Key Market Trends
Tip: Use it as a quick guide for the direction of major markets in the short term. A client of mine used to call me almost daily asking about the direction the markets were going. This cheat sheet will help you understand the market’s short-term trend.
Key drivers for the week of July 12, 2020
TIP – Here is a one-minute bullet-point summary. This tool gives investors and financial professionals a quick and simple list on what to look out for, and the main talking points of the week.
- Delta variation likely to dampen global growth into 2H
- Stocks, bonds and bond markets rally as ECB dovishness and Fed QE tapering eased worries
- The budget fight in Congress is over the Infrastructure Bill and raising the debt ceiling
- FOMC Expected to Say “substantial further progress” Not yet made
- Heavy earnings schedule: Tesla, Apple. Microsoft. Facebook. Pfizer. Amazon
- U.S. data: Q2 GDP, new home sales, durables, confidence, income, ECI
- Japan docket contains PPI (producer’s price index), retail sales, unemployment and confidence
- Eurozone GDP due, PMI, ESI, unemployment and HICP
- German Ifo business sentiment, unemployment, HICP, import prices
- UK monitors Brexit agreement regarding Northern Ireland protocol
Week Ahead: Delta Dents Global Growth
On July 26, 2020
Forecasts continue to be optimistic about global growth and a strong second half is expected. The accelerated spread of the Delta covid has been a source of concern and increased downside risks. However, we believe the virus will have a limited impact on growth.
The increased vaccination rate, especially in Western countries, together with the 1H momentum within more open economies and the pull caused by pent up demand, should be able to help reduce the negative impacts. Supply constraints are also decreasing in many sectors. The central bank will also continue to offer accommodation.
Delta risks are likely to delay such actions from the FOMC and ECB, despite the increased concern over QE tapering. As seen by the ECB’s stance last week, the bar has been raised for a tightening of policy.
The S&P 500 continues to rocket to new levels and hasn’t touched the 200MA since last June and we think it could correct at any moment. One of these triggers could come from a government shut down.
The $28.5 trillion debt level is the starting point, as the suspension of the debt limit for two years began in 2019, but will end by the end of July. Treasury Secretary Janet Yellen thinks the federal government is going to hit its spending limits very quickly. “unthinkable”.
Mitch McConnel, Senate Minority Leader (R-KY), said Republicans will not support a raise in the U.S. Debt Limit. The Senator said “I can’t imagine a single Republican in this environment that we’re in now — this free-for-all for taxes and spending — to vote to raise the debt limit.”
I think that there’s a There is a 50/50 chance that the government will shut down because Republicans seem to be united against raising debt limits. Inflation will be the reason why Republicans won’t immediately support increasing the limit….. but will most likely increase it on their terms. The government could increase the limit through reconciliation but it is unlikely. It is likely that you will run out of funds before the job gets done. So, I believe there’s a high probability of a shutdown.
Markets were slightly firmer today. Wall Street benefited greatly from the rally on European bourses following the dovish ECB stance. The dovish stance of the ECB has fueled renewed belief that the FOMC and ECB will not start tapering soon. Unexpectedly high jobless claims also caused some concern, but they added to the dovish outlook regarding monetary policies. The NASDAQ was up 0.36%, with the S&P 500 0.2% higher yesterday. Treasuries also gained a bit in value, based on the same factors. The 10-year rate was 2 basis points lower, at 1,278%. For the 30-year, it was 1.914%. The 2-year was slightly lower at 0.0200%.
We expect the market to meander through the weekend as they assess recent positioning and monetary factors, including the upcoming FOMC meeting (Wednesday), following the ECB’s meeting. Also, we will look at the Delta variant, global growth, and the uncertainty surrounding it. Today’s calendar is light, with just the flash July Markit manufacturing, services, and composite PMIs. The earnings slate slows to end the week but features Honeywell, NextEra Energy, American Express, Equinor, Roper Technologies, Kimberly-Clark, Schlumberger, Regions Financial.
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- Index & Sector Trends – You can use this information to determine which areas or sectors are experiencing an upward or downward trend.
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- Stocks to Watch – Stocks with dividends and high-quality blue chips to watch
- Economic Calendar – Discover what’s going on this week.
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