Oversold tech, French stress and the Riksbank

2026-11-01 · The investor's Sunday · Oversold or deflating tech, France and the euro test, The Riksbank against its path, The week ahead

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Is the tech sell-off an oversold dip or a deflating bubble? Is France forcing the euro's hand? And why the Riksbank can hold against its own path.

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Oversold or deflating: the technology test

Lance Roberts, on Thoughtful Money with Adam Taggart, argues technology stocks are oversold and the market may soon rotate back into growth. Joseph Wang, in his Markets Weekly video, argues the AI bubble is deflating from the speculative fringes inward, toward a grinding twenty to thirty per cent bear market.

They are arguing about different things. Roberts makes a claim about price, Wang about the business. Oversold describes positioning, not value: a stock can be oversold and still expensive. We side with Wang on direction and part with him on depth. Our standing view is that the S&P 500 settles lower over the next nine months as a grind rather than a rout, because credit is not confirming anything deeper: the US high-yield spread narrowed to 3.26 percentage points from 3.40.

Quinn Thompson, on Forward Guidance, calls the Fed a sideshow while the AI trade unravels. We agree that spending matters more than the Fed for these stocks, but not that the boom is coming apart. Memory would show it first, and South Korea's October exports rose 93.7 per cent, the fastest since 1974.

Read: the level is 400 basis points on US high yield. Wang's depth is confirmed if the spread breaks through it while the index is still falling. Roberts' rotation is confirmed if the spread keeps narrowing and Korean chip exports hold. Until then, the case for treating the fall as a bargain is not there, and neither is the case for a crash.

France: stress, not a forced choice

On The Jay Martin Show, Jay Martin argues that France's ten-year borrowing cost now exceeds five per cent and that Europe will be forced to choose between saving France and saving the euro.

The evidence backs the stress. French inflation rose to 3.4 per cent in September from 2.6, and the protests are in their third week. But French core inflation was only 1.7 per cent, so much of the jump is energy squeezing households rather than creditors walking away.

We disagree with the forced choice. With euro-area inflation at 3.8 per cent, our view is that the ECB keeps hiking, to at least 3.25 per cent by mid-2027 from 2.5 as of 16 September. A bank hiking into that cannot also be rescuing a member's bonds. The next test is the ECB itself, which decides on 17 December.

Read: the level is Martin's own five per cent on the French ten-year. Stress hardens if French yields keep holding above it while the budget fight goes on. Our ECB view is wrong on a December hold citing bond stress with inflation near 3.8.

The Riksbank against its own path

The Riksbank's own path points up, to 2.43 per cent by the first quarter of 2028 from 1.75 today. Our read remains a hold at 1.75 per cent on 12 November. Swedish inflation was 0.3 per cent in August, core inflation was 1.2 per cent and falling, and unemployment rose to 8.9 per cent from 8.6. The risk is energy: southern Swedish power averaged about 193 euros per megawatt-hour this week, up 58 per cent. That is a winter price, not a wage spiral.

Read: confirmed by a hold on the 12th; wrong if the bank follows its path and hikes. If power prices feed into the next inflation prints rather than fading, the case for the path strengthens.

The week ahead

This is a discussion of markets, not investment advice.

This episode discusses investing in general. It is not investment advice, it does not describe anyone's positions, and nothing in it is a recommendation to buy or sell anything.

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