Market Strategy 9/9/2019
- September 9, 2019
Hooked on a Feeling
Stocks show a heightened dependence on a mix of monetary policy, trade negotiation developments and economic data as they moved higher
Key Takeaways
- This week investors will be focused on economic data stateside and in Europe with the ECB rate decision due on Thursday.
- Last week saw a shift in investor sentiment away from defensive sectors and toward cyclicals.
- Ten-year US Treasury yields moved higher last week, closing at 1.56% on Friday. It was the first week in six that the yield on the 10-year ended higher, suggesting that the benchmark yield may have reached its low for this period.
- Last week’s payrolls report while short of expectations seemed like “progress not perfection” and consistent with the ebbs and flows of the data.
As we prepared to go to press this week stocks in Asia broadly edged higher as economic stimulus efforts announced by China last Friday (via lower reserve requirements for domestic banks) helped offset news that China’s export numbers for August reflected the effects of the tariff war on sales to the US as shipments from China unexpectedly declined 16% from a year earlier.
Last week stocks stateside and around the world got a boost from remarks by Fed Chair Jerome Powell at a meeting in Zurich signaling that the Federal Reserve remains committed to a policy highly sensitive to the vulnerabilities in the US economy in this time of trade war. US equities also got a boost from jobs related data released last Friday that reflected stateside resilience in the face of the current spate of economic slowing tied to cyclical issues and the trade dispute.
News that trade talks between the US and China will include a visit to Washington, DC from Chinese trade officials in October has provided global equities a boost.
With the United States hiking tariffs at the start of the month, followed by China’s retaliatory efforts and the potential for further escalation of hostilities if progress fails, investors could benefit from keeping things in context and recalling the bull market’s predilection for climbing a wall of worry over the last ten-plus years.
Key in our view at present time is to remain diversified in portfolio positioning, keeping an eye out for opportunities that can surface in pull backs or on market rotations and rebalancing.
This week the ECB’s rate decision will be front and center for investors on Thursday with markets wishing and hoping for some additional stimulus as economies in the Eurozone remain hostage to persistent slow growth with much of it tied to a reluctance by countries in the region to provide fiscal stimulus to offset repercussions from the trade war between the US and China.
With the S&P 500 around 1.5% below where it was on July 26th (when it was at 3,025.86) we believe investors should keep expectations right sized for now with prospects for markets to remain susceptible to interim volatility as trade war uncertainty persists creating a negative overhang on economic growth and corporate earnings projections. The recent shift from “risk off” to “risk on” could easily be challenged by a Presidential tweet or a sour piece of interim data.
Key in our view at present time is to remain diversified in portfolio positioning, keeping an eye out for opportunities that can surface in pull backs or on market rotations and rebalancing. For intermediate to longer-term investors with goals and objectives 3, 7, 10 and more years out patience is likely to be proven a virtue in an environment wherein transition is a central driver of longer-term market behavior. With globalization, technology, low interest rates, and low inflation key thematic factors worldwide, equities remain our favorite asset class for now.
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.
Other Disclosures
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. 2015.