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 – 19 Nov - UK inflation cools, Nvidia earnings ahead, equity markets continue slide
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
Key Points
- Equity markets continue slide as S&P 500 extends worst run since August
- Nvidia earnings tonight provide clear risk-on/off switch
- Bitcoin climbs back above $90k, gold stabilises above $4,000
- UK inflation cools, teeing up December rate cut
CPI inflation came in at 3.6% vs 3.8% before, with the core reading slowing to its lowest since March at 3.4% and services inflation down to 4.5%. It is likely that inflation has peaked, and this ought to provide ample cover for the Bank of England to press on with rate cuts come December. Given the expected fiscal tightening, which will deliver a contractionary impulse to the economy, the Bank should be leaning towards more cuts. Weakness in the labour market and the broader economy is likely to worsen, at least in the near term. However, the MPC will be mindful about potential inflation-inducing tax hikes from the Chancellor now that the broad-based income tax hike seems to no longer be an option. A lack of supply side help from government could make it harder for the BoE to pursue further cuts, but on balance I think the Bank is still going deeper with rate cuts next year than the market currently thinks - CPI data nudged us to two 25bps cuts priced in by April but I would tend to favour three by then.
For sterling, it's a damp outlook as it faces a currency-toxic mix of fiscal tightening, economic backsliding, and monetary loosening. Gilt yields ticked lower and GBPUSD dropped back a touch to its lowest since Friday but stayed within the range of the last couple of weeks. 1.31 is holding for the moment...Multiple rejections of the 20-day SMA suggests, bulls are in no mood to play the contrarian. The FTSE 100 stayed flat at the open as equity investors look to the Nvidia earnings report later as the key sentiment driver. Could be quiet until that is released after the closer tonight. FOMC meeting minutes are also due out.
The pace of selling remains steady but not disorderly. Yesterday, the Dow Jones fell over 1%, the Nasdaq Composite slipped 1.2% and the S&P 500 retreated 0.82%. The Vix spiked higher again.
Nvidia earnings are on tap later and we could see a bit of slack water until then– if they can beat and raise and maybe seen improved margins that it could calm some nerves. Deeply correlated stocks such as Palantir, TSMC, Super Micro, CoreWeave, Nebius, plus the entire industrial-AI complex are on the hook...look to Meta as the bellwether after having crossed below its 200-day SMA and kept cratering.
Earnings are seen +54% to $1.25 per share with revenues +56% yoy to $54.8bn. Analysts are sounding upbeat ahead of the report with guidance expected to be strong on continued ramp of the GB300 advanced AI servers and generally insatiable AI demand as hyperscalers continue to bolster capex. The bar is set very high but the stock is now in correction territory having slid over 10% in November and has crossed below its 50-day SMA, as is Microsoft and Tesla.
AI bubble economics: AI-startup Anthropic plans to spend $30 billion with Microsoft, which will, in turn and alongside Nvidia, invest billions in Anthropic. How all this gets monetized is not for this quarter but it’s part of the problem for AI stocks in November as investors work out whether all this money can a) found and b) deployed and c) deployed efficiently.
Bitcoin remains below $92k after a modest bounce from the lows just below $90k. Multiple stocks bound up 100% with Bitcoin – Strategy rallied near 6% yesterday. Spot gold bounced off the $4k level as it held onto its 20-day SMA. Silver also bounced off this level as the neckline of the double top held firm.
Earnings are seen +54% to $1.25 per share with revenues +56% yoy to $54.8bn. Analysts are sounding upbeat ahead of the report with guidance expected to be strong on continued ramp of the GB300 advanced AI servers and generally insatiable AI demand as hyperscalers continue to bolster capex. The bar is set very high but the stock is now in correction territory having slid over 10% in November and has crossed below its 50-day SMA, as is Microsoft and Tesla.
AI bubble economics: AI-startup Anthropic plans to spend $30 billion with Microsoft, which will, in turn and alongside Nvidia, invest billions in Anthropic. How all this gets monetized is not for this quarter but it’s part of the problem for AI stocks in November as investors work out whether all this money can a) found and b) deployed and c) deployed efficiently.
Bitcoin remains below $92k after a modest bounce from the lows just below $90k. Multiple stocks bound up 100% with Bitcoin – Strategy rallied near 6% yesterday. Spot gold bounced off the $4k level as it held onto its 20-day SMA. Silver also bounced off this level as the neckline of the double top held firm.
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