What to Focus On in this Week's Markets

• This will be a busy week for markets, both financial and commodities, given global tensions and the next to last US FOMC meeting of 2023. 
• The October jobs data will shine a light, theoretically, on the red-hot US labor market while Apple's quarterly earnings will be a read on consumer spending. 
• The end of the month will likely see all three major US stock indexes close lower, but not breaking out of long-term uptrends. 

This is going to be a busy week for global markets, with major events occurring nearly everywhere we look. As I talked about recently, the situation in the Middle East is going to keep investors interested in the safe haven markets of gold and crude oil, with the former continuing to show strength while the latter has fizzled of late. Since October 7, when Palestinian militants attacked Israel, December gold (GCZ23) has gained nearly 9% while the spot-month WTI crude oil contract (CLZ23) is sitting 0.5% higher. Meanwhile, investment traders have more than doubled their net-long futures position in gold and reduced their net-long futures position in WTI by 14% according to last Friday's CFTC Commitments of Traders report (legacy, futures only). 

As we look ahead to this week, the goings on in in the Middle East and possible global escalation of the fight will remain in the spotlight. But there are other events looking to take center stage as well. 

In the US, the next meeting of the Federal Open Market Committee (FOMC, the Fed) is scheduled for Tuesday, October 31 and Wednesday, November 1, culminating with an announcement on interest rates. If we go back to this past June and the Fed’s 25-basis point increase, Chairman Powell said we should expect at least two more increases during 2023. The Fed the bumped rates another 25-basis points in July before holding steady in September. That leaves us with this week’s meeting or the one in December for the second move before the end of the year. 

Economic data, for what that’s worth, has generally been viewed as bullish, though as I like to say if you ask the opinion of 10 economists and come away with at least 11 different opinions (I’ll say this again as well, I am extremely proud of not being an economist). When it comes to the endless predictions of a recession, the case has fallen flat because of the strength of the US labor market. Later this week we’ll get our weekly update on US weekly jobless claims (Thursday) and the heavily anticipated, much debated monthly jobs data for October. This includes US nonfarm payroll and unemployment rate. The former is always good for a laugh when compared to pre-report estimates, with the early guesses coming in at 175,000 versus the previous month’s surprising large 336,000. Let the revisions begin!

While I’m not a proponent of using quarterly earnings as a guide to decisions about investments for the future[i], I am looking forward to Apple’s (AAPL) quarterly announcement. A MarketWatch piece over the weekend discussed how this would be a read on consumers’ willingness to pay $1,000 for a new I-Phone at a time when there is so much hullabaloo over global inflation[ii]. Along with the US labor market, consumer spending also continues to run hot, also not an indication of an ongoing recession. At least not yet. 

Tuesday night not only brings All Hallows Eve, aka Halloween, but the end of the month of October. This means I’ll be updating all my monthly analysis, including the three major US stock indexes (S&P 500 ($INX), Dow Jones Industrial Average ($DOWI), Nasdaq ($NASX)). Heading into this week, all three were showing sharp losses for the month. Given I have talked about how these markets were still in long-term uptrends, am I concerned about this selloff? No. Where everyone else is running around like Chicken Little squawking, “Correction! Correction! Correction!”[iii], I see it as a possible Benjamin Franklin Fish Analogy[iv]. With October the month showing the largest seasonal moves, the stage would then be set for a potential rally to close out 2023, particularly if the Fed makes would could be its last hike of the year this week. 

[i] This goes back to all my decades as a broker/analyst/commentator when the mantra has always been, “Past performance is not indicative of future results”, or something along that line. 

[ii] No, inflation is not just a US issue, something I’ll be talking about again later. 

[iii] One of the silliest market phrases in use. A correction? The market was wrong to begin with? A correction from what? It usually is an indicator the person squawking it was in the wrong position. 

[iv] Like guests and fish, markets start to stink after three days/weeks/months (whatever timeframe is being studied) of moving against the trend (short-term/intermediate-term/long-term).

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