Last Week’s Big Picture
Historically, stock indices tend to rise after midterm elections. In addition to this, the presidential third term, which is in 2019, has seasonally been a positive one for the stock market. In terms of interest rates, the environment is still relatively low as the Fed seeks to a achieve a “neutral rate,” one that neither boosts nor stalls economic growth. This should provide long-term underlying support for the markets, or at least, that’s what investors had expected.
So what’s happening here in the short-term? Right now, indices are being negatively affected by ongoing trade war concerns. According to CNBC’s CFO consensus (covered below), trade is the No. 1 biggest worry, after which follow consumer demand and central bank policy. Bear in mind that a large majority of the S&P 500 companies that exceeded earnings expectations nevertheless were met by an average -1.5% decline.
Some financial pundits expect the Fed to back off slightly from its hawkishness. With additional concerns regarding Europe’s political climate, overall slowing global economic growth, and some clamoring over the widening federal deficit (none of which would be considered surprising) what did come as a surprise during this last week was the housing market report which shows a surprising plummet.
It appears that the only thing that we can be certain of is that market volatility will continue. So pay close attention to the coming economic reports and geopolitical news, as each bit of information is critical in this current and highly-volatile environment.
Here are last week’s highlights.
Monday, November 19, 2018
- Vice President Mike Pence’s comments on Sunday that there will be no end to US tariffs on $250 billion of Chinese goods unless China changes its ways contributed to Monday’s market plunge.
- The Dow Jones fell 400 points, as tech behemoths Apple, Amazon, and Facebook drag down the Nasdaq Composite.
- The housing market bucked lower significantly. With consensus range between 66 to 69, the November Housing Market Index report logged in at 60.
Tuesday, November 20, 2018
- Although yesterday’s housing market index surprisingly plummeted, today’s Housing Starts came within expectation at 1.228 M with consensus expectations ranging between 1.180 to 1.269 M.
- CNBC released its Global CFO Council survey–representing CFOs from the largest companies in the world–in which over 50% had expectations that the Dow may fall an additional 2,000 points before the market sell-off ends.
- The Dow slid another 600 points, completely erasing its 2018 gains.
- With rate hikes expected in December, the biggest concern among most financial institutions is the uncertainty caused by the ongoing tariff-driven trade war; this in addition to the political uncertainty in Europe and the overall slowing growth in the global economy.
Wednesday, November 21, 2018
- Durable Goods report is expected to come in at -2.4% for new orders, 0.4% ex-transportation, and 0.3% for core capital goods.
- New jobless claims is expected to come in at 215K.
- Consumer sentiment is expected to come in between 98.0 to 99.0.
- Consensus for existing home sales is expected at 5.210 M.
Thursday November 22, 2018
- Happy Thanksgiving!
- No economic reports today.
Friday, November 23, 2018
- Traditionally, slow day in the market. Nothing substantial to report due to markets only being open half a day.