HIGHLIGHTS
S&P500 dropped slightly this week, closing the week lower and ending the 7-week winning streak. The International Monetary Fund (IMF) called for a fiscal pivot, which could have monetary implications. Besides, Fedspeak did not push back against the expectation of a 25bps cut in November’s meeting.
Earnings: Corporate earnings performed well so far, with more than one-third of the S&P500 reported and more than 70% of them beating expectations. Looking ahead, more than 40% of the S&P500 market cap will report earnings in the coming week.
Commodities: Gold hit a new high again this week, mainly driven by the demand for diversification ahead of elections. Oil remains volatile due to the continuous tensions in the Middle East.
China: The PBoC cut 1Y and 5Y loan prime rates by 25bps this week, boosting CSI300. Many companies announced their share buyback plans with the PBoC relending program.
MARKETS
18,518.61 | +0.16% | |
S&P 500 | 5,808.12 | -0.96% |
Dow | 42,114.40 | -2.68% |
10-Year | 4.23% | +16bps |
Brent | 75.97 | +3.84% |
DXY | 104.32 | +0.83% |
*Data as of market close. 5-day change ending on Friday.
VIEW FROM THE STREET
Equity
UBS: Market sentiment is likely to remain vulnerable before the election and market volatility is expected to be high. Corporate earnings remain solid amid the resilient economy in the US.
Standard Chartered: We believe the valuations of Chinese equities are still compelling, even after the market rebound last month. Investors are recommended to remain cautious ahead of stimulus policy details.
Fixed Income
Goldman Sachs: Markets are pricing higher terminal rates, the long-term target of the Fed. 10Y treasury yields are at 4.25% and 30Y mortgage rates are above 6.5%. It is mainly driven by the new round of US economic data including new home sales, jobless claims and purchasing managers’ index.
Standard Chartered: Given the recent excessive surge in yields, we recommend locking in US bond yields. The yields are expected to retreat eventually, even with a Trump win.
Economy
Goldman Sachs: Global divergence will be a focus in the coming year, with the expectation of economic growth rising for the US, UK, and Brazil while dropping for Japan, China, and Europe.
UBS: Economic activity has been flat in most parts of the US since September, with mixed consumer spending. We believe the Fed is still on track to cut rates further with the aim to sustain growth amid falling inflation.
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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