Making sense of this crazy world
An abundance of comments this week from Goldman Sachs’ CEO to Warren Buffett, warning of a possible pull-back in stocks. Of course, they are talking about AI stocks – something that has been mentioned quite a few times over the last few weeks. Today, we’ll take a look at who is saying what!
To boot, the US economy is showing mounting signs of strain. One of the reasons, for sure, as to why the Democrats made ground in this week’s elections.
In the UK, nervous anticipation is building ahead of the UK Budget. It’s later than normal this year, with it being on the 26th November, as the government is hoping for better economic news before the announcements on tax. It may have worked as Ernst & Young this week, improved their outlook for UK growth.
There was hope that UK interest rates would fall, but the Monetary Policy Committee (MPC) voted 5-4 in favour of keeping rates on hold until after the Budget.
Rachel Reeves is being encouraged in some quarters to run a surplus and raise more money than is immediately required to give her some wriggle room if the economy deteriorates and/or interest rates rise.
On saying this, the rally in UK gilts last month, when yields fell, may have just provided a few extra billion in the coffers.
Finally, despite a paralysed property market here in the south, prices in Northern Ireland, Scotland and the north east of England are proving strong, elevating the average house price to just short of £300,000 according to the Halifax.
This week’s content:
- An abundance of warnings
- The boss of Nvidia disagrees
- The US economy is showing the strain
- The Democrats are gaining ground
- Improved UK growth forecasts
- UK interest rate kept on hold
- UK property prices rise despite Budget uncertainty
- Mortgage price war breaks out
- Comment
An abundance of warnings
Goldman Sachs Chairman and CEO, David Solomon, said, “of course, it is likely there’ll be a 10% to 20% drawdown in equity markets sometime in the next 12 to 24 months.” He spoke during a financial summit organised by the Hong Kong Monetary Authority on Tuesday.
Then there is the Buffett Indicator, a useful metric for assessing whether equity valuations have become bloated. Bloomberg commented that the measure compares the total value of US stocks with Gross Domestic Product (GDP). Today, it shows the stock market is more than twice the size of the economy.
“The current ratio naturally suggests equities are overvalued and echoes concerns about bubble-like behaviour,” Barclays derivatives strategists, including Stefano Pascale, said in a note to clients. Even though the indicator has limitations, it’s “still prudent for investors to consider the record stock market capitalisation-to-GDP ratio as another warning sign of excessive euphoria.”
Continues…
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