Good Monday morning and welcome back to the land of blinking screens. The key to the early trade today is easy to summarize as uncertainty has returned to the markets. The question, of course, is to what degree the election, the Fed, interest rates, and oil will spook the markets on this Halloween Monday.
In case you spent the weekend working on costumes and/or shopping for candy, the big story currently is the reopening of the probe into Hillary Clinton's emails. If you had any doubt that the election could still influence the markets, one need look no further than Friday's intraday action as proof to the contrary as stocks took a serious dive after the FBI announced it was going to review another 650,000 emails from Anthony Weiner's computers.
For the markets, the issue here is that the outcome of the election has been assumed. However, the 11th hour probe has put at least some degree of uncertainty back into the mix. And while the odds of a Clinton victory are still substantial according to most polls, there is a great deal of talk about a surprise outcome and/or a black swan event.
A similar theme can be applied to the Fed meeting this week. While no one really expects Janet Yellen to do anything that might appear to be "political" a handful of days before an election, the FOMC does meet this week. As usual, analysts will be parsing every word of the FOMC statement for clues about the Fed's next steps. In short, most players expect a rate hike in December. It is what happens next that has investors scratching their heads.
Next up is the issue of rising interest rates. Don't look now fans, but with some stronger-than expected economic data hitting the street last week, yields rose again. And with important technical levels now in play on the important bond charts, traders fret that a further spike in rates might negatively impact the outlook for the economy and corporate profits.
Finally, there is oil. With word that OPEC may not be in agreement on how to cut production (shocker), oil prices are sagging this morning. And while oil prices are currently high enough to keep talk of systemic risk at bay, don't forget that this was the focal point of the market when oil prices were crashing. As such, traders never let their eyes stray too far from the oil charts these days.
In summary, all of the above puts uncertainty in play and represents a reason to remain a bit cautious at this time. Thus, it would appear that the "sloppy period" will remain in place for at least a little while longer.
Current Market Drivers
We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can both identify and understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).
1. The State of the Election
2. The State of the Earnings Season
3. The State of Global Economies
4. The State of Global Central Bank Policies
Thought For The Day:
The snake you see is not the one that bites you. -Al Goldman
Wishing you green screens and all the best for a great day,
David D. Moenning
Chief Investment Officer
Sowell Management Services
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The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning's opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any investment program.
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