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 – 21 Nov - Nvidia sparks major reversal as stocks slump, AI names hit, Bitcoin slumps below $85k
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
Key Points
- Nvidia rally fizzles, sparking major intraday reversal in US stock markets
- FTSE 100 slumps to one-month low as European and Asian equities fall
- Bitcoin slumps below $85,000 as rout continues
- UK borrowing surges ahead of Budget next week
TL/DR: Stocks on course for worst week since April, SPX suffers biggest intraday swing since April and Bitcoin at lowest since April...but tariffs are not the issue. Is this the shakeout to clear the decks for seasonal rally starting next week or do we think the technicals are just looking too challenging right now?
Investors are feeling a bit bewildered after a sharp reversal in fortunes in yesterday’s US session. Nvidia had rallied at the open and positive stock futures continued into the cash session to see the S&P 500 up 1.9% at its highs before a sudden switch saw sellers take over. The broad market ended down 1.56% for the day in a 235-pt swing from top to bottom. The Nasdaq saw even greater volatility – erasing a gain of 2.6% to finish the day down 2.15%. April 8 was the last time we’ve seen such a swing. It was, in short, a tough day for bulls and a tough day for the Nvidia-will-save-the-market narrative.
AI names, from chipmakers to hyperscalers, were caught up in the wave of selling. Asian tech shares followed suit overnight with Tokyo down more than 2% and Hong Kong off by more than 2.5%. Suppliers like SK Hynix, Samsung, Foxconn and TSMC slumped, while SoftBank – which ditched its Nvidia stake to go all in on AI – fell 10%. European stock markets couldn’t help but slide in sympathy despite little genuine AI or chipmakers in the mix...risk-off sweeping all aside. The FTSE 100 declined about half a percent to below 9,500, hitting a one-month low, trades about 4% off its highs now.
As I said yesterday, the results from Nvidia did nothing to change the facts about AI valuations. The mood boost it delivered proved temporary, but this may have been a shakeout to clear the decks for the rally that everyone seems to be expecting despite the technical weakness and troublesome market internals.
The S&P 500 is down more than 5% from its 29 October record high, while the Nasdaq is down 7.8% over this period, with both below their 50-day moving averages. Yardeni: “We doubt that either will fall to their 200-day moving averages, currently at 6,157.70 and 20,158.34.”
I’ve been noting for a couple of weeks the challenging technical setup for the market, and this continues. The S&P 500 closed at 6,538, a breach of the 10 Oct low at 6,550. The 6,430 area is next in line as the 23.6% Fibonacci retracement of the rally off the April lows, matching the July swing high. Then 6,125, the Feb peaks, is the 38.2% level.
Stock futures this morning are a bit firmer, indicating a positive open but yesterday's reversal has done some more damage. It's a big options expiry day. One note on Nvidia is that it may been driven by an options trade shakeout at the $195-200 level and unwind of positions that triggered a cascade of selling.
What else happened?
Strong job growth in delayed BLS data reinforced expectations of unchanged Fed rates in December. The US added 119,000 jobs in September, which was more than expected, but unemployment rose to 4.4%, a four-year high. Continuing claims rose to 1.974mn, the highest since 2021.
Nevertheless, with the Oct data pulled and the November report now set to be released after the Fed’s meeting in December, it seems unlikely there will be enough data to warrant a cut. Minutes from the last meeting also reveal a pretty divided committee.
Canary in the coalmine? Bitcoin – a high beta risk proxy - fell a third day to the lowest since April, slipping below $85,000. MicroStrategy risks removal from MSCI USA and Nasdaq 100. iShares Bitcoin Trust saw a $355.5mn one-day outflow.
Japan announced a $135bn stimulus package, while data showed core inflation rose 3%. The yen caught some bid surprisingly with USDJPY slipping below 157.
UK government borrowing exceeded expectations in October and now is £10bn ahead of the last OBR forecast in the seven months in the fiscal year to date...in other words not a great situation as Rachel Reeves prepares her Budget next week. The UK’s fiscal outlook is worse than cloudy, it’s grim. Consumer confidence is no better, with the GfK report down 2pts to -19 in November as people brace for the bad news. GBPUSD sits on the 1.30 level with bulls trying to nudge it over 1.31 this morning.
For the latest Budget update check out our mini series with BlondeMoney's Helen Thomas.
Investors are feeling a bit bewildered after a sharp reversal in fortunes in yesterday’s US session. Nvidia had rallied at the open and positive stock futures continued into the cash session to see the S&P 500 up 1.9% at its highs before a sudden switch saw sellers take over. The broad market ended down 1.56% for the day in a 235-pt swing from top to bottom. The Nasdaq saw even greater volatility – erasing a gain of 2.6% to finish the day down 2.15%. April 8 was the last time we’ve seen such a swing. It was, in short, a tough day for bulls and a tough day for the Nvidia-will-save-the-market narrative.
AI names, from chipmakers to hyperscalers, were caught up in the wave of selling. Asian tech shares followed suit overnight with Tokyo down more than 2% and Hong Kong off by more than 2.5%. Suppliers like SK Hynix, Samsung, Foxconn and TSMC slumped, while SoftBank – which ditched its Nvidia stake to go all in on AI – fell 10%. European stock markets couldn’t help but slide in sympathy despite little genuine AI or chipmakers in the mix...risk-off sweeping all aside. The FTSE 100 declined about half a percent to below 9,500, hitting a one-month low, trades about 4% off its highs now.
As I said yesterday, the results from Nvidia did nothing to change the facts about AI valuations. The mood boost it delivered proved temporary, but this may have been a shakeout to clear the decks for the rally that everyone seems to be expecting despite the technical weakness and troublesome market internals.
The S&P 500 is down more than 5% from its 29 October record high, while the Nasdaq is down 7.8% over this period, with both below their 50-day moving averages. Yardeni: “We doubt that either will fall to their 200-day moving averages, currently at 6,157.70 and 20,158.34.”
I’ve been noting for a couple of weeks the challenging technical setup for the market, and this continues. The S&P 500 closed at 6,538, a breach of the 10 Oct low at 6,550. The 6,430 area is next in line as the 23.6% Fibonacci retracement of the rally off the April lows, matching the July swing high. Then 6,125, the Feb peaks, is the 38.2% level.
Stock futures this morning are a bit firmer, indicating a positive open but yesterday's reversal has done some more damage. It's a big options expiry day. One note on Nvidia is that it may been driven by an options trade shakeout at the $195-200 level and unwind of positions that triggered a cascade of selling.
What else happened?
Strong job growth in delayed BLS data reinforced expectations of unchanged Fed rates in December. The US added 119,000 jobs in September, which was more than expected, but unemployment rose to 4.4%, a four-year high. Continuing claims rose to 1.974mn, the highest since 2021.
Nevertheless, with the Oct data pulled and the November report now set to be released after the Fed’s meeting in December, it seems unlikely there will be enough data to warrant a cut. Minutes from the last meeting also reveal a pretty divided committee.
Canary in the coalmine? Bitcoin – a high beta risk proxy - fell a third day to the lowest since April, slipping below $85,000. MicroStrategy risks removal from MSCI USA and Nasdaq 100. iShares Bitcoin Trust saw a $355.5mn one-day outflow.
Japan announced a $135bn stimulus package, while data showed core inflation rose 3%. The yen caught some bid surprisingly with USDJPY slipping below 157.
UK government borrowing exceeded expectations in October and now is £10bn ahead of the last OBR forecast in the seven months in the fiscal year to date...in other words not a great situation as Rachel Reeves prepares her Budget next week. The UK’s fiscal outlook is worse than cloudy, it’s grim. Consumer confidence is no better, with the GfK report down 2pts to -19 in November as people brace for the bad news. GBPUSD sits on the 1.30 level with bulls trying to nudge it over 1.31 this morning.
For the latest Budget update check out our mini series with BlondeMoney's Helen Thomas.
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