Global markets

Worries on AI valuation pushed volatility up

Global equity markets experienced a notable spike in volatility last week, with major indices retreating from recent highs as investors digested a mix of high-profile corporate earnings, uneven economic data, and renewed uncertainty surrounding the Federal Reserve’s interest-rate outlook. Technology and consumer discretionary stocks were the weakest performers worldwide, while defensive sectors (particularly health care and consumer staples) provided relative stability, ending the week either in positive territory or with only modest declines.

Investor anxiety persisted despite Nvidia’s strong results. Markets were soft early in the week, then briefly rallied on Thursday morning following Nvidia’s earnings surprise, only to fade again and close lower. By week’s end, the S&P 500 and Nasdaq 100 had fallen 1.9% and 3.0%, respectively.

The sharp reversal in U.S. equities on Thursday underscored how profit-taking and lingering valuation concerns, especially in the AI-heavy technology sector, continue to fuel volatility.

US

AI fatigue became evident as enthusiasm around Artificial Intelligence stocks cooled. Even though a major chipmaker, NVIDIA, delivered a strong beat-and-raise earnings report, the initial rally in its shares quickly reversed. The pullback weighed on the broader technology sector and suggested that markets are finding it harder to justify long-term expectations for AI monetization.

Economic data added to the uncertainty. The delayed Nonfarm Payrolls report showed stronger-than-expected job creation, yet the unemployment rate moved higher, creating a contradictory picture of the labor market. This ambiguity made it more difficult for investors to assess the broader economic outlook and the Federal Reserve’s next steps.

Fed expectations were highly volatile throughout the week. Market skepticism early on gave way to a sharply rising probability of a December rate cut, which approached roughly 70 percent by week’s end. This shift was driven by comments from influential Fed officials who hinted that there may be room for additional policy adjustment. The more dovish tone helped spark a rebound late in the week, though it was not enough to offset prior losses.

On the corporate side, Nvidia delivered another set of results comfortably ahead of expectations, with third-quarter revenue at 57 billion dollars and fourth-quarter guidance at 65 billion, both well above buyside forecasts. The compute segment remained the primary driver with 66 percent year-over-year growth, and networking also posted solid gains. Gross margin recovered to 73.6 percent in the third quarter, with fourth-quarter guidance near 75 percent, reinforcing confidence that margins in the mid-seventies are sustainable. By contrast, Oracle’s need to rely on debt to fund part of its capital expenditures has unsettled investors. The company recently raised 18 billion dollars, bringing its total debt load to 100 billion, and the stock has fallen 39 percent from its September 2025 peak. 

Equity asset class

POSITIVE in the current environment

We shift to a Negative stance on government bonds. Positive global growth dynamics, price pressures in the US and profligate fiscal policies reduce the attractiveness of long-term government bonds as a potential hedge for economic downturn and increase the risk of higher long-term yields. Limited prospects of further central banks’ rate cuts and unattractive yield curve slopes at the front-end also reduce the attractiveness of government bonds on short-to-medium term maturities.