Nov 30 – Ryan Puplava gives the weekly wrap. Robin Griffiths tells Financial Sense Newshour listeners that the multi-year dominance by FAANG stocks (Facebook, Amazon, Apple, Netflix, and Google) is over. Energy expert Robert Rapier gives an update on oil prices and the energy sector, and explains where Trump is getting it wrong, in addition to covering the sectors he favors investment-wise. Listen in as Ryan, Robin, and Robert—that's a lot of R's!—explain what moved the markets this week!
One of the key catalysts this week was a speech from Fed Chairman Jerome Powell on Wednesday. The moment he mentioned rates were just below normal, the S&P 500 rallied .8 percent. This was a big step back from the comment he made Oct. 3 that we were a long ways away from neutral. This was important because Fed officials were predicting three hikes next year and that was well above the market’s expectations as evidenced in the Fed futures market and has helped to flatten the yield curve.
Powell also mentioned that the Fed will be paying close attention to incoming economic data so, essentially, it’s possible the Fed may be nearing a time to pause in 2019. Powell’s comments led to one of the second strongest equity rallies we’ve seen this year and we are now 2.3 percent for the S&P 500.
The FOMC minutes out this week further corroborated with his statement that many committee members are considering an adjustment in language from “further gradual rate increases” to an emphasis on “evaluating incoming data” or data dependent as has been used in the past. The minutes also hinted the rate increases from here might be adjusted down to 20 basis points from 25. This in combination with a soft PCE core print of a price increase of only .1 percent versus .2 percent expected, which led to a rally in Treasury prices and a drop in rates.
Though in November it looked like a Santa Claus rally might not be coming this year, Jer-HOHOHO-me Powell came to the rescue.
The next key item this week was trade soundbites from Trump and the WSJ. Trump said we are close to a deal but he isn’t sure he wants one because he said, it’s a good deal. This came off earlier comments this week that it is highly unlikely he will refrain from the planned rise in tariffs from 10 to 25 percent set to hit in January.
The WSJ later in the week cited from unnamed sources that both sides are considering forestalling any more tariffs through the spring to set the stage for further discussions. Investors are looking for any small victory possible regarding a de-escalation to the trade war and an agreement this weekend between Trump and President Xi at the G-20 meeting would be just that – if it happens.
Companies and investors are concerned about the increase in tariffs set to go up in January and with the possibility of more tariffs on another $267 billion with Trump mentioning even iPhones could be tariffed this week. The Retail industry group and Chinese equities would stand to benefit the most from a pause in trade war escalations. Not to mention equities as a whole for both countries.
Those were the two key stories this week but other areas worth mentioning are oil with a draw in natural gas inventories holding natural gas prices high while inventories are near five-year average lows and we still have supply and slow growth concerns for oil globally. OPEC will meet next week to discuss possibly a cut.
The one group benefiting from energy’s weakness has been the Transports. This has been one of the few leadership places in November in the market with the Dow Jones Transports up around six percent.
One last thing to mention this week is some interesting economic data: New Home Sales declined 8.9 percent in October over September and, at the current sales pace, there is 7.4 months supply of new homes for sale, the highest since Jan. 2011. This is a possible warning for homebuilders that prices may come down. That’s the market wrap for the week. All eyes are on Buenos Aires and the Trump and Xi meeting Saturday night but hopes have been tempered by many articles and tweets this week.
For a full archive of our Financial Sense Newshour podcasts containing daily updates, interviews with guest experts, and book interviews, go to www.financialsense.com/financial-sense-newshour.