Don't Fight the Techs - Our Weekly Cross Asset Views

Looking at our performance dashboard, this week delivers mix messages:  a high dispersion across equity markets (+6% for the NKY week-to-date (wtd) vs -2% for the RTY), US bonds bear flatten and underperform EUR and GBP curves (flat), credit spreads tightened marginally and EM debt outperformed, gold and Brent are down again while the USD gains 0.7% wtd. Realized volatilities have marginally increased while implied ones are down.Fed, Big techs reporting and US-China de-escalation were the 3 known unknowns of the week. The Fed duly delivered the 25bps fully-expected cut, announced QT termination for Dec 1st, but J. Powell pushed back against market expectations and delivered a message of restraint triggering a bond sell-off Wednesday (+10bps for UST 2/5/10y and +0.7% for the DXY): December is “far from” a “foregone conclusion”, current policy is “slightly restrictive” but now in range many estimate neutral, the FOMC is clearly split in views / preferences between job market risk vs inflation risk, and the lack of data due to the shutdown may justify a pause…. We still see 25bps for December and believe the Fed will keep a bias to cut towards 3% until it sees material signs of improvements in the job market. Still, 4% seems like a floor for 10y UST now. The ECB meeting was clearly less impactful as expected and points to a status quo for December.US Tech giants (MSFT, META, GOOGL, AMZ, AAPL) reported very solid earnings, with notable strengths in AI and cloud services, though some experienced challenges related to tariffs. This week META underperformance (-9% wtd) shows that the market continues to show it is now more “touchy” on aggressive capital deployment.  NVDA will now report on Nov 19, to close the Mag-7 earnings season, but those results will clearly not derail the AI momentum (+11% for NVIDIA and GOOGL wtd).