It’s one of those weeks which you look at on the calendar some time before and view it with a mixture of excitement and slight unease, and it is Halloween after all. Major central bank meetings including the Fed, ECB and BoJ will coincide with several of the biggest companies on the planet reporting their earnings, amid a complex geopolitical environment which includes President Trump meeting with Chinese counterpart President Xi. Meanwhile, US stocks markets continue in the only direction they know, while gold bugs experienced their first down week in nine, as market commentators continue to cogitate about the modern-day gold rush that we have witnessed this year.
Of course, we can’t forget that the US government is still shutdown, which means there has been a dearth of any important economic data for policymakers to use. In any event, the FOMC is fully expected cut rates by 25bps on Wednesday, even though the latest Atlanta Fed Q3 GDP estimates sit at 3.9% on an annualised basis. ‘Letting the economy run hot’ could be this year’s phrase for US economic policy amongst many, but it’s still tough to square this kind of strength with major job market weakness. Perhaps rates are not really that restrictive on the economy after all and really the terminal or neutral rate should be higher still. The ECB meeting should be a nothingburger event in truth, with nothing to change its phrase of the year – that policy is ‘in a good place’.
Stocks continue higher with news over the weekend that US and China trade negotiators have agreed ‘a very positive framework’ to extend the trade war ceasefire likely to buoy sentiment. There are increasing questions over the AI drivers and the circular financing fly wheel between the tech giants that is driving this risk rally. We have heard it called an ‘AI hot potato’ and even a Ponzi scheme. Without AI-related spending, the US economy would be in recession. But that is a discussion for another time, as results from Microsoft, Alphabet, Meta, Amazon and Apple will keep us glued to our screens after the US markets close on Wednesday and Thursday. Trick or treat? As we have said a few times previously, stock seasonality and the Santa Claus rally is not far around the corner too.