Emma Wall, Chief Investment Strategist, Hargreaves Lansdown:
“After a brief respite yesterday morning, following AI-juggernaut Nvidia’s expectation busting results, global markets are sliding once again. The tech giant posted third-quarter results overnight on Wednesday and the revenue and earnings beat saw the stock rally 4% on opening, dragging not just the NASDAQ up, but setting a risk-on stance in global stock markets. The euphoria proved short-lived, and today’s markets are a sea of red. Asian markets closed down around 2% on average, and Europe and UK stocks are on track for worst week since tariff tantrum in April. The FTSE 100 is flat at the time of writing trading at 9,517 but is down near 400 points from the highs of last week.
The multi-trillion-dollar question is whether this the beginning of the end of the major global market rout that, by law of averages, we are due. We don’t think so, though that doesn’t mean that markets will not be volatile in the months ahead. In part, this view is valuation based. The US is fully valued, and the AI sector is a mixed bag of revolutionary – Nvidia – and bubbly – a lot of the rest. But Europe and the UK are more attractively valued, particularly those sectors that have underperformed year to date; consumer staples, pharmaceuticals, and utilities. Emerging markets also offer potential for upside, particularly if dollar weakness continues.
Near term, and closer at hand, the UK Budget offers opportunities for stock pickers next week – if you’re willing to take a call on what the Chancellor may announce. Sectors such as housebuilders have suffered from negative market sentiment – and poor orders – in anticipation of punishing policy next Wednesday. Should this not materialise, there is potential for upside – though the reverse is also true. Better no-regrets moves include prudent financial planning; utilise your tax-efficient allowances, and outside of tax wrappers consider multi-asset ready-made funds where fund managers can run portfolios on your behalf, re-balancing without you having to pay a capital gains tax bill. Ideally choose one with some volatility management built in, as the path ahead is likely to be bumpy.
