly Outlook
Q4 Outlook for Investors: Diversify like it’s 2025 – don’t fall for déjà vu
Jacob Falkencrone
Global Head of Investment Strategy
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London Quick Take – 3 November - AI narrative, super strong earnings, easing trade tensions keep equity bulls in charge as Fed rows back a bit
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
So what’s happening? We’re still muddling through with the US government shutdown creating a murky picture in terms of economic data not being released, and the Fed has started to sound a little less easy, but some geopolitical clouds seem to be clearing with the US-China coming to terms. The White House announced Saturday that China will lift export controls on rare earths and end probes into US semiconductor firms under a new trade pact. China will issue general export licences for key materials, reversing previous curbs, while the US will pause certain tariffs and cancel a planned levy on Chinese goods. Meanwhile, the Supreme Court will begin hearing oral arguments over the legality of Trump’s tariffs this week.
Earnings are super strong for the S&P 500. About 80% of the roughly 300 S&P 500 firms that have reported so far have beaten expectations. The AI narrative is central to it all – Meta, Microsoft, Alphabet and Amazon spent about $100bn on capex last quarter, according to FactSet.
Amazon was the latest to roll out some great numbers as it posted cloud revenues +20% in Q3 with CEO Andy Jassy saying that AWS is "growing at a pace we haven't seen since 2022".
It looked positive on the top-line performance of the indices on Wall Street on Friday, but actually was a little more mixed as most of the gains came from a nearly 10% jump in Amazon shares. Meta continued its descent to trade down 13% for the week. Dip buyers have been active in this one though.
About 100 more S&P 500 companies report this week. Palantir reports earnings today, providing the market with the latest view of the AI story. It’s very richly valued but seems to float on air and hit $200 ahead of the print. For more AI grist Qualcomm and AMD are also set to report this week. It's also an import reporting season in the UK - earnings this week come from AstraZeneca, BP, National Grid, BT, ABF, Wise, Marks & Spencer and Sainsbury's.
Clouding the picture for a seasonal ramp into the year-end perhaps is the Federal Reserve, with chair Jay Powell triggering a back-up in yields last week with his intentionally hawkish message to the market. Powell made it clear that a Dec cut is far from a slam dunk certainty as he warned of “strongly differing views about how to proceed in December” that meant “a further reduction in the policy rate at the December meeting is not a forgone conclusion”. That’s left the chances of no cut at the December up from 5% a week ago to 30% today.
Similarly, we have some increased uncertainty in terms of the outlook for the UK central bank. GBPUSD bears are pushing to take on the 1.30 handle ahead of this week’s Bank of England decision, which will be a close-run thing. The chances of a rate cut have increased lately as inflation failed to hit 4% and wage growth stalled at 4-year lows...but the upcoming Budget would tend to suggest that the MPC will wait until its December meeting to pull the trigger.
Key Points
- US-China trade accord sees some clouds clear for markets
- AI narrative remains in play as earnings beat expectations
- Amazon shares soar on bumper cloud demand
- Fed sounds a little less easy as Bank of England set for close call this week
Equity markets kicked off November on the front foot with gains in Asia and Europe early on Monday, while US futures are looking up. The FTSE 100 rose about 0.2% to close within last week’s record high, with energy stocks leading the way. Bulls remain in control. Gold steadied above $4k, while oil prices crept up a bit after Opec decided to pause output hikes.
Wall Street hits November close to record highs after a positive October – the S&P 500 and Dow Jones both finishing the month up more than 2%, while the Nasdaq rallied 4.7% as the AI bull narrative held up. Earnings are strong for tech in the main and trade tensions with China are easing.
Wall Street hits November close to record highs after a positive October – the S&P 500 and Dow Jones both finishing the month up more than 2%, while the Nasdaq rallied 4.7% as the AI bull narrative held up. Earnings are strong for tech in the main and trade tensions with China are easing.
So what’s happening? We’re still muddling through with the US government shutdown creating a murky picture in terms of economic data not being released, and the Fed has started to sound a little less easy, but some geopolitical clouds seem to be clearing with the US-China coming to terms. The White House announced Saturday that China will lift export controls on rare earths and end probes into US semiconductor firms under a new trade pact. China will issue general export licences for key materials, reversing previous curbs, while the US will pause certain tariffs and cancel a planned levy on Chinese goods. Meanwhile, the Supreme Court will begin hearing oral arguments over the legality of Trump’s tariffs this week.
Earnings are super strong for the S&P 500. About 80% of the roughly 300 S&P 500 firms that have reported so far have beaten expectations. The AI narrative is central to it all – Meta, Microsoft, Alphabet and Amazon spent about $100bn on capex last quarter, according to FactSet.
Amazon was the latest to roll out some great numbers as it posted cloud revenues +20% in Q3 with CEO Andy Jassy saying that AWS is "growing at a pace we haven't seen since 2022".
It looked positive on the top-line performance of the indices on Wall Street on Friday, but actually was a little more mixed as most of the gains came from a nearly 10% jump in Amazon shares. Meta continued its descent to trade down 13% for the week. Dip buyers have been active in this one though.
About 100 more S&P 500 companies report this week. Palantir reports earnings today, providing the market with the latest view of the AI story. It’s very richly valued but seems to float on air and hit $200 ahead of the print. For more AI grist Qualcomm and AMD are also set to report this week. It's also an import reporting season in the UK - earnings this week come from AstraZeneca, BP, National Grid, BT, ABF, Wise, Marks & Spencer and Sainsbury's.
Clouding the picture for a seasonal ramp into the year-end perhaps is the Federal Reserve, with chair Jay Powell triggering a back-up in yields last week with his intentionally hawkish message to the market. Powell made it clear that a Dec cut is far from a slam dunk certainty as he warned of “strongly differing views about how to proceed in December” that meant “a further reduction in the policy rate at the December meeting is not a forgone conclusion”. That’s left the chances of no cut at the December up from 5% a week ago to 30% today.
Similarly, we have some increased uncertainty in terms of the outlook for the UK central bank. GBPUSD bears are pushing to take on the 1.30 handle ahead of this week’s Bank of England decision, which will be a close-run thing. The chances of a rate cut have increased lately as inflation failed to hit 4% and wage growth stalled at 4-year lows...but the upcoming Budget would tend to suggest that the MPC will wait until its December meeting to pull the trigger.
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