Market Snapshot

Market Snapshot is a weekly view from our portfolio managers, offering sharp, thematic insights into the trends shaping markets right now.

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This week in numbers

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Number of people in Peru financially included by Credicorp’s Yape app since 2022.

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Electricity prices in Taiwan forecast to be 5x higher by 2030, as the grid battles to keep up with demand.

Percentage of future capex classified as ‘green’ by British energy company Centrica (2023 to 2028).

Past performance is not an indicator of future performance.

This week’s Market Snapshot

Venezuela shock puts oil in focus

US removal of Venezuelan leader Maduro raises concerns and hopes about country’s economic and political future.

Venezuela holds the world’s largest proven crude oil reserves, but exports a small amount of global supply.
The country’s crude oil sector is viewed as a strategic priority by the Trump administration, but any efforts to scale-up production will require extensive investment.
For some investors, the US intervention could represent the start of a viable long-term economic turnaround for the country.

Geopolitics dominated investor concerns at the start of the year, following the US’s brazen capture of Venezuelan leader Nicolás Maduro, which has thrown the oil-rich South American country into deep political uncertainty.

The pre-dawn raid in the nation’s capital, Caracas, on 3 January saw Maduro seized by US military forces and taken to the US, where the ousted leader now faces narco-terrorism charges.

The weekend’s intervention marked an aggressive escalation in tactics by the Trump administration as it seeks access to Venezuela’s vast oil wealth. On Wednesday, two Venezuelan-linked oil tankers were seized in the North Atlantic.

Market response

Investor concerns have focused on the implications for the energy sector as well as the potential knock-on impact on the wider region.

The price of Brent crude rose 5% following the operation to reach US$62.2 per barrel on 6 January before falling back¹.

“[The US operation] underscores how quickly politics can reset the investment landscape,” says Charles Curran, Senior Investment Analyst at Federated Hermes.

According to Michael Czekaj, Senior Investment Analyst at Federated Hermes, the turmoil in Venezuela goes beyond the implications for the South American country and signals a shift in global spheres of influence.

“The market takeaway is that global politics is becoming more regionalised… as great powers seek to shape outcomes close to home, and protect strategic supply chains, using tools that sit between diplomacy and open war,” he says.

Despite holding the world’s largest proven crude oil reserves – an estimated 303 billion barrels, or roughly 17% of the global total² – Venezuela exports a small amount of global supply, because of decades of underinvestment, crumbling infrastructure and sweeping international sanctions (see Figure 1).

However, any efforts to scale-up production will require extensive investment, as Venezuelan crude is very heavy, making it expensive to refine and transport.

Figure 1: The great dichotomy – big reserves, limited exports

“[The US operation] underscores how quickly politics can reset the investment landscape"

Jason DeVito, Senior Portfolio Manager, Emerging Market Debt, at Federated Hermes, argues the US intervention could spur a viable long-term economic turnaround for the country.

“Venezuela has enormous oil wealth and economic potential, yet decades of mismanagement and political turmoil have left the vast majority of its population in poverty,” he says, pointing to the fact that over 80% of Venezuelans live below the breadline³.

“The country’s challenges stem largely from domestic policy decisions that have left resources underutilised, rather than external interference. We believe that, over the long term, Venezuela can rebuild its economy in a way that benefits its population, creating economic growth and social progress.”

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This month’s Market Snapshot

Markets take a pre-Christmas breather

Macro data sends mixed messages ahead of the festive break

Global indices trod water this week as investors weighed up the strength of consumer spending, inflation and jobs.

Sterling rises on strengthening PMIs.
Japan fiscal stimulus package raises inflation concerns.
US picture remains unclear – though tailwinds apparent.

Markets remained largely becalmed this week as a mixed bag of macro data posed as many questions as it answered about the state of the global economy.

In the UK, a 51.2 reading for the November S&P Global UK Composite purchasing managers’ index painted a stronger-than-expected picture of business activity. The data buoyed investors who, ahead of last week’s Budget, had factored in significant challenges for the economy. Sterling rose as a result, making for its biggest daily gain against the US dollar since April.

In Japan, yields on government debt rose to their highest level since 2007 on fears that the Bank of Japan will increase interest rates. Prime Minister Sanae Takaichi has announced a US$135bn stimulus plan, raising expectations that the central bank will push interest rates higher at its 18-19 December meeting.

In the US, federal macro data has been delayed due the record-length six-week government shutdown. RJ Gallo, Deputy Chief Investment Officer, Global Fixed Income, Federated Hermes, notes that the combination of declining jobs growth but sustained consumer spending has contributed to a relative lack of clarity for investors.

“Although the markets face incomplete and delayed federal data releases in the wake of the 43-day government shutdown, private sector and alternative data sources continue

to portray a resilient US economy,” he says. “US inflation, meanwhile, remains elevated, closer to 3% than to the Fed’s 2% target.”

Louise Dudley, Portfolio Manager, Global Equity ESG, highlights the better-than-expected outlook for the global economy. In the US, she flags declining concerns around the impact of tariff policies as well as strong company balance sheets and an upturn in M&A. Equally important are increased capital expenditure on artificial intelligence (AI) in Q4 going into 2026, deregulation, and tax and interest rate cuts – all of which help support a constructive backdrop, she says.

“Coupled with the impact of buybacks and dividends as well as better-than-feared employment numbers this environment makes for a positive outlook for investors in US equities,” Dudley says.

Outside of the US, productivity remains a drag for Europe, she adds, while China and emerging market valuations remain attractive.

Figure1: A weaker dollar and a strengthening yen

Yields look biased downward

What is driving EM corporate debt outperformance?

High contrast

A whipsaw week for tech

It’s been a bumpy week on the stock market, particularly for tech stocks.

Tech stocks swung wildly this week.
Nvidia earnings sparked brief rally before sentiment flipped.
New US jobs data unlikely to ease uncertainty about pace of rate cuts.

A volatile week for global markets saw tech stocks tumble amid renewed valuation fears, with Wednesday’s stronger-than-expected Nvidia earnings offering fleeting optimism, before stocks slumped again on Thursday.

Markets have been unsettled over the last month by fears about overstretched tech valuations and the sustainability of the artificial intelligence (AI) boom. These concerns have been mirrored in cryptocurrency markets, with the price of bitcoin dropping more than 30% since early October.¹

“The market has been under pressure as investor sentiment has cooled amid mounting questions around AI, with sentiment dampened further by renewed uncertainty over US Federal Reserve policy, prompting a scaling back of near-term rate-cut expectations” says Charlotte Daughtrey, Investment Director for Equities at Federated Hermes Limited.

“While volatility has risen, most analysts view the pullback as corrective rather than the start of a prolonged downturn,” she adds.

Mood swing

On Wednesday, US chipmaker Nvidia – widely viewed as a bellwether for the AI trade – reported Q3 earnings that comfortably beat expectations, briefly sending US tech stocks higher. But, while Nvidia’s strong results may have prompted investors to reassess the likelihood of an imminent AI-bubble burst, the bounce proved fleeting.

The rally reversed sharply on Thursday, with the Nasdaq dropping over 2% and the S&P 500 sliding by more than 1.5%².The VIX Index, commonly known as Wall Street’s fear gauge, spiked to 19% during trading to reach its highest point this month.³

Nvidia, the leading supplier of the graphics processing units (GPUs) powering much of the world’s AI infrastructure, reported impressive revenues of US$57bn in the third quarter – a 62% increase year-on-year – driven by heightened demand for its chips.⁴

Nvidia’s stock market performance has highlighted the stark decoupling between the AI chip giant and the rest of the so-called ‘Magnificent 7’ tech cohort – comprised of Alphabet, Microsoft, Google, Meta, Tesla and Amazon – over the last six months, as shown by Figure 1 below.

Figure 1: Nvidia is far ahead of the rest of the Mag 7

Data drought

The market’s reaction to Nvidia’s results has unfolded against an uncertain macro backdrop, with investors closely watching the latest US labour market data for clues on the US Federal Reserve’s (the Fed) next move on interest rates ahead of its December meeting.

The jobs data, released on Thursday, is the first data publication since the record-length US government shutdown which began in early October. The figures suggest a mixed picture for the country’s job market: while 119,000 jobs were added in September – surpassing analyst expectations – the rate of unemployment rose to 4.4%, a four-year high.⁵

“In a real plot twist, the latest US non-farm payroll report has delivered job growth well above breakeven,” explains Karen Manna, Investment Director and Portfolio Manager for Fixed Income at Federated Hermes. “But, the key question is whether markets will rally on the strength of this data, or stick with the recent drumbeat of layoff headlines.”

Manna adds that there are not any further data releases expected between now and the next Federal Open Market Committee (FOMC) meeting on 10 December.

“The catch is that the Fed won’t see any additional labour data before its December meeting, which has sent odds of a rate cut tumbling. While the September jobs data is strong, traders may quickly dismiss it as stale, arguing it doesn’t reflect the current temperature of the economy,” Manna adds.

Yields look biased downward

What is driving EM corporate debt outperformance?

High contrast

Has AI market mania reached a peak?

Global equity markets were gripped by fears this week that the AI boom might soon come to a shuddering halt.

Global equities took a hit this week amid concerns that tech stock valuations were looking stretched.
Tech giants have underpinned a six-month bull run in 2025. However, investors are questioning the pace of AI investment.
The S&P 500’s dividend yield currently resembles that of the dotcom era, but this may not necessarily be a reliable indicator of where markets are heading.

Global equities tumbled this week after the S&P 500 Index posted its biggest decline in a month on Tuesday amid fears that the market is heading for a correction following a record-breaking surge in tech stocks.

Investors are questioning whether the pace of investment in artificial intelligence (AI) can be maintained.

US chipmaker Nvidia hit a record high valuation of US$5tn last week – just three months after making history as the first ever US$4tn company – meaning that the value of the AI titan now exceeds the GDP of every country on Earth, except the US and China¹.

Nvidia was not the only member of the ‘Magnificent 7’ tech stocks to make headlines while doubling down on the outlook for AI. Meta, Amazon, Alphabet and Microsoft all released their third quarter earnings reports last week, which contained plans for even greater spending on AI-related projects and infrastructure than previously forecast.

Meta revised up its 2025 capital expenditure plans to US$70-72bn from US$66-72bn and said it expected next year to be “noticeably larger”². Alphabet now expects its spending for this year to be US$91bn and $93bn – up from an estimate of US$85bn in the summer³.

Microsoft’s capital expenditures in the third quarter totalled US$34.9bn, up from US$24bn in the previous quarter.

The AI boom has been a chief driver of equity markets in 2025 and has propelled big tech stocks to record highs. The ‘Magnificent 7’ – Apple, Nvidia, Microsoft, Amazon, Tesla, Alphabet, and Meta – currently hold a collective weighting of around 37% in the S&P 500. These companies accounted for 42% of the index’s 15% total return in the first three quarters of 2025⁴.

Figure 1 shows the performance of a Bloomberg index tracking the ‘Magnificent 7’ specifically versus the broader S&P 500 index.

Figure 1: Magnificent 7 underpins the S&P 500’s gains

However, fears that valuations are stretched and potentially on course for a correction underpinned a fall in global stocks this week.

On Tuesday, the US blue-chip S&P 500 and the tech-heavy Nasdaq index declined 1.2% and 2%, respectively⁵. Asian markets followed in their wake, with the South Korean Kospi index closing 2.9% lower the following day, while Japan’s Nikkei 225 was down 2.5%⁶.

After a brief respite on Wednesday, equities sold off again on Thursday in a round of trading that saw the Nasdaq close 1.9% down. The S&P 500 was down 1.1%, led by Tesla and Nvidia losses. The yield on the 10-year US Treasury fell 7bps to 4.09%⁷.

Figure 2: Is the S&P 500’s bull run faltering?

Can more analyst coverage help predict stock performance?

AI revolution needs shift in engagement focus

There’s power in data

At a time when investors are on the lookout for indications about where markets are heading, Daniel Peris, Head of Income and Value Group at Federated Hermes urges caution when it comes to drawing parallels with the dotcom bubble. He notes that any similarities between the S&P 500 now and during the dotcom bubble of the late 1990s, in terms of dividend yield, is a poor indicator of future market movements.

“I would urge dividend investors and those who might be concerned about the equity market’s current valuation to not rely, even slightly, on the S&P 500’s current dividend yield as a measure of valuation or future direction. The index’s roughly 1.1% yield is now for all intents and purposes the same as it was in 2000 at the height of the Internet Bubble. Dividend investors should ignore that fact. The market may be undervalued, it may be overvalued, it may be porridge-perfect – but dividend yield has nothing to do with it,” he says.

“Once upon a time, in a world far away, dividend yield was a useful tool for measuring the broad market (via the S&P 500, created in 1957). By the mid-1990s, dividend yield was already largely irrelevant as an aggregate measure. Investors drove up and rode down internet stocks in the late 1990s without regard to yield at the security or index level. The market’s record-low dividend yield at the time was a coincidental factor, not a causal relation that might explain or forecast market movements. Investors should assume the same now,” he adds.

¹ GDP (current US$) | Data

² Meta – Meta Reports Third Quarter 2025 Results

³ GOOG Exhibit 99.1 Q3 2025

⁴ Three on Thursday

⁵ Source: Bloomberg

⁶ Ibid

⁷ Ibid