Market Strategy 12/2/2019
- December 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…
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.
John Stoltzfus
Title:Chief Investment Strategist, Oppenheimer Asset Management Inc.
John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business, and other notable networks.
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