What to expect in the markets in the week ahead
September 27
Donald Trump has all but promised to dispute the election outcome if he loses. Wall Street’s taking him at his word.
Volatility markets from stocks to currencies and bonds show investors bracing for turbulence not just on election day, but for the ensuing weeks as well. The fear is that results from the Nov. 3 vote — already the most expensive event to hedge against ever — won’t be clear enough that a winner emerges without a protracted legal battle.
If that happens, the potential for political chaos and prolonged uncertainty is seen as a bigger risk for equity markets than who actually wins the vote, according to UBS AG.
The election outcome itself, once you know it, that would have meaningful but not an oversize impact on the market. But the prospect of it becoming a complete mess is another element that people don’t really know how to price.
-Stuart Kaiser, the bank’s head of derivatives research
Here’s a look at U.S. equity size and style total returns year to date:
Source: jhinvestments
Weekly market recap
The “sell-off has stabilized a bit over the last few days, but there are still no real signs of strength. Thus, the trend remains bearish and not much to bet on a rebound.
-Mark Newton, managing member at Newton Advisors
Both the $Dow Jones Industrial Average(.DJI.US)$ and $S&P 500 index(.SPX.US)$ posted four-week losing streaks, their longest slides since August 2019, despite Friday’s rally. The Dow lost 1.8% this week and the S&P 500 closed 0.6% lower week to date. The $Nasdaq Composite Index(.IXIC.US)$ had its first weekly gain in four weeks, rising 1.1% over that time period.
That mixed weekly performance followed concerns around the state of the U.S. economic recovery as well as uncertainty around a new fiscal stimulus bill.
House Democrats are preparing a $2.4 trillion relief package that they could vote on as soon as next week, a source familiar with the plans told CNBC. The bill would include enhanced unemployment benefits and aid to airlines, but the overall price tag remains well above what Republican leaders have said they are willing to spend.
After a buoyant and hopeful summer, financial markets are cooling in the face of reality. High-flying tech and tech-related stocks are in a full-blown correction, and weakness has recently spread to broader indexes, with a distinct smell of risk-off in the air. We had expected a gradual, albeit choppy, economic recovery, but it appears that some investors were not prepared for setbacks along the way.
-strategists at MRB Partners
The week ahead in focus
Here are the most anticipated earnings releases for the week ahead:
- $Weibo Corp(WB.US)$, $Micron Technology Inc(MU.US)$, $McCormick & Co Inc(MKC.US)$, $PepsiCo Inc(PEP.US)$, $Constellation Brands Inc(STZ.US)$, $Conagra Brands Inc(CAG.US)$ are among the companies slated to release their latest quarterly figures this week.
- The IPO market is still partying. Lots of IPOs are hitting the market in the week ahead.
Here’s a list of economic events for the week ahead:
- The first Trump and Biden debate
Donald Trump and Joe Biden are preparing to face off next week in the first of three presidential debates, as a Supreme Court vacancy supercharges the election season and the U.S. continues to grapple with the coronavirus pandemic.
The first debate will be held at 9 p.m. Eastern on Tuesday, and is hosted by Case Western Reserve University and the Cleveland Clinic, in the battleground state of Ohio. 「Fox News Sunday」 anchor Chris Wallace will moderate.
- Final Jobs Report Before U.S. Election
The last U.S. jobs report before the November election will probably show the labor market’s rebound continued in September, though losing some steam.
Employers probably added 850,000 workers in September, a step down from the 1.37 million a month earlier, according to the Bloomberg survey median. The unemployment rate is seen easing to 8.2% from 8.4%, smaller than the 1.8 percentage-point drops in August.
The monthly jobs report on Friday will follow the first presidential debate between President Donald Trump and Democratic challenger Joe Biden on Tuesday. The report will also wrap up a busy week on the U.S. economic calendar, which includes figures on income and spending, manufacturing and consumer confidence.
Source: Bloomberg, Yahoo Finance, Barron’s, Jhinvestments, Edwardjone
