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 – 6 November - BoE too close to call, UK banks rally, dip buyers steady Wall Street & Diageo's struggles continue
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 first podcast episode with BlondeMoney's Helen Thomas
Key Points
- Bank of England decision on a knife edge with sterling hovering just above $1.30
- UK banks rally on hopes they will avoid tax raid in Budget as housebuilder Vistry complains
- Wall Street stabilises as dip buyers come in, but Nvidia falls in uneven bounce
- Diageo's struggles continue, while AstraZeneca posts strong Q3 amid busy day for FTSE earnings
- SCOTUS appears sceptical on Trump's tariffs
US stocks rebounded as dip buyers came in to steady the ship but concerns about stretched tech valuations in the AI space remain. Asian equities pushed up overnight in response, led by Japan and China. European equities were trending lower, and US futures pulled back following yesterday’s rather uneven bounce. Hopes of ending the government shutdown are rising in the US, while a potential Supreme Court ruling against tariffs is now being taken seriously. Never a dull moment. And we have the Bank of England decision on a knife edge...
There was an uneven rally in the tech space – while chip stocks broadly rose, Nvidia fell nearly 2% as CEO Jensen Huang reportedly said China would win the AI race. Traders seemed to see this as a negative for the company – China will win without Nvidia’s chips is hardly a ringing endorsement of the tech. There was already pressure on the stock since China’s tech regulator banned top tech companies from using Nvidia chips.
I don’t think yesterday’s bounce does much to assuage worries about valuations. Equally, valuations alone don’t cause bear markets. Talk of 10-20% pullbacks continues. Interesting to note that OpenAI is said to be seeking government loan guarantees for its mega capex expansion – all these circular deals with tech companies. Meanwhile, it’s also been reported Deutsche Bank is seeking ways to hedge its AI exposure.
Loads of earnings still: Qualcomm beat easily on its Q4 revenues and earnings and Q1 guidance for next year was well ahead of estimates. Shares jumped 4% ahead of the print but then fell after-hours. Snap jumped as it beat earnings expectations and announced a deal with AI startup Perplexity. DuoLingo fell as user growth disappointed, while Rivian soared as it detailed its new SUV. Lyft rose as bookings topped estimates and IonQ posted a monster sales beat.
Away from AI the other area that’s dominated market headspace this year is trade. Treasury yields moved higher as US Supreme Court justices appeared sceptical about the legal basis for Trump’s tariffs. Yields moved up because if tariffs are killed off then the Treasury would have to refund all those duties collected so far – currently running at about $30bn a month, up from $6-7bn monthly before the April move. These are expected to deliver $3tn by 2035. The UBS Trump Tariff Losers basket had its sixth best day, according to BBG. This would throw all kinds of uncertainty - regurgitating all this tariff stuff would be hard for the market and create all kinds of idiosyncratic moves.
Not the best start to trading in London this morning but there are some bright spots amid a slew of corporate earnings updates. The FTSE 100 fell a touch at the open, but sterling is pushing up for a second day after bouncing at $1.30 support on Tuesday.
The Bank of England decision today is a close call – yesterday I looked at why it might be closer to cutting than the market has been thinking. If it does cut watch for a move in gilt yields to price for additional inflation (ie spreads with peers widening) – it will be interesting to see what the market does as we have this looming Budget. GBPUSD is gamely trying to push on and is up for a second day to $1.3080 after touching a 7-month low at $1.30 flat on Tuesday – a cut today would send it below this level to test the 50% retracement of the rally in the first half of the year at 1.2944, with the next move to 1.2744 possible if we see a real widening in spreads.
UK bank stocks rose on a report in the FT that Chancellor Rachel Reeves will spare them from a tax raid in the upcoming Budget. Lloyds and NatWest led gainers, opening over 2% higher, while the FTSE 350 Banks index rallied 1.5%. While we cannot know for certain what’s in the Budget – the speculation machine in overdrive more than ever – it's going to be a welcome boost. Banks are already highly taxed and their ability to support growth by lending would be affected should they face further levies.
Budget uncertainty: Housebuilder Vistry said the delay to the Autumn Budget this year had been “unhelpful” but was hoping for “further clarity” for the sector once it’s delivered on 26 November. ITV meanwhile blamed Budget-related uncertainty for a slump in advertising demand in the fourth quarter, saying it now expects total ad revenues down 9% for the quarter. Otherwise pretty solid results from ITV. While the Chancellor fiddles with her excel sheets the country’s businesses are feeling some heat.
AstraZeneca shares were a bit flat as the company posted decent Q3 results and hailed “strong underlying momentum” in the business that sets it up for a positive 2026. Total revenues rose 11% with core earnings per share 15%, leaving guidance for the full year unchanged. Management continues to expect high single-digit percentage revenue growth and low double-digit percentage core EPS growth.
Earnings from BT were broadly in line with expectations, with revenue a slight miss and earnings before nasties a slight beat. Revenues were down 3% to £4.93bn, while adjusted core earnings hit £2.08bn. Full-year guidance maintained, dividend raised and shares rose.
Sainsbury’s climbed on another positive set of half-year results as retail underlying operating profit hit £504mn, ahead of management expectations. Total sales ex-fuel rose 5.2% and underling profits were up 10% to £340mn. The solid progress we have seen from Sainsbury’s continues.
A downbeat trading statement from Diageo sent shares in the drinks maker lower. Organic sales were flat in its fiscal 2026 Q1 report and interim boss Nik Jhangiani said the company is “not satisfied with our current performance”. China and the US are weak spots, but there is not enough from Europe etc either. The US consumer is weaker than planned for and Chinese consumers are no digging the white spirits as much, so management has trimmed its full-year guidance, saying it now expects organic net sales growth to be flat to slightly negative, while annual organic profit growth is now seen in low-to-mid single digits versus a previous forecast of mid-single digit growth. There was also no update on a permanent CEO appointment. Shares are down by a third this year – value trap or opportunity for turnaround? The company expects about $3bn in free cash flow this year and to increase from this level going forward...6% FCF yield doesn’t look too bad if you think management can turnaround this around (a permanent CEO would help guide the market). It’s been a tough couple of years since Menezes died and the company has struggled to find the right leader. Tariffs don’t help either, but the key worry is around declining alcohol consumption and the impact from weight-loss drugs.
Finally, the drinks business might be tough but fintech is also a hard place to execute: Wise shares fell after reporting slowing revenue growth and a decline in margins.
There was an uneven rally in the tech space – while chip stocks broadly rose, Nvidia fell nearly 2% as CEO Jensen Huang reportedly said China would win the AI race. Traders seemed to see this as a negative for the company – China will win without Nvidia’s chips is hardly a ringing endorsement of the tech. There was already pressure on the stock since China’s tech regulator banned top tech companies from using Nvidia chips.
I don’t think yesterday’s bounce does much to assuage worries about valuations. Equally, valuations alone don’t cause bear markets. Talk of 10-20% pullbacks continues. Interesting to note that OpenAI is said to be seeking government loan guarantees for its mega capex expansion – all these circular deals with tech companies. Meanwhile, it’s also been reported Deutsche Bank is seeking ways to hedge its AI exposure.
Loads of earnings still: Qualcomm beat easily on its Q4 revenues and earnings and Q1 guidance for next year was well ahead of estimates. Shares jumped 4% ahead of the print but then fell after-hours. Snap jumped as it beat earnings expectations and announced a deal with AI startup Perplexity. DuoLingo fell as user growth disappointed, while Rivian soared as it detailed its new SUV. Lyft rose as bookings topped estimates and IonQ posted a monster sales beat.
Away from AI the other area that’s dominated market headspace this year is trade. Treasury yields moved higher as US Supreme Court justices appeared sceptical about the legal basis for Trump’s tariffs. Yields moved up because if tariffs are killed off then the Treasury would have to refund all those duties collected so far – currently running at about $30bn a month, up from $6-7bn monthly before the April move. These are expected to deliver $3tn by 2035. The UBS Trump Tariff Losers basket had its sixth best day, according to BBG. This would throw all kinds of uncertainty - regurgitating all this tariff stuff would be hard for the market and create all kinds of idiosyncratic moves.
Not the best start to trading in London this morning but there are some bright spots amid a slew of corporate earnings updates. The FTSE 100 fell a touch at the open, but sterling is pushing up for a second day after bouncing at $1.30 support on Tuesday.
The Bank of England decision today is a close call – yesterday I looked at why it might be closer to cutting than the market has been thinking. If it does cut watch for a move in gilt yields to price for additional inflation (ie spreads with peers widening) – it will be interesting to see what the market does as we have this looming Budget. GBPUSD is gamely trying to push on and is up for a second day to $1.3080 after touching a 7-month low at $1.30 flat on Tuesday – a cut today would send it below this level to test the 50% retracement of the rally in the first half of the year at 1.2944, with the next move to 1.2744 possible if we see a real widening in spreads.
UK bank stocks rose on a report in the FT that Chancellor Rachel Reeves will spare them from a tax raid in the upcoming Budget. Lloyds and NatWest led gainers, opening over 2% higher, while the FTSE 350 Banks index rallied 1.5%. While we cannot know for certain what’s in the Budget – the speculation machine in overdrive more than ever – it's going to be a welcome boost. Banks are already highly taxed and their ability to support growth by lending would be affected should they face further levies.
Budget uncertainty: Housebuilder Vistry said the delay to the Autumn Budget this year had been “unhelpful” but was hoping for “further clarity” for the sector once it’s delivered on 26 November. ITV meanwhile blamed Budget-related uncertainty for a slump in advertising demand in the fourth quarter, saying it now expects total ad revenues down 9% for the quarter. Otherwise pretty solid results from ITV. While the Chancellor fiddles with her excel sheets the country’s businesses are feeling some heat.
AstraZeneca shares were a bit flat as the company posted decent Q3 results and hailed “strong underlying momentum” in the business that sets it up for a positive 2026. Total revenues rose 11% with core earnings per share 15%, leaving guidance for the full year unchanged. Management continues to expect high single-digit percentage revenue growth and low double-digit percentage core EPS growth.
Earnings from BT were broadly in line with expectations, with revenue a slight miss and earnings before nasties a slight beat. Revenues were down 3% to £4.93bn, while adjusted core earnings hit £2.08bn. Full-year guidance maintained, dividend raised and shares rose.
Sainsbury’s climbed on another positive set of half-year results as retail underlying operating profit hit £504mn, ahead of management expectations. Total sales ex-fuel rose 5.2% and underling profits were up 10% to £340mn. The solid progress we have seen from Sainsbury’s continues.
A downbeat trading statement from Diageo sent shares in the drinks maker lower. Organic sales were flat in its fiscal 2026 Q1 report and interim boss Nik Jhangiani said the company is “not satisfied with our current performance”. China and the US are weak spots, but there is not enough from Europe etc either. The US consumer is weaker than planned for and Chinese consumers are no digging the white spirits as much, so management has trimmed its full-year guidance, saying it now expects organic net sales growth to be flat to slightly negative, while annual organic profit growth is now seen in low-to-mid single digits versus a previous forecast of mid-single digit growth. There was also no update on a permanent CEO appointment. Shares are down by a third this year – value trap or opportunity for turnaround? The company expects about $3bn in free cash flow this year and to increase from this level going forward...6% FCF yield doesn’t look too bad if you think management can turnaround this around (a permanent CEO would help guide the market). It’s been a tough couple of years since Menezes died and the company has struggled to find the right leader. Tariffs don’t help either, but the key worry is around declining alcohol consumption and the impact from weight-loss drugs.
Finally, the drinks business might be tough but fintech is also a hard place to execute: Wise shares fell after reporting slowing revenue growth and a decline in margins.
For more Budget coverage check our first podcast episode with BlondeMoney's Helen Thomas
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