Market Strategy 12/2/2019
Not Quite “Ease On Down the Road” But We’ll Take It
For all the green on the equity screen the year now nearing a close hasn’t been excessive in our view
Key Takeaways
- Investors return from the holiday weekend to a week heavily laden with important economic data tied to manufacturing, construction, auto sales, housing, and culminating with the nonfarm payroll report on Friday.
- With equity markets hitting new record highs across several major indices including the S&P 500 and Nasdaq Composite, prospects for further gains will hinge on economic data and trade talk progress.
- With about 98% of S&P 500 companies having thus far reported, Q3 earnings were off 1.1% overall on the back of 3.5% revenue growth.
- Last week’s economic data continued to show resilience even as the data reflected some slowing in economic growth.
We can’t stress enough the importance for investors to keep things in context when it comes to market performance. As such, 2019 is not so much a banner year for equities as a solid “do-over” year for stocks, which have managed to gain back what they lost in last year’s fourth quarter “mugging” and then getting a chance to add some to those regained levels over the course of this year.
In our view this year has the potential to serve as a good platform for stateside equity markets to rise further in 2020 so long as there’s a “Phase One” trade deal between the US and China formalized in the not too distant future.
The New Year will need to deliver the goods with more than a modicum of ink on said Phase One trade agreement, along with continued economic resilience and some improvement in revenues and earnings growth at the corporate level.
While the election year of a first term president has been known to be good to stocks from an historical perspective we expect the market to at some point not too far down the road move to a “show me, I’m from Missouri” position as it looks to see a significant improvement in fundamentals from a “Phase One” trade deal.
With the rising likelihood of a ”Phase One” trade deal in our view sometime between now and February 2020 and a potential for “comps” (revenue and earnings comparisons) stateside to improve in the new year the near eleven year old bull market may have a solid chance to prove it still has legs to run on.
We don’t look for “the good stuff” to be given investors without some testing of their convictions but expect it will be earned as patience gets tried; periods of increased volatility emerge from time to time and the markets are given further opportunity to continue to climb the proverbial “wall of worry” that has served as a platform from which markets can grind higher as they have since March, 2009.
In the week ahead investors and market observers will have plenty of economic data to parse as they return to their desks after the long Thanksgiving Day weekend. Updates and commentary on sales performance this holiday shopping season (from pre-Black Friday shopping to the current Black Friday – Cyber Monday shopping segment and beyond) will provide opportunity to check the condition of the consumer, who so far has been remarkably resilient.
As we prepared to go to press with this week’s publication news crossed the tape of a better than expected read on Chinese manufacturing adding a bullish tone and “risk off” feel to the start of the new week.
This report is issued and approved by Oppenheimer & Co. Inc., a member of all Principal Exchanges, and SIPC. This report is distributed by Oppenheimer & Co. Inc., for informational purposes only, to its institutional and retail investor clients. This report does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such offer or solicitation would be prohibited. The securities mentioned in this report may not be suitable for all types of investors. This report does not take into account the investment objectives, financial situation or specific needs of any particular client of Oppenheimer & Co. Inc. Recipients should consider this report as only a single factor in making an investment decision and should not rely solely on investment recommendations contained herein, if any, as a substitution for the exercise of independent judgment of the merits and risks of investments. The strategist writing this report is not a person or company with actual, implied or apparent authority to act on behalf of any issuer mentioned in the report. Before making an investment decision with respect to any security discussed in this report, the recipient should consider whether such investment is appropriate given the recipient's particular investment needs, objectives and financial circumstances. We recommend that investors independently evaluate particular investments and strategies, and encourage investors to seek the advice of a financial advisor. Oppenheimer & Co. Inc. will not treat non-client recipients as its clients solely by virtue of their receiving this report. Past performance is not a guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance of any security mentioned in this report. The price of the securities mentioned in this report and the income they produce may fluctuate and/or be adversely affected by exchange rates, and investors may realize losses on investments in such securities, including the loss of investment principal.
Oppenheimer & Co. Inc. accepts no liability for any loss arising from the use of information contained in this report. All information, opinions and statistical data contained in this report were obtained or derived from public sources believed to be reliable, but Oppenheimer & Co. Inc. does not represent that any such information, opinion or statistical data is accurate or complete and they should not be relied upon as such. All estimates and opinions expressed herein constitute judgments as of the date of this report and are subject to change without notice. Nothing in this report constitutes legal, accounting or tax advice. Since the levels and bases of taxation can change, any reference in this report to the impact of taxation.
Investment Strategy should not be construed as offering tax advice on the tax consequences of investments. As with any investment having potential tax implications, clients should consult with their own independent tax adviser.
This report may provide addresses of, or contain hyperlinks to, Internet web sites. Oppenheimer & Co. Inc. has not reviewed the linked Internet web site of any third party and takes no responsibility for the contents thereof. Each such address or hyperlink is provided solely for the recipient's convenience and information, and the content of linked third party web sites is not in any way incorporated into this document. Recipients who choose to access such third-party web sites or follow such hyperlinks do so at their own risk. The S&P 500 Index is an unmanaged value-weighted index of 500 common stocks that is generally considered representative of the U.S. stock market. The S&P 500 index figures do not reflect any fees, expenses or taxes. This research is distributed in the UK and elsewhere throughout Europe, as third party research by Oppenheimer Europe Ltd, which is authorized and regulated by the Financial Conduct Authority (FCA). This research is for information purposes only and is not to be construed as a solicitation or an offer to purchase or sell investments or related financial instruments. This report is for distribution only to persons who are eligible counterparties or professional clients and is exempt from the general restrictions in section 21 of the Financial Services and Markets Act 2000 on the communication of invitations or inducements to engage in investment activity on the grounds that it is being distributed in the UK only to persons of a kind described in Article 19(5) (Investment Professionals) and 49(2) High Net Worth companies, unincorporated associations etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended). It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons. In particular, this material is not for distribution to, and should not be relied upon by, retail clients, as defined under the rules of the FCA. Neither the FCA’s protection rules nor compensation scheme may be applied. This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Oppenheimer & Co. Inc. Copyright © Oppenheimer & Co. Inc. 2019.