A lot has happened over the past few weeks, with much of it crammed into the last few days of October.
For a start, there was a renewed outbreak of US-China trade hostilities. China restricted exports of its rare earths and President Trump boosted tariffs in retaliation.
Since then, much of the heat has dissipated from the trade spat after Presidents Trump and Xi Jinping met in South Korea at the end of last month.
The consequent agreement between the two leaders was very light on content.
Yet as far as investors were concerned, the fact that China said it would lift restrictions on exports of rare earths and critical minerals, over which it currently has a virtual monopoly, was a huge relief.
What was generally overlooked was that the matter would be reviewed in twelve months.
President Trump said that China would resume its purchases of US soybeans and have a good, long think about how it could hinder the movement of key chemicals involved in the manufacture of fentanyl.
Mr Trump was so pleased that he slashed his tariffs on Chinese imports by 10%, taking them all the way down to 47%.
It’s unclear what wasn’t discussed, but instructive that Mr Trump made little to no mention of TikTok, semiconductors or Taiwan.
These remain subjects for another day.
Meanwhile, the US Federal Reserve cut its Fed Funds rate by 25 basis points, as expected. Markets responded positively to the news.
But they were less happy when Federal Reserve Chair Jerome Powell said that a further quarter point cut in December was far from being a foregone conclusion.
As the markets had, according to the CME’s FedWatch Tool, previously assigned a 95% probability to another cut before year-end, this came as a bit of a shock. Stocks sold off accordingly.
There was also a plethora of big tech earnings releases, with five ‘Magnificent Seven’ constituents reporting.
Generally, these went well, even as some investors have raised questions over the circularity of all the promised investment in Artificial General Intelligence (AGI).
OpenAI, the world’s largest privately-owned company by market capitalisation, and owner of ChatGPT, is often involved in these pledges.
It is thought to have raised close to $60 billion, with two thirds of that coming from SoftBank alone. Others heavily involved include Anthropic, Meta, ScaleAI, Amazon, Alphabet and, of course, Nvidia.
But investors are starting to goggle at the numbers involved, expressing concerns that there may never be a decent return on all this investment.
Things came to a (smallish) head after Palantir released its third quarter earnings, along with better-than-expected fourth quarter guidance.
The software giant has gone from strength to strength since it launched its Artificial Intelligence Platform two years ago.
The stock flew higher initially following its earnings release, but then reversed sharply, for a high-low straight line drop of 18%.
Analysts blamed the sell-off on Palantir’s extraordinarily high valuation, which is many multiples above even Nvidia’s, while Palantir’s stock price is up 265% over the last twelve months, even after this week’s plunge.
But sentiment towards the company, and the AI trade in general, really took a hit after it was revealed that Michael Burry, a key player during the Great Financial Crisis and featured in ‘The Big Short’, was running large short positions on both Palantir and Nvidia.
If you remember the film, Mr Burry, as played by Christian Bale, ultimately won a fortune through shorting the US housing market.
But not before he came close to losing everything as it took such a long time for his bets to play out.
Will Mr Burry be taken to the brink again, or even beyond, over what is a very ballsy call?
Or will he prove to be the canary in the coalmine, just as he was in the late noughties? Who knows. But it should be fun finding out.
(David Morrison is a Senior Market Analyst at Trade Nation. Views are his own.)
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