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 – 13 November - UK growth stumbles, US govt shutdown ends and everyone piles back into gold and silver
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
For more Budget coverage check our latest podcast episode with BlondeMoney's Helen Thomas
Key Points
- US government shutdown ends, raising expectations for more debt and another Fed cut
- Gold surges to 3-week high and silver completes 16% round trip to near all-time high
- Dow Jones industrial average closes at record above 48,000 on rotation from tech to financials and healthcare
- Sterling slides to new 2-year low versus the euro as growth disappoints in Q3
TL/DR: Trump signed a spending bill to end the longest US government shutdown in history, gold and silver are surging once more, reigniting the big 2025 play that had cooled off markedly since the end of October; the Dow Jones hit a record high as investors rotated from tech to healthcare and financials; and UK growth stumbled in September, piling further pressure on the Chancellor ahead of the government and driving sterling to fresh two-year lows against the euro.
The FTSE 100 stumbled in early trade on Thursday as some quite tired bulls try to nudge the 10k level. Almost 16 points of ex-divis isn’t helping while Aviva and 3i fell on results that were short of expectations. Burberry jumped 5% as Q2 earnings saw the trench coat maker return to sales growth, boosted by Chinese demand. Weaker crude prices are a drag, but once-again soaring metal prices are providing a lift to the miners, with Endeavour Mining up 9% and Fresnillo +5% as everyone is piling back into gold and silver as hard assets find favour once more. It looks like the reopening is seen increasing debt levels and boost liquidity, while economic data is set to support a Fed rate cut in December. A US CPI inflation report scheduled for today will be delayed.
Weighing on spirits no doubt, the UK’s economy unexpectedly shrank in September, dragged down by the cyber attack, that crippled production at Jaguar Land Rover. The slowdown merely underscores the size of the problems facing the Chancellor ahead of the Budget. With GDP contracting 0.1% in September the overall picture for growth in the third quarter was worse than expected, with the economy expanding by 0.2%, below expectations and less than the 0.3% recorded in the previous quarter.
Market pricing advanced a little further in favour of a December rate cut by the Bank of England, gilt yields ticked down, and the pound dipped to fresh two-year lows against the euro and made a fresh all-time low (excluding the Truss episode) against the Swiss franc. But cable was ticking up a touch as the dollar was broadly offered in early European trade. EURUSD jumped to a two-week high and USDJPY came off the 155 which appears to be the line in the sand for Japan’s finance ministry. Also worth noting that the new PM Taikachi called on the BoJ to go slow with rate hikes.
In the US, the Dow Jones Industrial Average posted its first record close above 48,000 on Wednesday, spirits lifted by the end of the US government shutdown. The S&P 500 was essentially flat and the Nasdaq dipped a quarter of a percent as investors rotated out of tech. Healthcare was the main beneficiary, with Eli Lilly up 3.0% and AbbVie +3.6% as investors leaned into obesity and immunology cash-flow stories. Financials also rallied with Goldman Sachs +3.5%. Chipmakers were bid after AMD jumped 9% on an aggressive long-term data-centre revenue target, but some AI names like Palantir, Oracle and Meta fell. I looked at the Big Short trade on AI here.
Epstein emails...some bits there on Trump ...not something to get into here but just to say that when the heat comes down on him, he can get more unpredictable to take attention away from him...so watch out. Stock futures and USD ticked down when the Democrats released the emails...The shutdown is now in the rearview so his hand is free again.
Investors are piling back into hard assets. Gold, silver and platinum surged – hard assets finding favour over concerns about spending pledges. The potential for a $2000 handout to sub-100k earners will likely ignite both fiscal debt and inflation worries. Silver in particular has completed a remarkable 4-week round trip to almost a new all-time high after plunging 16%.
OPEC cast some serious shade on the IEA, taking a quote from its executive director in 2023 that talked about being at “the beginning of the end of the fossil fuel era” and putting up against the IEA’s latest World Energy Outlook, in which it says “oil and gas demand do not peak” out to 2050 and that “oil remains the dominant fuel” over this period. OPEC also said 2026 supply would match demand, sparking a sharp reversal in crude prices. Rising US crude inventories added further pressure as the market is worrying again about oversupply. Brent crude shed $2 to trade at a 3-week low.
The FTSE 100 stumbled in early trade on Thursday as some quite tired bulls try to nudge the 10k level. Almost 16 points of ex-divis isn’t helping while Aviva and 3i fell on results that were short of expectations. Burberry jumped 5% as Q2 earnings saw the trench coat maker return to sales growth, boosted by Chinese demand. Weaker crude prices are a drag, but once-again soaring metal prices are providing a lift to the miners, with Endeavour Mining up 9% and Fresnillo +5% as everyone is piling back into gold and silver as hard assets find favour once more. It looks like the reopening is seen increasing debt levels and boost liquidity, while economic data is set to support a Fed rate cut in December. A US CPI inflation report scheduled for today will be delayed.
Weighing on spirits no doubt, the UK’s economy unexpectedly shrank in September, dragged down by the cyber attack, that crippled production at Jaguar Land Rover. The slowdown merely underscores the size of the problems facing the Chancellor ahead of the Budget. With GDP contracting 0.1% in September the overall picture for growth in the third quarter was worse than expected, with the economy expanding by 0.2%, below expectations and less than the 0.3% recorded in the previous quarter.
Market pricing advanced a little further in favour of a December rate cut by the Bank of England, gilt yields ticked down, and the pound dipped to fresh two-year lows against the euro and made a fresh all-time low (excluding the Truss episode) against the Swiss franc. But cable was ticking up a touch as the dollar was broadly offered in early European trade. EURUSD jumped to a two-week high and USDJPY came off the 155 which appears to be the line in the sand for Japan’s finance ministry. Also worth noting that the new PM Taikachi called on the BoJ to go slow with rate hikes.
In the US, the Dow Jones Industrial Average posted its first record close above 48,000 on Wednesday, spirits lifted by the end of the US government shutdown. The S&P 500 was essentially flat and the Nasdaq dipped a quarter of a percent as investors rotated out of tech. Healthcare was the main beneficiary, with Eli Lilly up 3.0% and AbbVie +3.6% as investors leaned into obesity and immunology cash-flow stories. Financials also rallied with Goldman Sachs +3.5%. Chipmakers were bid after AMD jumped 9% on an aggressive long-term data-centre revenue target, but some AI names like Palantir, Oracle and Meta fell. I looked at the Big Short trade on AI here.
Epstein emails...some bits there on Trump ...not something to get into here but just to say that when the heat comes down on him, he can get more unpredictable to take attention away from him...so watch out. Stock futures and USD ticked down when the Democrats released the emails...The shutdown is now in the rearview so his hand is free again.
Investors are piling back into hard assets. Gold, silver and platinum surged – hard assets finding favour over concerns about spending pledges. The potential for a $2000 handout to sub-100k earners will likely ignite both fiscal debt and inflation worries. Silver in particular has completed a remarkable 4-week round trip to almost a new all-time high after plunging 16%.
OPEC cast some serious shade on the IEA, taking a quote from its executive director in 2023 that talked about being at “the beginning of the end of the fossil fuel era” and putting up against the IEA’s latest World Energy Outlook, in which it says “oil and gas demand do not peak” out to 2050 and that “oil remains the dominant fuel” over this period. OPEC also said 2026 supply would match demand, sparking a sharp reversal in crude prices. Rising US crude inventories added further pressure as the market is worrying again about oversupply. Brent crude shed $2 to trade at a 3-week low.
Budget watch
The market’s focus around the Budget is now squarely tied up with the political fallout it could spark...I think the market has basically been looking at this quite mechanistically – raise taxes by x, economic hit is y, gilt yields go down by z, Bank of England cuts and so on...but markets are never very good at pricing political risk – i.e. what are the political ramifications of carrying out a pretty seismic set of Budget measures? Specifically how does it land generally with voters and what is the reaction among Labour MPs? The calculation that tax hikes creates fiscal headroom and calms gilt markets misses the point that there are other functions in this equation – mainly MPs – who it seems are restless and won't be happy about losing their seats at the next election. Expect more speculation and more volatility in gilts and sterling...the fallout post-Budget is an unknown quantity, but markets are now waking up to the political risk entwined with this Budget as much as the fiscal and economic risks.
Sticking to view that a Budget that looks as though it builds fiscal credibility and market stability might not equate to political stability. As per yesterday’s note, the ensuing political instability = fiscal and market instability. The immediate problem would be a lack of clarity and baking in a premium for an even more left-leaning, high-borrowing, tax-and-spend government... the risk being that if Reeves/Starmer go then their fiscal rules which have underpinned an easing in gilt yields would be in serious doubt. Sterling now at risk of further weakness on economic weakness and the currency-negative combination of looser monetary policy and tighter fiscal environment.
The market’s focus around the Budget is now squarely tied up with the political fallout it could spark...I think the market has basically been looking at this quite mechanistically – raise taxes by x, economic hit is y, gilt yields go down by z, Bank of England cuts and so on...but markets are never very good at pricing political risk – i.e. what are the political ramifications of carrying out a pretty seismic set of Budget measures? Specifically how does it land generally with voters and what is the reaction among Labour MPs? The calculation that tax hikes creates fiscal headroom and calms gilt markets misses the point that there are other functions in this equation – mainly MPs – who it seems are restless and won't be happy about losing their seats at the next election. Expect more speculation and more volatility in gilts and sterling...the fallout post-Budget is an unknown quantity, but markets are now waking up to the political risk entwined with this Budget as much as the fiscal and economic risks.
Sticking to view that a Budget that looks as though it builds fiscal credibility and market stability might not equate to political stability. As per yesterday’s note, the ensuing political instability = fiscal and market instability. The immediate problem would be a lack of clarity and baking in a premium for an even more left-leaning, high-borrowing, tax-and-spend government... the risk being that if Reeves/Starmer go then their fiscal rules which have underpinned an easing in gilt yields would be in serious doubt. Sterling now at risk of further weakness on economic weakness and the currency-negative combination of looser monetary policy and tighter fiscal environment.
For more Budget coverage check our latest podcast episode with BlondeMoney's Helen Thomas
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