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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It's showtime for Nvidia tonight: can its earnings right market sentiment?
Saxo Market Call
Summary: Today, a look at the confluence of pivotal market technicals and the big event risk of the earnings calendar tonight after the close: Nvidia. How will the market treat this? Also, it is worth spending a bit of time contemplating the macro implications of what is going on in Japan, its bond market and the coming fiscal package announcement on Friday. Macro, FX, US- and geopolitics and much more also on today's pod, which is hosted by Saxo Global Head of Macro Strategy John J. Hardy.
Listen to the full episode now or follow the Saxo Market Call on your favorite podcast app.
Today’s Links
HT Matt Stoller (via Michael Every), a story on the US Pentagon first steps at real cost controls after decades of defense contractor gouging - simply trying to establish the ability for troops to maintain their own weaponry. “What is GDP for indeed” as Michael Every would say, and I have to wonder if, outside of defense giants, GDP is for bloating Mag7 monopolies and capturing a dominant and rising percentage of national profits either. In the long run: no. But in the short run, Meta wins monopoly trial, convinces judge that social networking is dead. True - now it is slobbering doomscrolling and Youtube, Tiktok and Instagram are all going head to head there.
Ukraine’s killzone - a different kind of hellscape from WWI, when you can’t hide from the air and drones are even fighting drones. I hope a peace deal can be agreed soon, this is simply as awful as it gets.
A huge test ahead for agentic AI - this could go badly wrong.
Chart of the Day - Two ways to look at the Nasdaq 100 Index
It’s pretty straightforward to run through the US Nasdaq 100 index market technicals locally and identify the levels we talked about on the podcast, like the area into the 24,000 former high from August (and Sep. retest), which is just below the October low of 24,200. And then there is the lower major support, the former cycle high before the April meltdown in the 22,200 area. But zooming waaaay out, we can look at how the market is priced relative to trend, using a linear regression formed during the very steady and stunning advance of the 10-year period from early 2010 (to avoid bottom picking of March 2009) to the end of 2019. Those lines are shown on the chart below, and I have extended them to give us a look at “out of sample” data performance since then. Of course, in 2020 we had the wild and brief pandemic wipeout followed by the insanely easy money (and Stonx Bro’s) rally into late 2021, which took the index well in excess of two standard deviations above the trend before the Fed finally turned hawkish enough to trigger a bear market that took us solidly below two standard deviations below the trendline when….ChatGPT was released in November of 2022, forming a key part of the market narrative since then that has sent us to fresh highs and above the old two standard deviation line. So a more significant market correction to the lower two standard deviation line below trend in early 2026 would send us to around 20,000. But it is also important to realize that market cycles don’t persist forever and we could get something far more disruptive. Consider the dangers of this type of approach in the chart below, where we map the 1988 through 2010 experience in the Nasdaq 100, which contained the period with similar spectacular performance, if with key key differences.
Now for the 1988-2010 experience below, where I created the “in sample” trendline from 1988 to beginning of 1998 - even before the wild late 1998 to 2000 ramp, which went multiple standard deviations above the trendline only then to result in a classic all-out crash that completely decoupled the index from the old trendline permanently. The 2009 lows were something like 10 standard deviations from the old trend and it took over sixteen years before a new nominal price high was achieved in 2016. It was the wreckage of that 2000-09 crash that enabled such amazing starting points to in turn create much of the next great bull market from 2010 to now. Had we stayed on the original trend line from 1988-98, we would be trading at around 125,000 in the Nasdaq 100 now.
Questions and comments, please!
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