Whats new pussy cat

For better or worse, for richer or poorer, we now know the outcome of the budget and who is taking over the leadership of the Conservative Party. Last week, we also had earnings reports from several members of the Magnificent 7, including Alphabet, Amazon, Microsoft, and Meta. This week, we get to find out who the new leader of the free world is and what the Fed’s plans are for interest rates in the coming months. 

In one of our blogs last week, we discussed what signals the jobs market gave us about the US economy’s outlook. On Friday, we had a weaker-than-anticipated employment report; only 12000 jobs were created in October, rather than the 100,000 forecast. Economists blamed Boeing strikes and the impact of the hurricanes for this miss, so that was alright then. After a disappointing end to the month for stock markets, the first day of trading in November was a slightly better one, at least in the US.

The past month was not good for any asset holders; developed markets fell 2% overall. Bond investors were not left out, as the global government bond index fell almost 4%, highlighting uncertainty over the trajectory of global interest rate-cutting cycles. Commodity prices fell, and small-cap stocks underperformed larger-cap ones. The Mag 7 results season showed why these stocks are so loved amongst the investment community, as revenues and earnings from these names outstripped the broader market. However, the question remains: is the market still paying too much for the outlook?

The US election and the Federal Reserve meeting will be the highlights of the week ahead. Having looked a week or so ago as if this was Trump’s to lose, some newspaper articles suggest this may be a tighter race than was assumed. I guess the other question is how the power is split between Congress and the Senate. The Fed is still expected to cut interest rates by another 25 basis points on Thursday, the announcement delayed by a day so as not to coincide with the election result. The bigger question is how they will manage expectations going forward, assuming they continue to support the soft landing central case. There is quite a lot of economic data for the markets to digest this week,  including the ISM Services PMI, Michigan consumer sentiment, foreign trade data, factory orders, and non-farm productivity measures.

As the bank rate-setting policy committee members meet, the Bank of England is likewise expected to cut rates by 25 basis points this week. It will be interesting to see if Mr Bailey cares to express his views on last week’s budget and how it may influence monetary policy going forward. We, too, get to see the release of the monthly S&P Global Services and Composite PMIs and the Halifax House Price Index. Stocks in Europe appear to be starting the week roughly where they closed on Friday.