Markets

  • Last week ended with a 9th consecutive losing session for the S&P 500.  Since 1928, there have only been twelve prior occurrences of nine consecutive losing sessions, the last one happening in 1980.  Performance in the one and four week periods following the prior occurrences had positive returns on average but negative median returns.
  • The S&P 500 has traded pretty quickly down to its 200 day moving average, which to this point has been acting as a nice support level.  Shorter term technicals have deteriorated recently.
  • From a global perspective, the U.S. has led markets lower which likely reflects significance of the uncertainty in the upcoming election.
  • Third quarter earnings have generally exceeded expectations.  FactSet reports earnings growth of 2.7% with 85% of the S&P reported.  A positive year over year result would break a streak of five consecutive negative quarters of earnings results.
  • Bond yields and the USD edged lower last week.  The recent upward bias of global sovereign yields may act as a ceiling for equity market multiples.

Central Banks

  • FOMC meeting was held and they kept monetary policy on hold as expected.  One key observation in the statement was a change in the language pertaining to inflation.  We suspect this is due to what they see as a likely jump in inflation data in 2017 from the recovery in oil prices.
  • BOJ met and announced their decision to hold steady on monetary policy and continue to target a 0% 10yr JGB and a -0.1% overnight rate.
  • BOE came out with a relatively hawkish statement and the PBOC discussed subtle tightening measures indicating a possible pivot off the dovish tilt.

Economics

  • October job numbers grew 161,000 (vs 175,000 expected), leaving unemployment at 4.9%.  The September and August were revised upward by 35,000 and 9,000 respectively. Wages grew 2.8% annual rate, the fastest clip since 2009.
  • PCE (Fed’s preferred inflation gauge) registered 1.7%, still below the 2% target.
  • ISM Services (54.8) and ISM Manufacturing (51.9) met and beat expectations respectively.
  • Oil continued to fall last week on record OPEC production figures, casting doubts about the September tentative plan to limit supplies.
  • China manufacturing PMI registered 50.4, the fastest pace in two years.

Politics

  • Betting market odds for a Clinton presidency have fallen from 82% to 70% while Trump has risen from 19% to 34% over the past two weeks.
  • The Clinton advantage in the Real Clear Politics Average polling data has fallen from 7.1% on 10/19 to only a 1.7% edge on Friday 11/4.  This is going to be closer that most people think.
  • Markets have grown soft in sympathy with Clinton’s deteriorating lead due to the fact that Trump’s anti-immigration and anti-trade policies are generally not known to be market/growth friendly policies.  At risk of stating the obvious, a Clinton presidency is also much more predictable, while a Trump presidency seems to be anything but predictable.
  • Predicit.org has odds of a Republican Senate at 34% and a Democratic House majority at 7% coming into election week.
  • The U.K. high court ruled that Prime Minister Theresa May might need parliamentary assent for Article 50 notification.