Long neck bottle, let go of my hand
My football team was thumped, and stocks around the globe took a bit of a beating last week, so it was all a bit of a downer. Bondholders did not enjoy a particularly good week either, nor did commodities; oil slipped back below $60 a barrel. The MAG 7 “index” fell circa 5% on the week.
There was not much good news on the economic front either; the Federal Government shutdown continues into its 38th day, although there was some glimmer of hope towards the end of the week that helped the S&P 500 rally from its lows, bouncing off its 50-day moving average. Should the S&P 500 break below the 50-day moving average, a test of the S&P 500’s 200-day moving average is possible, which would amount to an 11% correction. There appears to be some form of horse trading taking place between the Republicans and the Democrats at present, which is encouraging traders to believe a conclusion might be in sight.
The monthly American consumer sentiment survey, released on Friday, made for ugly reading despite stock markets close to record highs. There was also not much good news on the US employment front, as layoffs increased this month, according to a private consultancy group. The preliminary November Consumer sentiment index dropped 3.3 points to 50.3, just above a June 2022 reading of 50, which was the weakest in University of Michigan data since 1978. A combination of rising prices, concerns about unemployment, fears of a potential global trade war, and the ongoing government shutdown has left people less than optimistic. A measure of current economic conditions slumped 6.3 points to a record low of 52.3. Needless to say, this week’s stock market setback has also brought caution to retail investors, as the AAII reduced its expectations for stock prices to rise over the next six months, with bullish sentiment decreasing by 6.1 percentage points over the week.
On the plus side, the VIX fear index rose this past week, as would be expected during periods of volatility, but there were no signs of panic; some will debate whether that’s a good thing or a bad thing. The global economy appears to be holding up, if the Purchasing Manager Surveys are a reliable guide to the future. The latest S&P Global Market Intelligence’s PMI surveys have signalled a strong start to the fourth quarter for the global economy, consistent with global GDP growing at an annualised rate of 3.0%.
Looking to the week ahead, the US data will be sparse until the shutdown ends. We are due a raft of employment data on Thursday for the US economy, then retail sales and Producer Prices on Friday. On Tuesday, the UK’s monthly employment report will be released, including average earnings. The unemployment rate is expected to remain at 4.8%, but the average earnings are expected to rise to 4.7%. Then on Thursday, there is another raft of UK economic data, including the first quarterly estimate of GDP for Q3 2025. The UK economy is forecast to grow 0.3% quarter-on-quarter. We also have economic reports from China and Europe this week.