HIGHLIGHTS
US equities were down this week after the mixed earnings results. Nonfarm payroll was below expectations, while the unemployment rate remained unchanged. This is the last major data before the US election next week.
Election: Markets are monitoring the polling closely. Political experts predict that the Senate will be under Republican control, while the House and White House are still uncertain. Volatility in stock markets fell after the likelihood of Trump’s win increased.
Mixed Picture: Core personal consumption expenditures price index reported a biggest monthly increase in the recent 6-month, while overall inflation is still near 2%. Job growth dropped significantly, mainly driven by the hurricanes last month and the worker strikes.
Gold: Gold is performing well amid the high geopolitical uncertainty. Foreign currency reserves at major central banks are also diversifying from the dollar towards gold. In addition, some market participants are concerned about the US deficits and debt, as well as the possibility of inflation rebound.
MARKETS
18,239.92 | -1.50% | |
S&P 500 | 5,728.80 | -1.37% |
Dow | 42,052.19 | -0.15% |
10-Year | 4.36% | +13bps |
Brent | 72.91 | -4.03% |
DXY | 104.32 | +0.00% |
*Data as of market close. 5-day change ending on Friday.
VIEW FROM THE STREET
Equity
J.P. Morgan: Looking ahead, we believe the resilience in consumption could support corporate earnings, leading to better performances in equities and a stable economy. Fed could also ease policy methodically.
UBS: Historically, Fed rate cuts in non-recessionary periods have been favorable for equities. Q3 earning season also started positively, and the earnings per share growth remains healthy.
Fixed Income
Morgan Stanley: US treasury yields jumped about 40bps last month, mainly driven by the data-driven Fed and uncertain fiscal policy. Also, the move correlates with the “Trump Trade” due to the recent shift in his favor in prediction markets.
UBS: The recent inflation print should allow the Fed to cut rates in the coming week. Recent Fed comments also suggested that 25bps cut is possible as it continues to move toward neutral policy rate. We expect 50bps of cuts for the rest of the year.
Economy
J.P. Morgan: Consumer sentiment looks healthy in aggregate according to the Q3 GDP, providing confidence to investors. However, the increase in wealth is supporting the spending in higher-income cohorts while lower-income households are still under pressure.
Barclays: The uncertainty for the global economy is mainly driven by the US election. Comparing the two candidates, the Trump administration is more likely to bring significant changes to Emerging Asian economies than the Harris administration.
KNOWLEDGE TRANSFER
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DISCLOSURE
This newsletter is meant for informational purposes only and is not investment advice. Always consult a licensed investment professional before making important investment decisions. Advertising and sponsorship do not influence editorial content or decisions. Market Hedwig is not responsible for the promises made or the quality or reliability of the products or services offered in any advertisement.
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