Our Products Make Us Different, Our People Make Us Great

Weekly Market Commentary

10.21.19

The Fed has entered a quiet period in the lead up to the two-day FOMC meeting on October 29-30. Analyst consensus has solidified around the expectation of a 25bp cut alongside the resumption of Open Market Operations through the purchase of short-dated treasuries (“Just don’t call it QE,” crows a chorus of Fed Watchers who have nothing better to do than bicker over the intricacies of monetary policy).

This will be the Fed’s third rate cut in recent months, exemplifying policy makers’ efforts to preempt a recession as the global economy creaks under the strain of raised trade barriers and heightened geopolitical risk. Hungry eyes eagerly await Tuesday afternoon’s Fed Statement for hints of the future rate path. Futures markets indicate a 30% chance of a fourth cut at the December meeting, with 1-2 further cuts in 2020. In the dovish scenario, the overnight rate would sit at 1.0-1.25 next December with little room for further stimulus at a time when the Federal deficit will have ballooned to over $1 trillion per year.

Developing markets in Latin America and the Arab World have been hit by a surge of instability as protests engulf the capitals of Lebanon, Chile, and Ecuador. We’ve discussed the situation in Hong Kong at length in recent months, but unrest is spreading across the globe as citizens voice their frustrations with government corruption, economic stagnation, and income inequality. Already, protesters have overthrown the governments of Algeria and Sudan; the authoritarian leaders of Egypt and Venezuela have initiated brutal crackdowns on their respective civic societies to maintain control; and a nascently reformed Ethiopia is tearing apart at the seams owing to a surge in ethnic separatism.

The Week Ahead

Monday: Canadian Parliamentary Elections
Tuesday: Existing home sales, September (consensus estimate -0.6%, last +1.3%); Brexit Super Tuesday
Wednesday: FHFA house price index, August (consensus +0.4%, last +0.4%)
Thursday: Jobless claims, week of 10/14/2019 (consensus 215k, last 214k); New home sales, September (consensus -1.4%, last +7.1%)
Friday: University of Michigan Consumer Sentiment, October (consensus 96.0, last 96.0)

10/18/2019 Market Strikes

10 Year Treasury:

  1.754

S&P 500:

2,986.20

FN 3.0:

101.16

FNCL 102:

2.717

Please Note: The above Market Commentary information is updated weekly.