The State of Markets: Equities: What's (Really) Troubling Markets?
US equity markets broke below their sideways trading ranges this week. That is, having started to consolidate their post-election gains, they rolled over on Thursday and Friday (see key chart below). News outlets suggest that was driven by Powell’s hawkish comments on Thursday (he said the Fed is not “in a hurry” to cut rates, and that the performance of the US economy was “remarkably good”). US 2 and 10 year yields, though, closed broadly flat on the week.
The key question, therefore, is: What’s really troubling the market? And how much more downside is there in US equities in coming weeks? Is the S&P500, for example, about to sell-off back to its 50 day moving average, or even lower? And, how worried should markets be about the disruptive (inflationary) impact of Trump’s tariffs? We outline our view on that in recent research, including in our Daily Risk Appetite publication, as well as in yesterday’s Longview on Friday (see link below).
Next week’s US macro data has a strong housing theme, with updates on the NAHB home builders index (Monday), housing starts and permits (Tuesday), and existing home sales (Thursday). Elsewhere the Conference Board Leading Index is due on Thursday and S&P manufacturing & service sector PMIs (November first estimates) are on Friday. There are also speeches/comments from several key FOMC members. Please see below for full list of key macro data and events.
Key chart: S&P500 futures candlestick shown with its 50 day moving average
Upcoming important data/events this week:
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Events: |
PBoC policy decision (1 & 5 year LPR) (Wed, 1am). |
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Monday: |
US NAHB homebuilders index (Nov, 3pm). |
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Tuesday: |
US housing starts & building permits (Oct, 1:30pm). |
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Wednesday: |
UK headline & core CPI (Oct, 7am); German PPI (Oct, 7am). |
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Thursday: |
US Conference Board leading index (Oct, 3pm); US existing home sales (Oct, 3pm); Eurozone consumer confidence (November first estimate, 3pm). |
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Friday: |
Flash PMIs for manufacturing & service sector for Japan (12:30am), France (8:15am), Germany (8:30am), Eurozone (9am), UK (9:30am) & US (2:45pm) – all November first estimates. |
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Key earnings: |
Walmart, Lowe's, Medtronic (Tues); NVIDIA, TJX, Target (Wed); Intuit, Deere&Company (Thurs). |
Key Research
Longview on Friday, 15th November 2024:
“Minsky Moments, Einhorn's Inflation Concerns & Assessing Tariff Risks”
“we have increased our bets on inflation, I think we are going to have another inflection up inflation. I think that… …the policy mix that is being proposed is inflationary”
Source: David Einhorn, Greenlight Capital, CNBC/Delivering Alpha conference on inflation expectations….wed, 13th November 2024
The market is concerned. Concerned about rising inflationary pressures. Troubled by when and how Trump will implement tariffs on China and the rest of the world. Worried about what impact that will have on the global economy. Who will take the brunt of it? Will it add to medium term inflationary pressure? Are bonds about to have a Minsky moment?
Added to which, why are European markets struggling whilst US markets hit new highs? Does this clean sweep victory reinforce the concept of ‘American Exceptionalism’? Can Europe/the UK (& other parts of the world) outperform US equity markets (or are they consigned to the annals of history in terms of preferred stock markets)?
Key North American macro data & events:
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Events: |
Speeches by the Fed’s Goolsbee at the Financial Markets Group Fall Conference (Mon, 3pm), Hammack at the 2024 Financial Stability Conference (Thurs, 1:45pm) & Goolsbee in a moderated Q&A (Thurs, 5:25pm). |
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Monday: |
US New York Fed service sector business activity (Nov, 1:30pm); US NAHB homebuilders index (Nov, 3pm); US total net TIC flows (Sept, 9pm). |
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Tuesday: |
US housing starts & building permits (Oct, 1:30pm); Canadian headline & core CPI (Oct, 1:30pm). |
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Wednesday: |
N/A |
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Thursday: |
US Philadelphia Fed business outlook (Nov, 1:30pm); US weekly jobless claims (1:30pm); US Conference Board leading index (Oct, 3pm); US existing home sales (Oct, 3pm); US Kansas City Fed manufacturing sector activity (Nov, 4pm). |
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Friday: |
Canadian retail sales (Sept, 1:30pm); US S&P manufacturing & service sector PMIs (November first estimates, 2:45pm); US Michigan sentiment (November final estimate, 3pm); US Kansas City Fed service sector activity (Nov, 4pm). |
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Key earnings: |
Walmart, Lowe's, Medtronic (Tues); NVIDIA, TJX, Palo Alto Networks, Target (Wed); Intuit, Deere&Company, Copart (Thurs). |
Fig B: US Conference Board leading index (Y-o-Y %)
Key European macro data & events
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Events: |
Speeches by the ECB’s Guindos in Frankfurt (Mon, 8am), Nagel in Tokyo (Mon, 8am), Makhlouf in Dublin (Mon, 9am), Lane in Rome (Mon, 1pm), Stournaras in Athens (Mon, 1pm), Vujcic in London (Mon, 6:30pm), Lagarde in Paris (Mon, 6:30pm), Elderson at Green Finance Forum (Tues, 8:30am), Vujcic in London (Tues, 10:45am), Lagarde & Guindos at MacroPru conference (Wed, 1pm & 6pm), Stournaras in London (Wed, 6:30pm), Makhlouf in Dublin (Wed, 7pm), Villeroy in Tokyo (Thurs, 5:25am), Knot in Amsterdam (Thurs, 8am), Holzmann in Vienna (Thurs, 8:30am), Cipollone in Frankfurt (Thurs, 8:30am), Escriva in Spanish Parliament (Thurs, 9am), Lane in Amsterdam (Thurs, 3:30pm), Holzmann, Kazimir & Vujcic in Vienna (Thurs, 4pm), Lagarde in Frankfurt (Fri, 8:30am), Centeno in London (Fri, 9am) & Nagel & Villeroy in Frankfurt (Fri, 1pm); ECB publishes Euro Area negotiated wages indicator for Q3 2024 (Tues, 10am) & Financial Stability review (Wed, 9am). |
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Monday: |
Eurozone trade balance (Sept, 10am). |
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Tuesday: |
ECB current account (Sept, 7pm); Eurozone headline & core CPI (October final estimate, 10am). |
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Wednesday: |
German PPI (Oct, 7am); Eurozone construction output (Sept, 10am). |
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Thursday: |
Eurozone new car sales (Oct, 5am); French INSEE business & manufacturing confidence (Nov, 7:45am); Eurozone consumer confidence (November first estimate, 3pm). |
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Friday: |
German GDP (Q3 final estimate, 7am); HCOB manufacturing & service sector PMIs for France (8:15am), Germany (8:30am) & Eurozone (9am) – all November first estimates. |
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Key earnings: |
N/A |
Fig C: Eurozone consumer confidence (index)
Key UK macro data & events
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Events: |
Speeches by the Bank of England’s Ramsden on monetary policy (Wed, 4pm) & Mann in a fireside chat with Brown Brothers Harriman (Thurs, 2pm). |
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Monday: |
Rightmove house prices (Nov, 12:01am). |
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Tuesday: |
N/A |
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Wednesday: |
Headline & core CPI, RPI & PPI (Oct, 7am); Land Registry house price index (Sept, 9:30am). |
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Thursday: |
Public sector finances (Oct, 7am); CBI industrial trends orders (Nov, 11am). |
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Friday: |
GfK consumer confidence (Nov, 12:01am); retail sales (Oct, 7am); S&P manufacturing & service sector PMIs (November first estimates, 9:30am). |
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Key earnings: |
N/A |
Fig D: UK services & goods CPI (Y-o-Y %)
Key Asia-Pacific macro data & events
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Events: |
PBoC policy decision (1 & 5 year LPR) (Wed, 1am); RBA minutes from November meeting (Tues, 12:30am); speeches by the RBA’s Kent at the Sir Leslie Melville Lecture in Canberra (Mon, 6:30am) & Bullock at the Women in Payments Conference (Thurs, 8am). |
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Monday: |
N/A |
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Tuesday: |
Australian Westpac leading index (Oct, 11:30pm); Japanese imports/exports and trade balance (Oct, 11:50pm). |
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Wednesday: |
Japanese machine tool orders (October final estimate, 6am). |
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Thursday: |
Australian S&P manufacturing & service sector PMIs (November first estimates, 10pm); Japanese headline & core CPI (Oct, 11:30pm). |
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Friday: |
Japanese Jibun Bank manufacturing & service sector PMIs (November first estimates, 12:30am). |
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Key earnings: |
PDD Holdings (Thurs). |
Fig E: Japanese headline & core CPI (Y-o-Y %)
Last week:
Longview on Friday, 15th November 2024:
“Minsky Moments, Einhorn's Inflation Concerns & Assessing Tariff Risks”
Quant Monthly Appendix 1, 14th November 2024:
“S&P500 Sector Valuation Overview”
Monthly Global Asset Allocation No. 54, 13th November 2024:
“ADD US Small & Mid-Cap Exposure”
The SHORT VIEW (& market positioning), 12th November 2024:
“Post Election Themes: Gold, Bitcoin & Equities”
Prior week:
Longview on Friday, 8th November 2024:
“Regime Shifts, Trump & Risks to the Bull Case”
Longview ‘Tactical’ Alert No. 86, 6th November 2024:
“Move Tactically Overweight Equities A.k.a. Expected Republican ‘clean sweep’ is stock market & growth friendly”
Tactical Equity Asset Allocation No. 250, 5th November 2024:
“Markets (& Models) -> Primed A.k.a. Awaiting Election Outcome”
Monthly Global Asset Allocation No. 53, 5th November 2024:
“BUY Bonds -> Pain Trade Ahead A.k.a. Move OW US Treasuries (from NEUTRAL)”