Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Here’s some highlights from the episode.
Nvidia’s Earnings: High Expectations
As Nvidia prepares to announce its earnings, the market is paying close attention. Expectations are high, with options markets reflecting significant volatility. Peter Garnry, Saxo’s Chief Investment Strategist, anticipates that Nvidia will likely exceed consensus estimates for the quarter but also notes potential risks. A revenue miss, given Nvidia’s high valuation, could lead to market fluctuations.
Any delays in Nvidia’s anticipated Blackwell chip could also impact the market. The Blackwell chip, expected to be significantly more efficient than its predecessor, is seen as a potential game-changer in AI applications. If Nvidia can meet these expectations, it could further solidify its role in the AI sector. However, any setbacks might lead to increased volatility.
Jackson Hole and the U.S. Election: Market Implications
Last week wasn’t about Nvidia as the U.S. Federal Reserve's annual Jackson Hole symposium drew attention. While there were no major surprises, Federal Reserve Chair Jerome Powell suggested the possibility of reducing interest rates, leading to speculation about the Fed’s future actions, especially with the U.S. election approaching. John Hardy, Saxo’s Chief Macro Strategist, mentioned that the intersection of the Fed’s rate cycle and the U.S. election could have significant implications for the market.
The U.S. Election: Market Considerations
While Nvidia and the Fed are currently in focus, Garnry believes the upcoming U.S. election is a crucial factor that may be underestimated by the market. He suggests that a decisive win by either Harris or Trump could have implications for inflation, as both candidates might prioritise short-term political gains over long-term economic stability.
Garnry points out that a Harris victory with a split Congress could potentially help in reducing inflation by limiting extensive policy changes. However, the Senate race, particularly in states like Montana, could play a key role in shaping the next administration's policy direction.
Looking Ahead
As 2025 approaches, the intersection of fiscal policy and the U.S. election will be a critical period for the markets. With Nvidia’s earnings and the U.S. election both on the horizon, the coming months could be pivotal for investors. The outcomes of these events are likely to influence market performance and economic policy in the years to come.
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