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Dressed To Scare

Oil, AI and interest rates all look positively frightening this October. The data underneath is more reassuring than the mask suggests.

Every October, markets put on a costume. This year there are three positively terrifying examples on show for us.

The Oil Spectre. Brent crude touched about US$113 a barrel in September, after trading under US$70 in early July. Tension around the Strait of Hormuz is the cause, and it is a fair reason to be nervous.

The AI Ghost. Each new model from a Chinese lab revives the same fear: that AI valuations have run ahead of reality. In July, one release was enough to rattle chip stocks from Tokyo to Seoul.

The Central Banker. The US Federal Reserve raised rates in September, and some forecasters expect another increase in October, because energy costs can feed through into inflation.

Now take the masks off.

By the end of September, the S&P 500 was about 1% of its August record. The IMF says the global economy has weathered the oil shock better than feared so far. The reasons are practical: economies use less oil per dollar of output than in the 1970s; governments have drawn on reserves; supply from outside the Gulf has risen. Meanwhile, spending on AI and data centres has become a growth engine well beyond the United States.

US real GDP grew at a 2.2% annualised rate in the second quarter, revised up from the earlier 1.5% estimate. Payrolls fell in July, though unemployment held at 4.1%. This isn’t a boom. It’s an economy that looks scarier than it behaves.

What this means for portfolios

The headlines are separate. The risks are connected. Oil moves inflation, inflation moves interest rates, and interest rates move the price investors will pay for everything else. Watching that chain matters more than reacting to any single costume.

It also explains why energy and data infrastructure sit at the centre of our thinking. AI ambitions need power, and power needs investment. Meanwhile, the case for diversification looks as sensible as ever. Sometimes the most considered move is no move at all.

The skill this season is telling a costume from a creature. A good allocator checks the data before running for the exit.

This article is for informational purposes only and does not constitute investment advice or a recommendation of any security or strategy. Past performance and historical seasonal patterns are not indicative of future results.

Oil, AI and interest rates all look positively frightening this October. The data underneath is more reassuring than the mask suggests.

Every October, markets put on a costume. This year there are three positively terrifying examples on show for us.

The Oil Spectre. Brent crude touched about US$113 a barrel in September, after trading under US$70 in early July. Tension around the Strait of Hormuz is the cause, and it is a fair reason to be nervous.

The AI Ghost. Each new model from a Chinese lab revives the same fear: that AI valuations have run ahead of reality. In July, one release was enough to rattle chip stocks from Tokyo to Seoul.

The Central Banker. The US Federal Reserve raised rates in September, and some forecasters expect another increase in October, because energy costs can feed through into inflation.

Now take the masks off.

By the end of September, the S&P 500 was about 1% of its August record. The IMF says the global economy has weathered the oil shock better than feared so far. The reasons are practical: economies use less oil per dollar of output than in the 1970s; governments have drawn on reserves; supply from outside the Gulf has risen. Meanwhile, spending on AI and data centres has become a growth engine well beyond the United States.

US real GDP grew at a 2.2% annualised rate in the second quarter, revised up from the earlier 1.5% estimate. Payrolls fell in July, though unemployment held at 4.1%. This isn’t a boom. It’s an economy that looks scarier than it behaves.

What this means for portfolios

The headlines are separate. The risks are connected. Oil moves inflation, inflation moves interest rates, and interest rates move the price investors will pay for everything else. Watching that chain matters more than reacting to any single costume.

It also explains why energy and data infrastructure sit at the centre of our thinking. AI ambitions need power, and power needs investment. Meanwhile, the case for diversification looks as sensible as ever. Sometimes the most considered move is no move at all.

The skill this season is telling a costume from a creature. A good allocator checks the data before running for the exit.

This article is for informational purposes only and does not constitute investment advice or a recommendation of any security or strategy. Past performance and historical seasonal patterns are not indicative of future results.