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By: John Kicklighter, Head of Market Research
Talking Points:
The economic docket over the coming week is so populated that it is likely that anticipation is likely to cut into the reaction function of the event risk that crosses the wires – and not just related to the anticipation of the US election and FOMC decision. Historically, the 44th week of the year is the best performing such time frame of the fourth quarter for the S&P 500. Further, November is the best calendar month for the index overall going back the past few decades. That still comes with an elevated average state of implied (‘expected’) volatility and volume, but that only makes the performance that much more remarkable.
Chart of Seasonal S&P 500 Performance and Volume Over Past 75 Years (Monthly)
Source: John Kicklighter, StoneX
With that predisposition backdrop and the acknowledgement for the high profile event risk the week ahead, we are in a better position to evaluate the top event risk on the docket this week. It can be difficult to pick out particular listings for such a prolific docket as what we are dealing week, but it is worth starting from a position of theme. Growth is just such a consideration – and ultimately what markets boil down to fundamentally.
There are plenty of growth-oriented releases on tap – such as China’s government PMIs – but it is worth honing in on the US and Eurozone 2Q GDP releases. While these are to some extent ‘lagging indicators’, the weight of the largest and second largest (aggregate) economies is too consequential to ignore, particularly if there is a coordinated improvement or deterioration. It would essentially set the view of the developed world.
IMF World Economic Outlook (WEO) Update of Growth Forecasts for October 2024
Source: IMF WEO Report, StoneX
More complicated but carrying more prominence for the current situation this week is the Bank of Japan (BOJ) rate decision. The group hiked rates this year into positive territory which is already a feat given the historical norm, but there remains serious contention over what the course is moving forward for this authority representing one of the world’s largest economies. The 0.25 percent benchmark is such a contrast to the peaks scoped by US, Eurozone, UK and other Western counterparts.
As these others are cutting, Japan is still seen as having a backdrop supportive of further hikes. The question is how quickly that tightening and normalization to counterparts will come. No change is expected at this meeting, but the Japanese election will certainly be seen as factoring in here. Further, the IMF’s ‘expectation’ that the BOJ will raise its benchmark up to 1.50 percent by 2027 will seriously weigh on the market’s speculative spectrum.
Chart of Relative Monetary Policy Stance of Major Central Banks
Source: John Kicklighter, StoneX
Finally, picking from a wide range of event risk for market-moving capacity, it would unwise not to set some degree of expectation around the October US nonfarm payrolls (NFPs). One of the more tactical implications of market potential is the fact that it occurs at the very end of the week – so it caters to the anticipation that can help curb market activity until it crosses the wires.
Furthermore, the focus of the Fed has very notable shifted in its dual mandate from inflation to employment trends – even though recent data has suggested this may be too early a transition. Given the dispute, event risk like the JOLTs job quits and openings will be more interesting earlier in the week but the jobless rate and average hourly earnings will be the all-consuming overview.
Table of Major Global Macro Events Scheduled for Week
Source: John Kicklighter, StoneX
-- Written by John Kicklighter, Global Head of Content
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