Intro: Investors will assess the damage to the Southeastern US as well as how the 2 candidates performed in the latest Presidential debate. On the economic calendar, we have Retail Sales, PPI and University of Michigan Sentiment. The Bank of England is also scheduled to meet.
Hurricane Matthew: In the aftermath of one of the strongest hurricanes in recently memory, investors will be looking to see how devastating the damage is to the Southeastern US. The more insurance claims we see from damaged homes and businesses, the more insurance companies and reinsurance companies stock will get hit. With the money they do pay out, we can potentially see home builders spike in an effort to rebuild. Consumer Discretionary companies may get a boost in the area as insurance claims we will be used to replace furniture and electronics. Airlines and other transportation companies could potentially slip the longer it takes them to get their schedules back up to speed. If the storm has a round 2 along the Florida coast, estimates may have to wait.
2nd debate between A Giant Douche and A Turd Sandwich: On Sunday (10/10) we had our 2nd Presidential debate. After the 1st debate, the market effectively called Hillary Clinton the winner as the broader markets went up. If Hillary is to win the 2nd debate, we should expect the US markets to be higher. Should Trump win the 2nd debate in the minds of investors, expect to see the broader markets sell off as uncertainty enters the market.
Certain sectors will again be affected should the candidates point out their specific policies. We will likely see energy companies react such as oil and coal bounce higher if Trump were to win while alternative energy firms would go higher if Clinton were to win. The Trump Trade (the Mexican Peso weakening against the US Dollar while the Russian Ruble strengthens) will also be affected along with other currencies against the US Dollar from the outcome. Should Trump win, expect the Dollar to weaken while a Clinton win would leave it relatively unchanged.
FOMC Meeting Minutes: On Wednesday (10/12) the latest FOMC Minutes are released. Investors will be looking closely at the language of the minutes to see what may have changed from the previous FOMC meeting. Unless we see significant language changes, expect limited movement in the broader markets.
Bank of England: The Bank of England is scheduled this week to publish its policy decision, minutes of the meeting, official votes and new forecasts. After lowering its benchmark interest rate in August to the lowest in its 322-year history, investors will look to see if they will cut it any further towards zero. With the FTSE 100 recently hitting new all-time highs after the gloom and doom prediction following Brexit, it is unlikely they would announce any additional QE at this time. If they were to announce additional quantitative easing, we can expect to see British stocks continue to climb. At this moment, the British markets movements don’t seem to correlate with the US markets.
Continuing on Brexit ramifications: It’s looking like the UK will initiate Brexit sometime in March of next year. Even though the FTSE 100 hit a new high on the thought that British goods will be cheaper to export as the British Sterling hits a new 31 year low, investors will be listening to Angela Merkel as she plans on being a tough negotiator for Britain to have access to the single market. The tougher her rhetoric is, the lower the pound will go. The French President is also talking tough rhetoric. Any time either one of them of them talk’s tough, look for the pound to fall further.
Sterling Flash Crash: “Sorry, your fingers are too fat for this trade.” Last Friday, the British Sterling crashed 6% in Asian markets, hitting a fresh new 31 year low before slightly recovering. With the continued dropping of the pound, and the rhetoric mentioned above, tourism to the UK should see a spike. Looks like it’s time to book that flight to England and pick up a pint.
Retail Sales: On Friday (8/14), Retail Sales are released. Should the figure come in better than expected, it would continue to signal an improving economy to the FED, indicating that the average US consumer can absorb an interest rate hike by the end of the year.
Gold: In the past month, the precious metal has dropped from $1,350/oz to $1,250/oz as odds of a rate hike in the US have risen. As odds increase of a rate hike, gold may continue to slip. However, if the Fed fails to raise rates, (like they have done all year) the current time would be ideal to buy the precious metal.
Columbus Day: On Monday (10/10), banks and the bond market in the US are closed for Columbus Day (since history has proven that the Vikings discovered North America 500 years before Columbus did, anybody up for changing the holiday to Viking Day to honor the Vikings for finding the new world?). Canadian markets are also closed for their Thanksgiving while Japan’s markets are closed for (I’m not making this up!!!) Health-Sports Day. However, the US equity markets will be open. We can expect lighter than normal volume with the potential for irregular volatility.
Happy Health-Sports Day!!!!