Summary of markets last week:

This past week has been eventful in markets with various quarterly earnings updates by major companies, several releases of macro data, and some key Fed commentary. All of which has generated mixed messages about the US growth and inflation outlook (and, with that, large daily price swings in US equities). In particular, equities sold off sharply ahead of Wednesday’s Fed press conference. They then rallied later in the week, most notably on Friday’s nonfarm payrolls. Elsewhere rates and bond yields fell post Fed meeting and then again on Friday, while the dollar was also lower. 

With US equities therefore struggling to find direction this past week, the key question has become: Is this pullback ongoing? Or are equities starting to stabilise, with the uptrend about to resume? The move lower in rates/bond yields, in that respect, is encouraging for the bulls (e.g. see 10 year yields in the chart below, which are down ~20bps from their 25th April high). Equally, as we’ve noted in recent research, a number of positioning, liquidity, and macro factors create a potentially challenging set up for equities in the next few months.

Key macro data and events this coming week, as well as certain speeches by Fed presidents, all bear watching closely in that respect. In particular, US data includes the SLOOS credit conditions survey (Monday); consumer credit (Tuesday); and the Michigan sentiment survey (Friday). There are also speeches by several key Fed Presidents this week, including Barkin, Williams, and Goolsbee, among others, while several key companies are due to report their earnings. Please see below for a full list of key macro data, earnings, and events for the week ahead. 

Key chart: US 10-year Treasury yield (%), shown with 50, 90, & 200 day moving averages

The most important macro data, events & earnings reports out next week

Key Longview research published last week 

You'll find some extracts from research we've published recently below. The full reports are available to subscribers. To see the options we have available for private investors, please click below.

Tactical Equity Asset Allocation No. 244, 2^nd May 2024:
"Equities: Further Near Term Downside Expected"

On 23^rd April, we moved ‘Tactically’ NEUTRAL equities (having been overweight since October 2023). In that publication we outlined the five different types of pullbacks in bull markets, and argued that this current one is most likely to be either: i) a “healthy 5 – 10% correction”; or ii) a “correction driven by a mid-cycle slowdown”. As such, we advised “near term caution” and removed our OW equities position.

Since that time, US equities are broadly unchanged with the S&P500 having rallied up to its 50 day moving average (at 5,160) before pulling back (over the past two days – fig 1). Our views from April 23^rd remain unchanged. In particular, there are 4 reasons why we expect continued further downside in US (& global) equity markets over coming weeks (potentially months).

Commodity Fundamentals Report No. 182, 1^st May 2024:

"Oil: How Much Downside?"

“Oil market price action has, broadly speaking, followed the classic ‘buy the rumour, SELL the fact’ pattern in recent weeks...  

…By the time of Israel’s bombing of the Iranian embassy in Syria (1^st April), though, most of the move was done. That is, prices then edged up a little further (in anticipation of an escalation) but, by April 5^th, the news was in the price (i.e. there was no/little price upside beyond that date”

Source: Longview on Friday: “Bonds, Equities & Oil – Latest Thoughts”

Markets are forward-looking discounting machines. It’s somewhat unsurprising, therefore, that the oil price topped on the news of conflict between Israel and Iran. In other words, oil prices rallied ahead of the event, which had been largely priced in ahead of time (see quote above & last week’s LV on Friday for detail). Since then, the geopolitical risk premium has started to unwind, and the oil price is down almost 10% from its 12^th April highs (helped by general risk aversion in markets).

North America: Key events next week

Fig B: US Michigan Sentiment (index)

Eurozone: Key events next week

Fig C: Eurozone PPI (Y-o-Y %)

UK: Key events next week