Market Outlook for the Week Ahead
- Nvidia Earnings Awaited Amid High Expectations
- Bitcoin Soars, Analysts See $100K Target
- U.S. Housing Data and Fed Speeches in Focus
- Oil Slumps While Geopolitical Tensions Boost Gold
- Key Economic Data: UK, Eurozone, and China
Fed Chair Powell Cautious on Rate Cuts Amid Strong U.S. Economy
Federal Reserve Chair Jerome Powell expressed confidence in the U.S. economy’s strength, suggesting there’s no urgency to reduce interest rates quickly. Speaking in Dallas, Powell noted that with the economy performing well, the Fed has room to approach further rate cuts cautiously. Recent data show inflation nearing the Fed’s 2% target, but Powell emphasized that achieving this goal might follow a “sometimes-bumpy” path. The Fed has already reduced rates twice since September, most recently by a quarter-point, and further cuts remain likely if inflation continues to ease. Powell also highlighted improvements in productivity and labor supply, which have bolstered economic growth without causing overheating. The Fed is maintaining a careful stance as incoming President Donald Trump’s economic policies — including potential tax cuts, immigration limits, and tariffs — may introduce uncertainties. Powell reiterated his commitment to the Fed’s mandate, dismissing any potential resignation under presidential pressure. The labor market remains stable, and Powell noted that strong productivity gains could allow the Fed to control inflation effectively.
Concerns Over Trump’s Return as APEC Leaders Warn of Protectionist Shift
At the Asia-Pacific Economic Cooperation (APEC) summit in Lima, Peru, leaders voiced concerns about potential economic upheaval as Donald Trump prepares to return to the White House. Andres Velasco, dean of the School of Public Policy at the London School of Economics, directly addressed the potential impact, warning of a “more protectionist world led by the United States,” which he said could adversely affect Pacific Rim and Latin American nations. Trump’s anticipated policies — including expanded US oil and gas production and heightened tariffs — are seen as potential threats to climate efforts and global trade stability. While some leaders, such as Vietnam’s President Luong Cuong, hinted at the risks of “isolationism and trade wars,” they refrained from mentioning Trump by name. However, Velasco’s remarks openly acknowledged the challenges the US administration may bring to APEC’s trade-focused agenda. The cautionary tone may intensify as other influential figures, including JPMorgan Chase CEO Jamie Dimon, are set to speak, and as US President Joe Biden and China’s President Xi Jinping prepare for a meeting later in the summit.
JPMorgan Predicts Fed Will Pause Rate Cuts in 2025 Amid Economic Uncertainty
JPMorgan Asset Management anticipates that the Federal Reserve will likely pause its rate cuts after December, allowing time to assess the effects of policies introduced under President-elect Donald Trump. Karen Ward, chief market strategist for Europe, the Middle East, and Africa at JPMorgan, highlighted the uncertainty surrounding 2025, suggesting that the Fed may hold off on additional rate adjustments until clearer economic indicators emerge. While Wall Street generally expects more rate cuts, Ward’s view diverges, anticipating only one more rate cut in December before a pause through 2025. The Fed has already reduced rates by a combined 0.75% in recent months, with another 0.25% cut likely in December. Ward also noted that potential fiscal expansion and rising US inflation could make Northern European government bonds more attractive investments.
Taylor Swift’s Toronto Shows Boost Local Economy, Attract Big Brands
Taylor Swift’s highly anticipated Eras Tour kicks off in Toronto, transforming the city as banks, brands, and local businesses leverage her presence. Swift’s six shows have not only attracted hundreds of thousands of fans but also significant investment from top corporations. Royal Bank of Canada and Rogers Communications, official sponsors, are using the event to enhance their brand visibility. Rogers, also the owner of the concert venue and the Toronto Blue Jays, is offering season ticket incentives tied to concert seats to boost baseball sales. The tour is expected to generate C$282 million in economic impact and C$152 million in direct spending, with 500,000 visitors and downtown hotel bookings up by 83% compared to last year. Toronto authorities are using the event as a trial for handling infrastructure and traffic in preparation for the 2026 FIFA World Cup.
Lula’s Partnership with China Risks Conflict with Trump’s Trade Policies
Brazilian President Luiz Inácio Lula da Silva is strengthening Brazil’s economic ties with China, seeking support from Beijing for infrastructure projects and development. Lula’s administration has launched ambitious road and rail projects to link Brazil’s interior to Pacific ports, facilitating faster trade with China. Chinese President Xi Jinping’s upcoming visit to Latin America, including Brazil, highlights this growing alliance. However, this partnership risks friction with the U.S., especially with President-elect Donald Trump’s more aggressive stance on China. Trump’s potential tariffs could disrupt Brazil’s trade balance if the U.S. discourages closer ties with China. Brazil’s approach aims to leverage China’s Belt and Road Initiative, albeit without formally joining. While Washington warns Brazil of risks, Lula is focused on boosting trade, particularly in agriculture, to meet Asian demand. This strategy underlines Brazil’s pivot to Asia, even as it faces pressure from the U.S.
Musk’s New “Efficiency” Department Criticized as Inefficient and Unnecessary
Elon Musk has been selected to lead a new Department of Government Efficiency (DOGE) in the upcoming Trump administration, aiming to reduce federal waste and streamline spending. However, critics argue that this initiative lacks true authority and overlooks the government’s existing efficiency measures. According to labor economist Kathryn Anne Edwards, Congress already has control over spending, with the Government Accountability Office (GAO) effectively auditing and identifying waste. The GAO, celebrating its 100th year, reported a $74 billion recovery in fiscal 2023 alone and saves the government $133 for every $1 it spends. Edwards argues that the federal government’s real issue lies in a lack of Congressional action on identified inefficiencies, rather than a lack of oversight. She contends that DOGE, lacking Congressional backing and expertise, could prove more symbolic than impactful, and calls for leadership grounded in understanding government functions.
Italy Secures Local Ownership for Monte dei Paschi as Rome Sells 15% Stake
Italy’s Finance Minister Giancarlo Giorgetti has successfully pushed for Banca Monte dei Paschi di Siena (MPS) to return to private ownership, ensuring it remains in Italian hands. Through recent efforts, Italian tycoons like the Caltagirone Group and the Del Vecchio family acquired stakes, along with Banco BPM, which now holds 5% and could potentially become MPS’s largest shareholder. This move aligns with the government’s strategy to establish a third major banking group in Italy, reducing foreign influence. Following years of financial instability and restructuring, MPS has seen profitability return with the help of higher interest rates. Giorgetti’s efforts contrast with Germany’s struggle over Commerzbank, as Italian Prime Minister Giorgia Meloni has managed to protect MPS from foreign acquisition while backing strategic deals, like the potential sale of ITA Airways to Lufthansa. Italy’s current 11.7% stake in MPS is expected to be further reduced to meet EU privatization requirements following its 2017 bailout.
Brookfield Corp.’s Profits Climb with Wealth Unit Expansion, Eyes Global Growth
Brookfield Corp. reported a significant profit increase in the second quarter, driven by its wealth solutions business, which nearly doubled its profits. The Toronto-based firm, led by CEO Bruce Flatt, saw distributable earnings reach $1.26 billion, or 80 cents per share, a 19% rise from the previous year. Brookfield’s wealth unit, formerly Brookfield Reinsurance and managed by Sachin Shah, recently reinsured $1.4 billion in UK pension liabilities, marking its expansion beyond North America. With recent ventures in Japan and plans to explore the UK and Asia, Brookfield aims to grow its wealth assets to $300 billion within five years. While other Brookfield divisions reported slower growth, the company closed over $30 billion in recent financings and repurchased $1 billion in shares. In a strategic move, Brookfield Asset Management relocated to New York to tap into broader US investment markets.
ECB Prioritizes Risk Management in October Rate Cut, Confident Inflation Will Slow
The European Central Bank (ECB) cited risk management as a key reason for its early rate cut in October, according to the latest policy meeting summary. Officials believed that cutting rates sooner posed minimal risks and allowed the bank to adjust policy to a weakening growth outlook and slowing inflation. Some members initially suggested waiting until December for more data, but ultimately agreed on the timely move. The ECB expressed growing confidence in meeting its 2% inflation target, observing strong disinflation trends and initial signs of improvement in services inflation. Concerns were noted regarding the labor market’s potential slowdown and an increase in savings rates, influenced by high interest rates and economic uncertainty. ECB officials highlighted the importance of keeping options open for future rate adjustments, reinforcing a cautious approach to monetary easing as inflation nears the target.
MacKenzie Scott Donates $65 Million Amid Quiet Year After Amazon Stock Sale
Philanthropist MacKenzie Scott recently donated $65 million to the New York-based nonprofit Local Initiatives Support Corp. (LISC) following her sale of Amazon stock worth around $8.4 billion. Known for her substantial, no-strings-attached contributions, Scott has had a quieter giving year in 2024, with only $640 million granted to 361 organizations listed on her platform, Yield Giving. This latest contribution is LISC’s largest gift to date and will support housing and community development projects nationwide. Scott’s recent stock sale has left much of the $8.4 billion unallocated to specific charities, with no political donations recorded this year. LISC’s CEO Michael Pugh noted that Scott’s unrestricted funding enables significant projects that benefit communities across the U.S., helping to fulfill the “American Dream” for many.
*The viewpoints are attributed by Wallis Zeng.
Market Momentum Slows, But Long-Term Outlook Remains Positive: AimStar’s Take on Diversification Opportunities
Uptrend Still in Place, but Some Short-Term Caution Needed:
AimStar remain positive on the stock market over the next 12 months, supported by the Federal Reserve’s easing cycle. However, momentum is starting to slow down. We’re seeing signs such as fewer stocks making new highs and defensive sectors (like utilities and healthcare) showing strong performance, which usually signals potential market weakness. The current sentiment suggests that the market could experience a short-term pullback. Despite this, we recommend using any dips as a chance to accumulate stocks as the broader uptrend is still intact.
Rising Concerns on the Horizon:
There are a few growing concerns impacting the market. Recently, East Coast port closures and escalating tensions in the Middle East have spooked investors. These events could disrupt supply chains, particularly in the retail industry, which depends heavily on these ports. On the flip side, geopolitical risks have boosted defense stocks, as we’ve seen a breakout in the Aerospace & Defense sector.
Strong September Performance Defies Expectations, but Election Year Could Add Volatility:
September is usually a weak month for stocks, but this year, the S&P 500 posted a 2.02% gain, defying its usual negative trend. However, with the upcoming election, October might see some volatility or consolidation. Still, any market dips should be viewed as buying opportunities, as the long-term outlook for stocks remains strong.
Market Signals Remain Positive:
In the medium to long term, things are looking good for equities. Around 76% of stocks in the S&P 500 are trading above their 50-day and 200-day moving averages, which is a positive sign. Additionally, riskier sectors like consumer discretionary are outperforming defensive sectors, indicating that the market is positioning itself for more upside over the next 12-18 months.
Focus on Diversification:
For the past year and a half, concentrated bets on a few large stocks have worked well. However, the market is now broadening out, and we believe a diversified approach will be more effective. Historically, when markets become highly concentrated, it often sets the stage for more average stocks to catch up, which is good news for diversified portfolios.
*The viewpoints are attributed by Tony Yuan
Nvidia, the darling of the AI sector, is set to announce its quarterly earnings. Meanwhile, the cryptocurrency market continues to rise, the UK is preparing to release its inflation data, and oil prices appear to remain sluggish.
Here are the top five events to watch in the market this week:
1. Nvidia Earnings Awaited Amid High Expectations
Nvidia (NASDAQ: NVDA) will release Q3 earnings Wednesday, a key test for tech and AI-driven stocks. Its 200% stock surge this year makes it the world’s most valuable company, but high expectations may trigger volatility. Other earnings include Walmart, Target, and key Chinese firms like Baidu and Pinduoduo.
2. Bitcoin Soars, Analysts See $100K Target
Since the U.S. election on November 5, Bitcoin has surged 30%, surpassing $90,000 for the first time. The crypto market’s total value now exceeds $3 trillion, rivaling Tesla, Meta, and Berkshire Hathaway.
The rally is fueled by expectations of a pro-crypto regulatory environment under the incoming Trump administration. Analysts increasingly believe Bitcoin could hit six figures, though the feasibility of Trump’s promises, including a national Bitcoin reserve, remains uncertain.
3. U.S. Housing Data and Fed Speeches in Focus
This week, investors will receive key housing reports, including building permits, housing starts, and existing home sales, along with jobless claims. Friday’s PMI data may offer insights into business reactions to Trump’s trade policies.
Earnings from Walmart and Lowe’s on Tuesday will shed light on consumer spending. Fed officials, including Austan Goolsbee, Jeffrey Schmid, and Beth Hammack, are also scheduled to speak.
4. Key Economic Data: UK, Eurozone, and China
The UK will release October CPI on Wednesday, with inflation expected to rise to 2.2%, surpassing the Bank of England’s 2% target. BoE Governor Andrew Bailey will address inflation and monetary policy at a parliamentary hearing on Tuesday. Retail sales and PMI data are due Friday.
China’s LPR rates, lowered last month to boost credit demand and growth, will be updated Wednesday.
The Eurozone will publish CPI data, while France, Germany, and the broader Eurozone release PMI figures on Friday.
5. Oil Slumps While Geopolitical Tensions Boost Gold
Oil prices fell 2% on Friday, with Brent down 4% and WTI off 5% for the week, amid weaker Chinese demand and cautious Fed rate-cut signals.
China’s slower refinery activity and the IEA’s forecast of an oil surplus by 2025 added to concerns. Fed Chair Powell hinted at a cautious approach to future rate cuts, limiting fuel demand growth.
Gold rebounded from a two-month low, reaching $2,597, as heightened geopolitical risks boosted safe-haven demand. Reports suggest the U.S. lifted restrictions on Ukraine’s use of American weapons, potentially escalating the conflict.
The most anticipated earnings releases for the week of November 18, 2024 are Nvidia #NVDA, Snowflake #SNOW, Walmart #WMT, Palo Alto Networks #PANW, NIO #NIO, Symbotic #SYM, Target #TGT, ZIM Integrated Shipping Services #ZIM, Trip.com #TCOM, and Workhorse Group #WKHS.
Published by Vikki Zhao
November 18, 2024, 10:00 AM EST. 6 min read
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