October is known for market moving events since most of the big downward moves (1929, 1987, 2008) have happened in Oct. Why Oct? It could be Autumn Blues or upcoming time change with Fall Back, Back to school season... There are many potential topics for behavior finance scientists to study and may get some doctorates. This year's October started with its usual volatility in first week due to inflation and not-so-good manufacturing and services sector confidence readings. Second week gave some positive signals on trade talks bringing back markets. Now let's look at events for remaining part of October. All of these events again could impact markets!
Brexit:
Finally the deadline of Oct 31 is almost here and that has forced UK and EU to seriously talk to each other on some kind of deal - including the question of hard vs soft customs border between UK and N. Ireland. It will come down to the wire but my guess is that either deadline will be extended by another 3 months or some kind of Phase 1 of deal would be in place. Either way it would be good since crashing out of EU without a deal could seriously jeopardize the confidence in UK and extend it across EU and World Economy does not need yet another uncertainty.
Earnings:
Next week earnings season should kick off with full force with Netflix and many major banks announcing earnings. The expectations have been lowered across the board. So earnings would play out similar to what's happening over last few quarters. Companies after companies would beat already lowered earnings and give slightly cautious-to-upbeat forecasts with caveats of trade deal, interest rate direction and so on. Basically companies will talk about external factors and still boast how they are doing well despite these challenges (which is true by the way). Markets would react positively to the companies who guide higher and severely punish who miss on guidance even slightly. I call it as putting them in "penalty box" for couple of quarters. Many cloud/SAAS companies including some of the recent IPOs have reset their valuations. So these companies would go up if they can maintain double digit growths. I like the potential of HCAT, MDLA, NTNX and MRNA.
Trade:
President Trump is learning the art of "phasing" from Silicon Valley (even if he hates California and valley). It was very evident from his supposedly trade deal, Basically he announced BVP (barely viable product) and told his trade representatives to write "PRD" over next three weeks for phase 1 of the deal. At same time he also said that we have started work on phase 2 of trade deal. As we all know this seems like any product development in high-tech. I am sure there would be phases 3...n. But either way it's positive signal that something is happening and risk of increased tariffs has gone down significantly.
There are couple of other factors which one need to watch out. Interest rate direction in Fed meeting at end of Oct and Election results in Argentina. More on that some other time!
/Shyam
Brexit:
Finally the deadline of Oct 31 is almost here and that has forced UK and EU to seriously talk to each other on some kind of deal - including the question of hard vs soft customs border between UK and N. Ireland. It will come down to the wire but my guess is that either deadline will be extended by another 3 months or some kind of Phase 1 of deal would be in place. Either way it would be good since crashing out of EU without a deal could seriously jeopardize the confidence in UK and extend it across EU and World Economy does not need yet another uncertainty.
Earnings:
Next week earnings season should kick off with full force with Netflix and many major banks announcing earnings. The expectations have been lowered across the board. So earnings would play out similar to what's happening over last few quarters. Companies after companies would beat already lowered earnings and give slightly cautious-to-upbeat forecasts with caveats of trade deal, interest rate direction and so on. Basically companies will talk about external factors and still boast how they are doing well despite these challenges (which is true by the way). Markets would react positively to the companies who guide higher and severely punish who miss on guidance even slightly. I call it as putting them in "penalty box" for couple of quarters. Many cloud/SAAS companies including some of the recent IPOs have reset their valuations. So these companies would go up if they can maintain double digit growths. I like the potential of HCAT, MDLA, NTNX and MRNA.
Trade:
President Trump is learning the art of "phasing" from Silicon Valley (even if he hates California and valley). It was very evident from his supposedly trade deal, Basically he announced BVP (barely viable product) and told his trade representatives to write "PRD" over next three weeks for phase 1 of the deal. At same time he also said that we have started work on phase 2 of trade deal. As we all know this seems like any product development in high-tech. I am sure there would be phases 3...n. But either way it's positive signal that something is happening and risk of increased tariffs has gone down significantly.
There are couple of other factors which one need to watch out. Interest rate direction in Fed meeting at end of Oct and Election results in Argentina. More on that some other time!
/Shyam
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