In writing 3 weeks ago, I stated stock markets were pretty much at all-time-highs with interest rates slowly coming down and Trump’s tariff rhetoric pretty much old news BUT many market participants were talking about an ‘AI bubble’ and real fears of a stock market crash.
Well, IF we had that crash it was a pretty mild one! We had a circa 7 – 8 % fall in the markets exampled by the US technology NASDAQ index falling from 24,000 to circa 22,300 and all other global markets showing similar 5 – 7% falls. But since then, markets have recouped half of those losses with the NASDAQ back at 23,400 as of December 2nd.
Perhaps the sheer fact that everyone was staking about an ‘AI bubble’ and the likelihood of a large stock market fall meant we are not going to get that fall, which is why we saw only mild action on the downside. Nvidia posting strong earnings helped the recovery.
Future direction will of course depend on the economic data, especially data focussed on the strength of the US economy and any change in inflation numbers from expectations (US inflation stubbornly hovering around 3% against a central bank goal of 2%).
UK
We had the UK budget with not many market surprises with most of the changes leaked in advance. Markets found the budget ‘tolerable’ with reasonable fiscal constraint so the stock market was pretty unchanged on the news and Gilt (UK Government bond ) yields falling slightly (therefore prices higher). Bond sentiment remains fragile. 30-year Gilt yields are not far away from 25-year highs. The 30-year Gilt yields 5.25% yield-to-maturity, high by historic standards but down from the panicky 5.70% of 2 months ago.
SNAPSHOTS
GOLD at $4,240 has been one of the best performing assets this year in a volatile world. (US stocks have been the most volatile this year in their history). Gold’s yearly high is close to $4,500
OIL is very stable and flat in price at $63 per barrel – just too much supply in a world that is flat economically.
US DOLLAR – Is down about 10% for the year with most of that fall happening in the first half of the year. The fall due to markets losing faith with Trump including tariff policy but also due to interest rates slowly heading lower in the US (the biggest driver of any currency’s strength is the level and direction of interest rates in that country).
Nothing in this article represents investment advice.
