Potiphar had very few cares he was one of Egypt’s millionaires

Well and truly into the final quarter of the year, October ended the month in a similar downbeat mood, to the way it started the month. October has been notable for some of the worst months in stock market history, 1029, 1987 and 2008, making that month memorable or forgettable depending on one’s view. Historically though October may not be known for one of the best months for returns, it is also not one of the worst, this past month ended up being better than the average. The run-up to Christmas will now be keenly anticipated.

November began on a sure footing as the S&P 500 climbed to new highs. A combination of a solid US jobs report and some better than expected Chinese manufacturing data, helping support risk assets. Caixin manufacturing activity had expanded at its fastest pace for over two years in October. The US economy reported third-quarter growth of 1.9%, again slightly ahead of expectations. As we come to the end of the US earnings season, the blended decline in earnings is looking marginally better than expectations. Equity investors appeared reassured, by the recent data, possibly concluding that the Fed may be justified in its wait and see approach to further rate cuts. Capital markets did not even ripple that the House of Representatives voted for a formal impeachment enquiry into Donald Trump.

Something of a recovery from the end of 2018 was to be expected but not sure many analysts had a recovery in 2019 of over 20% in US equity markets. Notably, as economic growth and earnings expectations have been continually downgraded, throughout the year, and we still have no real clarity in the China-US trade talks.

We started the year deep in fear territory and fell back into that region in the middle of the year; indicators suggest that we are now well into greed. There does feel to be a lot of optimism at this current point as equity investors look to the run into Christmas. Invariably when sentiment indicators suggest these levels of optimism, a correction is on the cards.

Looking to the week ahead, we get the monthly Purchasing Manager Surveys. There is hope that the US Institute for Supply Management services PMI, will rebound in October. The Michigan Consumer survey is also expected to show improvement. The Bank of England meets this week, as well as publishing their latest inflation data; they will announce the interest rate decision. No change is expected, and as with Jerome Powell last week the emphasis for investors will be on the nature of the comments from Mark Carney. Chinese import-export data will also focus investor minds. Earnings season will slow in the US and start to pick up now in Europe.