Equities overall had another good week as they appear to continue to be boosted by the liquidity provided by central banks. The S&P 500 did take a pause for breath on Friday. It is probably worth noting that the index comprising of the 500 largest companies in the United States by market capitalisation has hardly moved since early July. We are no chartists but the fact that the index is failing to push on may be a sign that it may need to reset a little lower. This index is not alone in stalling; the oil price has failed to move far from a trading range around the mid $40 a barrel since its recoverynfrom the lows.
In the coming weeks the focus may move away from the efforts and central banks and back to corporate events, as the third quarter earnings season starts in early October. According to Factset analysts are forecasting yet another year on year decline in quarterly earnings. Should this occur it will be the sixth quarter of year over year earnings declines.
Equities seem to remain as out of favour as ever, last week equities saw $7.4m of outflows, money came from Exchange Traded funds as well as mutual funds. The Vix index fell sharply over the week, to close just above 12. Gold remains in demand, in a world where over $10tn dollars of government debt offers a negative yield, and everyone fears more traditional asset classes, gold seems to remain an attractive alternative.
Looking to the week ahead, Monday sees the first election debate between in the red corner Hillary Clinton, and in the blue corner Donald Trump. There have been concerns ahead of the fixture over the fitness of Mrs Clinton, will she stay the course or look for some early knock out punches. Mr Trump may be looking to jab and move probing for weaknesses in the defence of the opposition. As there are three of these debates scheduled, the first one may be a cagy affair.
Federal Reserve members are never far from the news and again will be in the spotlight this week, including Janet Yellen who may be asked to throw further light on what interest rate policy might be. One would suggest that these public speeches should now be taken with a pinch of salt.
The oil price may also be back in focus as members of OPEC gather together at the International Energy Forum.
Janet Yellen won’t be the only central baker in the limelight this week as Mario Draghi speaks at the quarterly hearing of the committee Economic and Monetary Affairs of the European parliament.
It a fairly busy week for economic data around the globe, particularly for Europe and the US. A couple of highlights will be US durable goods orders on Tuesday, and on Thursday the final estimate for GDP growth in the second quarter. On Friday we get the release of the final estimate for the second quarter GDP growth for the UK economy. Europe, the focus will probably be the latest unemployment rate alongside a selection of economic data particularly from the German economy.