- NEW LPL Market Signals Podcast. On the latest episode of the LPL Market Signals Podcast, listen to LPL Financial Chief Investment Strategist John Lynch and Senior Market Strategist Ryan Detrick review the S&P 500 Index’s worst month so far this year, European economic concerns, U.S./China trade issues, and Federal Reserve (Fed) policy. Market Signals by LPL Financial is now available on iTunes, Google Play and Spotify. Please join our discussion on social via #LPLMarketSignals.
- Trump sees “great deal” with China, but threatens more tariffs. President Trump expressed optimism in an interview Monday night that the U.S. and China would come to terms on trade. However, he didn’t think the U.S.’ largest trading partner was ready to make a deal and threatened to announce in December (and later implement) tariffs on the remaining portion of goods imported from China (~$275 billion) if the two sides can’t come to terms when they meet next month. Though we see a deal being reached prior to escalations reaching what might be dubbed an all-out trade war, both sides claim they have the wherewithal to stand their ground.
- Buybacks set to ramp up. With more than half of S&P 500 firms having reported third-quarter earnings, cash available for share repurchases is set to ramp up as blackout periods expire; more than $100 billion by some estimates on top of last week’s ~$50 billion. Add to that a wave of quarterly dividend payments due over the next few weeks, which investors tend to reinvest, and we could see stocks stabilize heading into the historically positive year-end stretch.
- Rate hike in December still likely, but odds falling. Fed fund futures currently show investors expect the Fed to increase short-term interest rates when it meets in December (no hike expected at November meeting), though market-implied odds have fallen this month from a high of 79% on October 9 to ~66% this morning*. Though U.S. economic data continues to impress overall and corporate America remains in great shape, the Fed must also be cognizant, at a minimum, of market volatility and the impact higher rates have on the U.S. dollar, which by extension impacts the global markets; emerging economies in particular, whose export-oriented economies often depend on commodities (which trade in dollars) and tend to issue dollar-denominated debt. These reasons help to support the notion that the Fed could be less aggressive with its rate-hike campaign through 2019 than current consensus projections.
- CDS prices highest since December 2016. Credit-default swap (CDS) prices, a measure of the cost of insuring against default on a bond, are showing some signs of angst from U.S. equities’ rough October. On today’s LPL Research blog post, we analyze the cause of CDS prices’ recent rise, and highlight our updated thoughts on fixed income’s reaction to stock-market volatility.
- S&P CoreLogic Case-Shiller Home Price Index (MoM, Aug)
- Conference Board Consumer Confidence Index (Oct)
- Eurozone GDP (Q3)
- Eurozone Consumer Confidence (Oct)
- Japan Industrial Production (Preliminary, Sep)
- Japan Consumer Confidence (Oct)
- Eurozone Consumer Price Index (Oct)
- Nikkei Japan Manufacturing PMI (Oct)
- Caixin China Manufacturing PMI (Oct)
- Nonfarm Productivity (Preliminary, QoQ, Q3)
- Markit US Manufacturing PMI (Oct)
- ISM Manufacturing (Oct)
- Nonfarm Payrolls (Oct)
- Durable Goods Orders (Sep)
- Markit Germany Manufacturing PMI (Oct)
- Markit Eurozone Manufacturing PMI (Oct)
*Market Implied rate hike expectations are calculated based on the pricing of various fed funds futures contracts.
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Index data obtained via FactSet
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