Overview: Global stocks notched a third straight week of gains on the heels of third quarter earnings, ongoing U.S./China trade talks, and progress in Brexit negotiations. Both U.S. stocks (S&P 500) and international (MSCI EAFE and EM) were up about 1.2% for the week. Third quarter earnings have now been reported for about 36% of the companies in the SS&P 500 index, with nearly 80% of reporting companies beating analyst estimates. Strength of earnings has been across various sectors, with a common theme that companies have been able to manage tariffs while pursuing product and marketing initiatives. Progress continues towards a phase one agreement that President Trump and President Xi are expected to sign in Nov. The ‘cease fire’ is welcome news to move forward to avoid further economic damage. In bonds, U.S. 10-year Treasury yields increased 5 bps on the week to 1.80%, up from 1.67% at the start of Oct.
Looking Ahead: The deadline for Brexit has been postponed for three months, so this relieves tension over the original Oct. 31 deadline as both sides work on a deal. Earnings continue this week, and the economic highlight will be the Federal Reserve meeting Tuesday and Wednesday, where the Fed is expected to cut the funds rate by 25 bps to 1.75%. Important economic data will be released on Wednesday (3rd quarter GDP estimate – consensus 1.7%), and Friday (employment report – consensus 93,000 new jobs and unemployment 3.6%). Markets will continue to focus on this fundamental economic data, as well as trade and earnings reports. Investors will await important details on any changes to Fed balance sheet policies and commentary on interest rates.
Sources: Goldman Sachs Asset Management, Pac Global, Factset
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