The State of Markets: ‘(starting to) Price out Recession Risk’
Momentum in US equity markets faded somewhat last week. That is, after strong gains in late September, the S&P500 broadly traded sideways/lower; the NASDAQ100 failed to convincingly break above a key resistance level (at around 20,000, on the cash index); while other indices rolled over (e.g. see the Russell 2000). Consistent with that, implied volatility trended up (as measured by the VIX).
Yesterday’s reaction to the nonfarm payrolls print, though, was encouraging for the bulls – with strong gains amongst major indices. Of note, the number was much better than expected (+254k, vs. consensus of +150k), and prior months were revised higher. Treasury yields moved up; the dollar strengthened further (DXY: +0.5% yesterday); and rates priced out 25bps of Fed cuts from this easing cycle (see key chart below).
More clues on Fed policy are likely next week with the release of the minutes from the September meeting (Wednesday), followed by the September CPI report (Thursday). Other key data points include the NFIB small business survey (Tuesday), as well as PPI and University of Michigan sentiment (both on Friday). Elsewhere earnings season gets going (with key banks reporting on Friday, including JPMorgan, Wells Fargo & BNY Mellon). Please see below for a full list of key events and data releases in the week ahead.
Key chart: December 2025 & 2026 implied Fed funds rates (%)
Upcoming important data/events this week:
Events: |
Fed minutes from September meeting (Wed, 7pm); RBNZ policy decision (Wed, 2am); market holidays in China on account of National Day (Mon) & Hong Kong on account of Chung Yeung Day (Fri). |
Monday: |
German factory orders (Aug, 7am); Eurozone retail sales (Aug, 10am). |
Tuesday: |
US NFIB small business optimism (Sept, 11am). |
Wednesday: |
Japanese machine tool orders (September first estimate, 7am). |
Thursday: |
US headline & core CPI (Sept, 1:30pm). |
Friday: |
Japanese M2 & M3 money supply (Sept, 12:50am); US headline & core PPI (Sept, 1:30pm); US Michigan sentiment (October first estimate, 3pm). |
Key earnings: |
PepsiCo (Tues); JPMorgan, Wells Fargo&Co (Fri). |
Key Research
Tactical Equity Asset Allocation No. 249, 3rd October 2024:
“Five Key Reasons for (Tactical, Near Term) Caution”
We remain cautious about the near term (1 – 4 month) tactical outlook for the S&P500.
Medium term (1 – 4 month) market timing models are around 80 – 90% of the way towards generating a full across the board SELL signal. That is, a wide variety of models are already on SELL (including the proportion of single stocks at 52 week highs less those at 52 week lows – see FIG 1 below). Other technical models are also on SELL. Our slow moving ‘market environment’ model and fast moving risk appetite scoring system are also both on/close to SELL. There’s a lack of downside put protection in portfolios and momentum is rolling over, while a small number of models are not yet on SELL (but are close) – see section 1b & 2 for detail.
Key North American macro data & events:
Events: |
Speeches by the Fed’s Bowman at Independent Bankers Association of Texas (Mon, 6pm), Kashkari at an event hosted by the Bank Holding Company Association (Mon, 6:50pm), Bostic in a conversation with Steve Koonin (Mon, 11pm), Musalem on the Economy and monetary policy (Mon, 11:30pm), Kugler at ECB event (Tues, 8am), Bostic on the Economic outlook (Tues, 5:45pm), Collins at a Community Banking conference (Tues, 9pm), Bostic (Tues, 1pm), Logan at the Houston Energy conference (Wed, 2:15pm), Goolsbee at payments conference (Wed, 3:30pm), Collins at Worcester event (Wed, 10pm), Daly in moderated conversation (Wed, 11pm), Barkin in Fireside chat (Thurs, 3:30pm), Williams at Binghamton University (Thurs, 4pm), Goolsbee at the Community Bankers Symposium (Fri, 2:45pm) & Logan in panel discussion (Fri, 3:45pm); Fed minutes from September meeting (Wed, 7pm). |
Monday: |
US consumer credit (Aug, 8pm). |
Tuesday: |
US NFIB small business optimism (Sept, 11am); US imports/exports, & trade balance (Aug 1:30pm). |
Wednesday: |
US wholesale inventory (August final estimate, 3pm). |
Thursday: |
US headline & core CPI (Sept, 1:30pm); US weekly jobless claims (1:30pm). |
Friday: |
US headline & core PPI (Sept, 1:30pm); Canadian employment data (Sept, 1:30pm); US Michigan sentiment (October first estimate, 3pm). |
Key earnings: |
PepsiCo (Tues); Progressive, Delta Air Lines, Domino’s Pizza Inc. (Thurs); JPMorgan, Wells Fargo&Co, Bank of NY Mellon, Fastenal (Fri). |
Fig B: US Michigan sentiment (index)
Key European macro data & events
Events: |
Speeches by the ECB’s Cipollone on digital payments in Frankfurt (Mon, 8:05am), Lane in Frankfurt (Mon, 8:45am), Escriva in Madrid (Mon, 12:45pm) & Villeroy in Paris (Wed, 5pm). |
Monday: |
German factory orders (Aug, 7am); Eurozone Sentix investor confidence (Oct, 9:30am); Eurozone retail sales (Aug, 10am). |
Tuesday: |
German industrial production (Aug, 7am). |
Wednesday: |
German imports/exports, & trade balance (Aug, 7am). |
Thursday: |
German retail sales (Aug, 7am); Italian industrial production (Aug, 9am). |
Friday: |
German headline CPI (September final estimate, 7am). |
Key earnings: |
N/A |
Fig C: Eurozone retail sales (with 3 month moving average)
Key UK macro data & events
Events: |
N/A |
Monday: |
N/A |
Tuesday: |
N/A |
Wednesday: |
BRC retail sales (Sept, 12:01am). |
Thursday: |
RICS house price balance (Sept, 12:01am). |
Friday: |
Monthly GDP estimate, industrial & manufacturing production, goods trade balance & construction output (Aug, 7am). |
Key earnings: |
N/A |
Fig D: UK RICS house price balance (index)
Key Asia-Pacific macro data & events
Events: |
RBA minutes from September meeting (Tues, 1:30am); RBNZ policy decision (Wed, 2am); speeches by the RBA’s Hauser at the Walkley Foundation (Tues, 1:30am), Kent at Macquarie University (Wed, 1am) & Hunter at Macquarie University (Thurs, 8:45am); market holidays in China on account of National Day (Mon) & Hong Kong on account of Chung Yeung Day (Fri). |
Monday: |
Australian headline CPI (Sept, 1am); Japanese ESRI leading index (August first estimate, 6am). |
Tuesday: |
Australian Westpac consumer confidence (Oct, 12:30am); Japanese cash earnings (Aug, 12:30am); Japanese household spending (Aug, 12:30am); Australian NAB business confidence (Sept, 1:30am); Australian ANZ-Indeed job advertisements (Sept, 1:30am). |
Wednesday: |
Japanese machine tool orders (September first estimate, 7am). |
Thursday: |
Japanese PPI (Sept, 12:50am); Japanese bank lending (Sept, 12:50am). |
Friday: |
Japanese M2 & M3 money supply (Sept, 12:50am). |
Key earnings: |
Fast Retailing, Seven & i Holdings (Thurs). |
Fig E: Japanese ESRI leading indicator (index)
Last week:
Longview on Friday, 4th October 2024:
“Tactical Equites, OIL, & Strategic AA Update”
Tactical Equity Asset Allocation No. 249, 3rd October 2024:
“Five Key Reasons for (Tactical, Near Term) Caution”
Quarterly Asset Allocation No. 59, 30th September 2024:
“All Change”
Prior week:
Longview on Friday, 27th September 2024:
“The Global Investment Puzzle (& the ‘Hidden Gems’)”
Monthly Global Asset Allocation No, 50, 25th September 2024:
“Chinese Equities: Bear Market Rally a.k.a. A Trade Not An Investment”
Quarterly Asset Allocation No. 59, 25th September 2024:
“Cheap Markets with Earnings Growth”
The SHORT VIEW (& market positioning), 24th September 2024:
“Copper: Uptrend Ongoing (for now)”