Trading update : 13 October 2025

US market optimism is hitting extremes, even as a $16 trillion surge in the S&P 500 sparks “bubble trouble” fears, particularly around AI infrastructure debt and chip demand. Meanwhile, cautious growth forecasts in Europe, and a healthy emerging market outlook add layers of complexity, and opportunities to the global investment thesis.

Making the call!

It seems like nothing can derail bullish sentiment on the US stock market. Data from Goldman Sachs’ trading desk going back to 2010 showed that over 20 recent trading sessions, there have been an average of 40 million call options traded per day, by far the largest on record. Retail traders remain bullish on stocks as well. Call options – effectively used as a bet on rising stock prices – expressed as a percentage of all options volume reached 65%, which is one of the highest levels since 2022.

Wall Street momentum

The month of September will be remembered as a time when a simple bet that winning trades continue to win saw its best stretch in three years in commodities, stocks and foreign exchange markets. Investors chased momentum across assets and time zones, with gold surging and stocks building on a months-long advance that has added around $35 trillion to share values worldwide. The trend is so strong in equities that it’s starting to defy the efforts of money managers to keep up, with the proportion of long-only actively managed funds beating benchmarks having fallen to 22% in 2025.

Bubble trouble!

The S&P 500 (VOO-NASQ) slipped along with technology stocks earlier in the week as concerns grew that a $16 trillion surge from its April lows had gone too far. The drop came amid mounting chatter about a bubble forming around AI, with the billions poured into building infrastructure fuelling fears of a replay of the dot-com crash 25 years ago. Profit-taking risks have rapidly risen across markets, and are particularly elevated for the Nasdaq, potentially hampering further upside. JPMorgan Chase & Co. data also shows that the amount of debt tied to AI has ballooned to $1.2 trillion, making it the largest segment in the investment-grade market.

Chip dip

European chip stocks slid after the Information reported that Oracle’s (ORCL-NASQ) profit margin in its cloud computing business is lower than many analysts have been estimating, raising concerns over the sustainability of AI chip demand.

AI arms race update

Hunyuan Image 3.0, the latest artificial intelligence model from Tencent (where Prosus (PRX-JSE) is the biggest shareholder), has surpassed Google (GOOGL-NASQ) DeepMind’s Gemini 2.5 Flash Image, known as “Nano Banana,” the South China Morning Post reported.

Spluttering along

The German government is set to raise its economic forecasts, bringing official projections for Europe’s largest economy into line with those of the country’s leading research institutes, according to people familiar with the matter. Economy Minister Katherina Reiche is set to flag 0.2% growth for 2025 in her autumn projections. That compares with a forecast by the previous administration for no growth at all.

EU growth concerns

Christine Lagarde sees the European Central Bank (ECB) nearing its 2% inflation target and expects economic growth to pick up in 2026. The ECB president told EU lawmakers that sluggish exports and a stronger euro are expected to hold growth back for the remainder of the year. However, a quickening of inflation across Europe’s largest economies in September reinforced a holding pattern for interest rates by the ECB. Bloomberg reports that consumer prices rose 2.4.% in September in Germany from a year ago on gains in services costs – the fastest annual pace since February. Price pressures also ticked up in the 20-nation bloc’s other top economies.

EV price wars

As US tax credits on electric vehicles (EVs) come to an end, Tesla (TSLA-NASQ) unveiled cheaper versions of the Model Y and 3. Tesla’s Model Y standard SUV is priced just under $40,000, and the Model 3 standard sedan at around $37,000. The company also released a new version of its Full Self-Driving (FSD) driver assistance system. The market didn’t react positively, with the EV maker’s stock closing -4.45% lower.

Thriving, not just surviving

Emerging market (EM) assets look set to cap a banner year, with investors expecting inflows into equities and bonds to gain momentum in the final quarter. Sentiment has rarely been this buoyant, with an HSBC Holdings Plc survey showing EM fund managers as the most bullish since the start of 2021, when an everything rally was in full swing during the pandemic. Goldman Sachs Group Inc. strategists said EM markets are “thriving, not just surviving,” as economic growth this year surpassed expectations despite higher tariffs.

Shredded!

Local paper stocks had a shocker following the nasty update from Mondi (MNP-JSE), which fell -16.5% to hit a nearly 11-year low after falling prices and weak demand hit Q3 profit. Sappi (SAP-JSE) wasn’t spared in the aftermath, getting smashed -11.5%.

Sector focus: Retail

The local apparel industry grew 5.3% YoY in August 2025, driven by the home (+10.4%) and beauty (+10.1%) categories, ahead of women’s wear (+4.2%), men’s wear (+3.0%), and kids & baby (+4.3%), continuing the year-to-date trend of outperformance. The sector no doubt offers value, but sustained growth will hinge on GDP growth above 2% (and we’re not there yet). In this sector, stick with retailers that have a value-focused offering, like Pepkor Holdings (PPH-JSE) and Mr Price (MRP-JSE).