- Risk-on back on after clarity on Fed policy, trade. After a speech from Federal Reserve (Fed) chair Jerome Powell last Wednesday provided relief for investors that policy would not be as tight as feared in the coming year, global equities momentum is continuing after the U.S. agreed to postpone a planned increase in tariffs on $200 billion of Chinese goods as the two countries restart negotiations in earnest. The two sides are set to meet in Washington beginning in mid-December with a focus on the longstanding issues troubling American business leaders, including the forced transfer of technology, intellectual property protection, and cybersecurity. It is also expected that China will purchase more U.S. goods in agriculture, industrials, and technology. The goal is that the opening of these markets will help restore balance to global trade, while reducing the costs of cross-border commerce. While hard-liners may view the truce as a temporary delay tactic, we view any clarity relative to supply chain disruptions, input costs, and tariffs as supportive for further growth in trade and capital investment. It should also be noted that the 90-day timeframe, ending on or around March 1, would occur just before China’s annual national legislative session, normally a period where Chinese leaders are wary of making international concessions. Any escalation of the tariff war could be perceived as embarrassing for President Xi leading into this meeting. In our latest Weekly Market Commentary, due out later today, we share more of our thoughts on these major market-moving events and reiterate our positive stock market outlook.
- Oil catching a bid early. WTI crude is set to begin the week sharply higher on news that Russia and Saudi Arabia have announced an agreement to manage the oil market with the expanded members of OPEC, dubbed “OPEC+.” Though output cuts have not been confirmed by the group, the initial agreement opens the door to a production cut deal. Reports also suggested that the Canadian province of Alberta will cut oil production by almost 9%, or 325k barrels/day, to manage a pipeline bottleneck that has doubled the storage levels in the province. The U.S., though, is also producing record output, which contributed to oil’s ~22% plunge in November, and the influx of supply has put more pressure on OPEC + and non-OPEC producers to curtail output in the coming year. Consequently, we continue to believe that lower oil prices are primarily a supply-related issue and not indicative of global demand issues, and look for WTI to trade ~$65/barrel by the end of 2019.
- Week ahead. Several Fed speeches will garner attention this week following last week’s dovish comments from chair Powell. Looking at economic releases, the monthly nonfarm payrolls report headlines the docket, but look for a bevy of Purchasing Managers Index data out of the U.S., Eurozone, and China to be among other important releases on investors’ radars. Track these and other important events on our Weekly Global Economic & Policy Calendar.
Monitoring the Week Ahead
- Markit US Manufacturing PMI (Nov)
- ISM Manufacturing PMI (Nov)
- Markit/BME Germany Manufacturing PMI (Nov)
- Markit Eurozone Manufacturing PMI (Nov)
- Markit UK Manufacturing PMI (Nov)
- Eurozone PPI Report (Oct)
- ADP Employment Report (Nov)
- Markit US Services PMI (Nov)
- ISM Non-Manufacturing Index (Nov)
- Fed Beige Book
- Trade Balance (Oct)
- Initial Jobless Claims (Dec. 1)
- Durable Goods Orders (Oct)
- China Foreign Reserves (Nov)
- University of Michigan Sentiment Index (Preliminary, Dec)
- Jobs Report (Nov)
- Japan Leading Index (Oct)
- Germany Industrial Production (Oct)
- Eurozone GDP (Q3)
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
All company names noted herein are for educational purposes only and not an indication of trading intent or a solitication of their products or services. LPL Financial doesn’t provide research on individual equities.
All performance referenced is historical and is no guarantee of future results.
This research material has been prepared by LPL Financial LLC.
To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.
The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured. These products are not Bank/Credit Union obligations and are not endorsed, recommended or guaranteed by any Bank/Credit Union or any government agency. The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.
Index data obtained via FactSet
For Public Use – Tracking #1-798416 (Exp. 11/19)