The election is all anyone wants to talk about, but what if it is a non-event for markets?
Tepid economic data in the US was contrasted by surprisingly strong data coming out of the EU. This strengthened the dollar and gave US markets a bit of a pull back on the first week of quarterly corporate earnings.
US Job openings fell by 388K, API Oil stock piles increased by 2.7M barrels, and US consumer sentiment slipped as well, from 91.2 to 87.9. Job openings could be a good sign of positions being filled. Stock piles increasing is not a good sign. Consumer sentiment does not have a silver lining; however, a one-month decline does not make a trend. Should that sentiment continue over the next few months that could spell signs of worry for holiday season consumption.
It was not all bad last week. Retail sales expanded 0.5%, a great showing after a -0.2% last month. Initial Jobless claims came in at 246K when 256K was expected.
German data improved for the week, showing strength in exports and consumer confidence. Germany apparently set the pace as EU industrial production increased more than expected as well.
OPEC talks a good game regarding potential freezes in production or even cuts. The reality is they have in fact produced more oil as of late than ever before; producing 33.64 million barrels per day in September! Their talk has kept oil prices a float while their actions have gone without notice.
China has been on the mend since their fall off last summer and again this past January. As of late they are again showing signs of the global slowdown hitting them. Chinese exports fell 10% in September, while imports also fell 1.9%.
All things considered markets were focused on the release of the Federal Open Market Committee (FOMC) minutes from September. Investors were hopeful to gain insights into a potential rate hike in November or December.
As discussed in the past, most people are discounting a rate hike in November. The meeting comes just days before the election. The popular belief is the ‘data dependent’ FOMC is likely targeting December.
Here is the kicker… If the election is close, markets will be reactive to the outcome. If, however, one candidate takes a commanding lead, the markets will start pricing in that outcome; purchasing/selling the things that will perform well/poorly given the assumed outcome. Here is the sneak attack: If we get into that type of a scenario, the FOMC may not fear the election causing volatility. This could cause the FOMC to act in November, rather than December.
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