Weekly | Sliding upward
Your weekly summary with the most important news for your investments.
Your weekly summary with the most important news for your investments:
U.S. stock market performance.
This week's economic and financial factors.
Political and geopolitical considerations.
The major U.S. equity indices continued to rise, adding so far in November average returns of +6% with stocks such as Intel, Microsoft and Walmart reaching their year-to-date highs and Apple falling just -1.2% short of its all-time high. This despite the fact that:
On the monetary front Federal Reserve (Fed) Chairman Jerome Powell was cautious in his comments about inflation developments.
The House of Representatives only has until this Friday to avoid a shutdown of the federal government if they do not extend temporary funding for such activities.
Moody's risk rating agency chose to impose a negative outlook on the country's risk rating from stable, arguing "the growing deficit and a decrease in the country's fiscal debt payment capacity".
Despite this, this week we will not only have inflation data for the previous month, but also industrial production and retail sales data will be published. For now, inflation is expected to ease to 3.4% (from 3.7%) while core inflation, which excludes food and energy prices, will remain at around 4% (no relevant change).
On the corporate front, Alibaba, Cisco, Home Depot, JD.com, Macy's, Ross Stores Target, TJX and Walmart among others will be reporting, giving us a glimpse of US consumer behavior in an environment where inflation and positive real rates continue to persist. According to Factset, with 460 S&P 500 companies having reported their third quarter results, sales have expanded +2.3% while profits have expanded +4.1% compared to the same quarter of the previous year. Giving room for the price to earnings ratio of the S&P 500 to sustain at 18 times, surpassing the 10-year average of 17.5 times. In addition, next Wednesday, the focus will be on the meeting between the presidents of the United States, Joe Biden, and China, Xi Jinping, in a complex geopolitical scenario with two wars advancing simultaneously between Russia and Ukraine and Israel and Hamas, respectively. This meeting will take place in the context of the APEC Summit that is being held this week in San Francisco, USA.
However, let us briefly summarize what Powell said last Thursday, which resulted in a rebound in the rate structure, with the 10-year sovereign rate closing at 4.65% (+13 basis points). In his speech the policymaker noted the following:
"The Federal Open Market Committee (FOMC) is committed to achieving a monetary policy stance that is tight enough to reduce inflation to 2 percent over time; we are not confident that we have achieved such a stance. We know that continued progress toward our 2 percent objective is not assured: inflation has given us some equivocal signals. If it becomes appropriate to tighten policy further, we will not hesitate to do so. We will continue to move cautiously, allowing ourselves to address both the risk of being misled by a few good months of data and the risk of tightening too much. We are making decisions meeting after meeting, based on the totality of incoming data and their implications for the outlook for economic activity and inflation, as well as the balance of risks, determining the extent of additional policy tightening that may be appropriate to bring inflation back to 2 percent over time. We will continue to do so until the task is completed."
With that, once again verbally interjecting almost a month before the next monetary policy meeting. For now, market agents estimate, with a probability of more than 90%, that the issuing institution will leave its monetary policy rate at 5.5%, closing the year with a real rate close to +1.5%. For now, the misalignment in the price of oil towards US$77 a barrel, despite the conflict in the Middle East, will help with inflationary pressures at the end of the year, giving the FED degrees of freedom.
On the political front, everyone is looking forward to the plan put forward by the newly appointed leader of the House of Representatives, Mike Johnson, which will have two programs - a first extension of fiscal spending at current levels through January 19 of next year focused on keeping the federal government operational and a second plan extending through February 2, to include additional federal services. The proposed plan does not include cuts or conflict funding to support Ukraine and Israel, leaving these for larger programs. Congress must approve these proposals before Friday, when, according to the Treasury, there would be no funding to continue operating. This is precisely the reason why Moody's opted to change the country risk rating in line with other credit agencies that adopted similar measures in previous months.
In conclusion, the appetite for equities has been transversal in the month of November allowing an upward slide of stock indexes supported by corporate results. However, only a verbal anti-inflationary intervention or a rising core inflation figure will be reason enough to trim the gains made in recent weeks.
This Week
Monday (November 13)
Quarterly Reports
Mitsubishi UFJ Financial Group Inc.
Nu Holdings Ltd.
Sun Life Financial Inc.
Tyson Foods, Inc.
Korea Electric Power Corporation
Economic Reports
Consumer Inflation Expectations
Tuesday (Nov. 14)
Quarterly Reports
Home Depot, Inc.
Tencent Music Entertainment Group
Vipshop Holdings Limited
Aramark
Sigma Lithium Corporation
Economic Reports
Monthly Change in Underlying Inflation Report
Annual Change in Underlying Inflation Report
Monthly Change in Inflation Report
Annual Change in Inflation Report
Wednesday (November 15)
Quarterly Reports
Cisco Systems, Inc.
Palo Alto Networks, Inc.
TJX Companies, Inc.
Target Corporation
Copart, Inc.
Economic Reports
Producer Price Index Report
Retail Sales Monthly Change Report
Thursday (November 16)
Quarterly Reports
Walmart Inc.
Alibaba Group Holding Limited
Applied Materials, Inc.
NetEase, Inc.
Warner Music Group Corp.
Economic Reports
Initial Jobless Claims Report
Monthly Change in Import Prices Report
Monthly Export Price Change Report
Philadelphia Fed Manufacturing Index
Friday (November 17)
Quarterly Reports
BJ's Wholesale Club Holdings, Inc.
Spectrum Brands Holdings, Inc.
Buckle, Inc.
Twist Bioscience Corporation
Destination XL Group, Inc.
Economic Reports
Preliminary Consumer Confidence Report, Michigan.
Now you have more information about your investments. See you next week with more news.
*This is an illustrative example and does not represent an investment recommendation.