I hope everyone had a great weekend! Living in Frankenmuth, I feel it's worth noting that we are now just 75 days away from Christmas.
U.S. equities finished higher last week despite persistent volatility driven by oil prices, inflation concerns, global bond yields, and ongoing AI-related headlines.
This morning, reports indicate that President Trump announced an "energy ceasefire" between Russia and Ukraine intended to halt attacks on energy infrastructure, although neither side has formally confirmed the agreement. Interestingly, both Goldman Sachs and JPMorgan estimate that Middle Eastern crude exports remain near pre-war levels.
Domestically, attention now turns to what could be a pivotal week for both earnings and inflation. Major banks begin reporting on Tuesday, followed by ASML on Wednesday and TSMC on Thursday, providing important insights into corporate profitability and the sustainability of AI-related spending.
Wednesday's CPI report is the other major catalyst on investors' radar, with headline inflation expected to increase by 0.6% month-over-month. Markets now assign only about a 19% probability of an October Fed rate hike, down from roughly 66% at the end of September, with expectations increasingly shifting toward a potential move in December.
It will be interesting to see how earnings season unfolds given the resilience we have seen throughout the year. While I remain constructive on the broader market, I would not be surprised to see some rotation into value oriented and defensive sectors as investors become increasingly sensitive to valuations and more focused on the financial returns generated by AI related spending.
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Attached is this week's Market Strategy Radar Screen Report from John Stoltzfus, Chief Investment Strategist at Oppenheimer Asset Management.
Have a great week!