October 14, 2024
Good morning,
The U.S. stock market continued to climb its wall of expanding list of worries last week. Despite the sharp rise in geopolitical risk from the Middle East, rising oil prices, higher yields in credit markets, and lowered expectations of Fed easing, the S&P 500 Index was able to set new highs and post a gain of +1.11% on the week.
To begin this week, the U.S. markets see a quasi-federal holiday today that leaves the Treasury market closed even as the stock market remains open for business. In a bit of a weird twist, Bond futures are nevertheless open and point to lower prices / higher yields, continuing a strong 2+ week trend. S&P 500 Futures are up about +.20% – continuing their same trend.
There has been a growing drumbeat of attention paid to a “Trump trade” helping to drive equity prices recently. The higher and steeper Treasury yield curve is also consistent with that theme, especially if one thinks that the GOP can pull off a clean sweep of the presidency and both houses of Congress.
Q3 earnings season officially began on Friday, and we will get a full week’s worth this week. They will have to deliver strong results to keep this bull market going. For reference, FactSet is currently projecting 4.2% earnings growth in Q3, 16.1% in Q4, and 14.9% for the full-year 2025. The big economic data point of the week is Thursday’s Retail Sales numbers. A weak number might be forgiven due to the hurricanes. But a strong number will be another log on the stock melt-up fire. With the VIX elevated and hovering around its warning signal threshold of 20, we could see a lot of volatility this week from company earnings and retail sales. The equity market is due for a pullback, anyway.
Be well,
Mike
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