Sorry for the obvious reference, but I’m hoping it’s going to be a spook-tacular ‘bullet in’ this week. [Ed – you frighten everyone each week, that’s for sure!] 

Apple is predicting a blockbuster holiday season even as China sales hit a speed bump. Tim Cook says the slowdown is only temporary, predicting the iPhone 17, off to a faster start than usual, will propel growth in the world’s No. 1 smartphone arena. Strong earnings from Apple and Amazon lifted investor sentiment after a brief halt in the global rally. Meanwhile, perhaps giving some pause for thought, ‘Big Short’ investor Michael Burry sent a cryptic “sometimes, we see bubbles” warning on X.

Scary comparisons are being made to the .com bubble in the year 2000. That was brutal:  Microsoft was down 65%, Amazon lost almost all its value, Cisco, Intel and Oracle were down an average of 86%. But as Jonathan Mack, Investment Manager at Raymond James, says this time it’s not the same, and has some graphs to prove it [Ed – you love a good graph!]  

Firstly, the number of unprofitable technology stocks in the sector is much lower than it was back then:

Secondly, the technology sector carries far less debt than any other sector on the US marketplace, making these companies much more resilient to any stresses that may occur: 

Source: Janus Henderson Note titled current AI wave vs the Dotcom bubble

OK, but is it time to stop investing in the AI dominated areas? Not if NVIDIA’s CEO Jensen Huang is correct in his suggestion that the world will be spending $3-4trn per year on AI infrastructure by 2030. And he’s definitely backing that up with figures as

News emerged on Friday the chip giant will supply more than 260,000 of its most advanced artificial intelligence (AI) chips to South Korea’s government, as well as Samsung, LG, and Hyundai. The companies will all deploy the AI chips in factories to make everything from semiconductors and robots to autonomous vehicles and meant that South Korea can “now produce intelligence as a new export,” chief executive Jensen Huang said. Mr Huang did not disclose the value of the South Korean deals.

It caps off a busy week for Nvidia, which on Wednesday became the first company to be valued at $5 trillion and on Thursday saw signs of a thaw in US-China trade relations that may mean it can export more of its chips to China.

And if you are still spooked by all the talk of an AI bubble, I’ve an attachment for you this week. It’s from Nersen Pillay, Senior Investment Director at W1M. Hopefully it will make the dark nights a little easier to get through!!

Market Updates

In the latest Weekly Digest from Rathbones, Head of Market Analysis John Wyn-Evans turns his attention to the UK as the countdown to the Autumn Budget begins. He considers the Chancellor’s limited fiscal options, from frozen tax thresholds to potential income tax increases, and the growing challenge of balancing public finances with support for households.

John also looks at the latest economic data, which show inflation easing faster than expected but growth still subdued. He explains why this could give the Bank of England a little more scope to cut interest rates next year, even as tighter fiscal policy looms.

Lastly, he reviews how markets are responding, with gilt yields edging lower, sterling steady and some analysts seeing the Budget as a potential turning point for investor sentiment.

Meanwhile the team at Tatton Investment Management this week cover the following areas in their Tatton Weekly:

• Faster change, stronger growth, bigger risks – US megacaps are spending big on AI but their huge earnings are no longer enough to fund the build-out. Now they’re borrowing big and rationing resources – and that includes jobs.
• Renminbi is a power tool – The lure of China’s currency as a safe bet is growing from US dollar weakness, and its government’s push to create an alternative global reserve currency. 
• Why does tech want private debt? – Meta borrowed $27 billion from private markets and Mark Zuckerberg is now ‘defending’ a move that could already be an expensive mistake.

I am pleased to enclose the link to the latest video from Charles Berry, Divisional Director and Senior Investment Manager at RBC Brewin Dolphin in his quarterly series. The link to the video is here.

Please note, due to the bespoke nature of the portfolios they run, even if you are a Brewin Dolphin client, not all changes discussed will apply to all portfolios. If you would like to know more, please speak to your usual JB Wealth Advisor. 

Chart of the Week

There’s a long-running theory that the Wizard of Oz is not just a children’s story, but a metaphor for America’s late-19th-century debate over the gold standard, which linked the value of the dollar to the value of gold, say Marlborough Asset Management.

The Yellow Brick Road symbolised gold, Dorothy’s silver shoes (changed to ruby slippers for the film) represented silver, the Scarecrow stood for farmers and the Tin Man represented industrial workers, all trying to find prosperity in a system constrained by a tight money supply.

The gold standard meant the number of dollars issued was connected to the size of the US gold reserves. This limited the amount of money that could circulate and, in effect, restricted access to wealth.

Fast forward to today, and gold is once again at the centre of a monetary debate, only this time the story is global. Gold was one of the best-performing assets in 2024 and it has continued to surge this year, although the price recently slipped by around 6% in one day. After the precious metal’s stellar rise, clients are asking: what’s behind the move and what happens next?

Let’s start with the fundamentals. In 2022, when the US sanctioned Russia and froze its dollar reserves, central banks worldwide took notice. If reserves held in US government bonds could be frozen, then perhaps it was time to diversify away from dollar-denominated assets. The result? A surge in gold buying by the central banks of countries ranging from China to Poland, as nations sought to move their reserves into assets free of political risk.

But central banks aren’t the only ones following the yellow brick road. As prices climbed, investor demand accelerated. Gold exchange-traded funds* (ETFs) have seen unprecedented inflows, and individual investors have joined the rush. A recent photo from ABC Bullion in Australia showed queues snaking around the block as people lined up to buy gold bars. Asked why, many said they didn’t want to miss out, while some even spoke about storing gold “under the mattress”. This kind of exuberance usually signals the market has peaked (at least for the short term), and sure enough, we’ve just seen a pullback.

Our chart shows how strongly the gold price has surged since the beginning of last year and also highlights the unprecedented flows into gold ETFs, which attracted $64 billion (around £48 billion) from investors in the first nine months of this year.

Miscellaneous

Alina Khan, at FT Adviser has reported that research by Barclays found a quarter of investors felt under pressure to act quickly on unsolicited advice from finfluencers. And that some 42 per cent of those who have acted on social media investment content admit to losing money as a result. The most common ‘red flags’ cited by investors were promises of “get rich quick” returns, promotion of cryptocurrencies, penny stocks, or “secret” opportunities, and selling courses in how to follow in their footsteps. Clare Francis, director of savings and investments at Barclays Smart Investor, said: “the research shows that many people are putting themselves at risk in pursuit of their aspirational lifestyles – which are often fictional, not reality.”

Financial advice firm Blevins Franks has warned a new digital border system that kicked in this month could prompt investigations into travellers’ personal finances. The EU Exit/Entry System (EES) took effect on 12 October and requires UK nationals to register their biometric details at Schengen borders when travelling for short periods. Travellers will be tracked when entering and leaving countries in the Schengen area, and anyone who overstays the 90-day limit for EU non-resident status, misuses visa-free travel or uses fake identities will be flagged up. David Morley, head of wealth structuring at Blevins Franks said the automation of border control checks could trigger tax probes for travellers managing their finances. “Tax authorities will be able to determine if anyone has been living ‘under the radar’ and open an investigation to claim back taxes,” he said. “Failing to comply with the tax and/or visa rules can lead to serious consequences, which for taxation range from tax investigations, backdated liabilities, interest immigration, denial of entry or, at the extreme, deportation. If clients spend more than six months a year in an EU country, or meet other residency criteria, they are legally obliged to declare worldwide income and gains. “If a client does not have a current residence permit, and/or has not correctly declared themselves for tax, advisers should seek assistance immediately from someone properly authorised in their country of residence to regularise their status and avoid escalating consequences,” Morley said.

I’m off now to clear up all the sad looking pumpkins that have been in the porch all night. But that will teach them to come trick or treating here! I hope to catch you next time.