Corrections are part and parcel of any trending market. The more extreme the underlying move, the less significant the trigger for a retreat needs to be. Yesterday, in equities, that spark came as traders assessed the impact of the French political crisis and the inactivity of the US government.
The euphoria seen in stock markets once again fails to migrate influence into our market and oil prices languish in the shadow of competing drivers and a resigned feeling of ‘what next?’ The stock market gorges on its success with gargantuan self-investment, and OpenAI is once again the talk of the town. Last week, markets were left agog at the Nvidia $100 billion investment into OpenAI, but yesterday, OpenAI in turn reached a deal to buy up to 10 percent of AMD in order to secure the chip capability to rollout further extensions of its AI ambitions.
Although stocks retreated and oil edged higher on Friday, the story of the week was the mirror image of these performances. A weak private US job market report, in the absence of official data, reaffirmed expectations that two more interest rate cuts are forthcoming this year. The astronomical tech valuations clearly bear all the hallmarks of FOMO and herd mentality. We do not doubt that this rally is unsustainable and that a nasty correction is in order once deteriorating economic data warrant it, as tariffs begin to bite.
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