28 Oct A BIG WEEK BUT WILL IT BE A DUD LIKE PAST BIG WEEKS?
Many times I have commented about the narrowness of the market. Bloomberg quantified this lack of breadth on Friday. The newswire stated Thursday was the third time this year that the number of decliners was least 400 more than gainers when the NASDAQ was up at least 0.5%. Prior to 2019 it had only happened four times since 2010—a sign of deeper and deeper concentration of size and equity weightings.
Wow! Historically such concentrations indicate a market top. However with this written, as evidenced by the 200 day moving average which is flat since July 2018, a case can be made the market has already reached an apex. I am not aware of another time that such has occurred.
Before Vanguard’s Bogle’s death, he commented that the annual return of the popular 60% 40% stock bond portfolio would be around 1.5% for the next 10 years, the result of concentration of funds in a few stocks and record low interest rates. Bogle also commented individual shares could outperform as monies rotate from the concentrated issues into the lesser owned shares.
Wednesday is a FOMC meeting. At the time of this writing, the markets are suggesting a 90% chance of another reduction, the third of the year. Last year at this time, it was widely expected the Central Bank would increase rates 2-4 times.
As widely noted trade is blamed for the massive change in sentiment. While recent data has suggested some slowing, the economy is still stronger than its annual growth rate from 2008-16.
There have been some suggestions the market (and the President) has bullied the Fed into acting, believing equities would crater if no action is taken.
I don’t know how to respond to this view other than to write trade issues has and will continue to have a greater impact upon the technology sector given supply chains and the like.
The news now emanates from the West Coast, a point Facebook likes to make for as according to the company 72% of Americans now get their news from this social media giant. Can we make an argument there is no interest like self-interest? It is not what one writes but rather why one writes it?
The technology sector et.al. is getting hurt by trade, a point evidenced by an annual decline in both revenues and profits of this sector.
As inferred above, this week can potentially be a “big week” given the plethora of top tier events and economic releases. As stated there is a FOMC meeting, but also released is trade data, a confidence survey, third quarter GDP, the ISM and the October’s labor report. All can have a considerable impact upon psychology and the markets.
Also occurring this week is four of the largest seven companies in the S & P 500 report earnings. As noted several times, earnings released to date have been mixed.
I must write that in other past “big weeks,” such have proven out to be duds.
Last night the foreign markets were up. London was down 0.04%, Paris up 0.13% and Frankfurt up 0.44%. China was up 0.85%, Japan up 0.30% and Hang Sang up 0.84%.
The Dow should open mixed. The 10-year is off 10/32 to yield 1.84%.