“Me and my guitar will sing to you, Oh little Rachael oh”, Eric Clapton

Tesla’s results helped drag the NASDAQ back into positive territory by the end of the week; however, it failed to pull the broader index into the blue. On Friday, there was a mixed bag of US economic data; durable goods orders came in slightly weaker than expected, the Michigan Consumer sentiment index rose slightly, and the year-ahead inflation expectations were revised down to 2.7% in October 2024 from an earlier estimate of 2.9%, but remains above the Fed target. I have also been following the FRED five-year five year forward inflation expectations, which has dipped in the past week. So maybe some positive news there.

Despite this possibly slightly improving anecdotal data on inflation, it is fair to say that overall, the recent data does not endorse the feeling that the Fed will be in any hurry to do more than the 50 basis points anticipated by the market before the year-end. One wonders if US equities are buoyed to a degree by the notion that any news is good news at present. If the economic data is weaker, there is possibly more room for the Fed to move; if it is more robust, that should underpin corporate earnings. Talking of earnings, with just over one-third of the S&P 500 announcing their earnings, the blended year-on-year growth is just under 4%, slightly below where analysts had forecast at the start of the quarter. According to FactSet,  20 S&P 500 companies have issued negative EPS guidance, and 11 S&P 500 companies have positive EPS guidance for Q4. This week, it’s the turn of the energy sector to report, with Exxon and Chevron being the focus.

After 4 months of waiting, the time we hear what Ms Reeves has in store for the country will be revealed. I cannot remember a budget being so discussed ahead of time, anticipated and feared in equal measure. The 2-year gilt yield finished the week at 4.15%, up from just over 4% at the start of the week.

There is a raft of US economic data coming out of the US this week—almost too long to list—but it will help shape the view of the current state of the US economy. I guess the jobs report at the end of the week will be the primary focus. We are also just nine days away from a new US president. Yields across the curve continued to move higher in the past week in the US, a reflection of the possible resetting, once again, of the Fed’s rate-cutting path. At some point, one would expect higher yields to hit equity sentiment. The Vix finished the week higher, probably reflecting the current heightened economic uncertainty. There is also quite a lot coming from Europe: GDP,  consumer confidence and inflation expectations, industrial sentiment, as well as core inflation and unemployment data. It’s a busy week ahead, and equity markets look like they are starting the week on a positive note. The Israeli strikes on Iranian military sites and not oil facilities have led to hope that the attack hurt Iran enough but will not lead to further retaliation. That may be the hope, but being no expert, the situation remains uncertain, to say the least, in the region.