Stock Market Week October 21 – what to expect, how to trade

Stay ahead of the stock market’s near-term moves by keeping an eye on these key macroeconomic events. We’ve also got you covered with a rundown of the most important upcoming earnings reports and insight into how the November Effect and the U.S. Presidential elections could impact your investments. Plus, discover our top picks for promising investments this November.

The most important events to watch this week

The week of October 21 appears light on macroeconomic events and releases. However, several key reports and events are worth monitoring. On Wednesday, October 23, we’ll focus on U.S. Existing Home Sales and Crude Oil Inventories. Thursday, October 24 brings New Home Sales, Initial Jobless Claims, and the S&P Global Manufacturing (PMI) data. On Friday, the U.S. Durable Goods Orders report warrants attention. Additionally, IMF meetings take place from Monday to Wednesday, where representatives from global central banks will discuss topics like worldwide growth, economic risks, and geopolitics – factors that could potentially impact the stock market.

U.S. Existing Home Sales & New Home Sales

The U.S. existing home sales report is set to be released on Wednesday. Analysts anticipate a slight uptick in sales, from 3.86 million in August 2024 to 3.88 million in September 2024. Should the data surpass these projections, it could buoy the stock market as investors gain increased confidence in the nation’s economic growth.

Investors consider existing home sales the housing market’s pulse, offering a monthly snapshot of the nation’s single-family homes, condos, and co-ops. It’s more than just numbers—it’s a gauge of demand, a health check for the entire housing sector.

When existing home sales are thriving, it’s like a shot of adrenaline for the economy. Consumer confidence surges, and with it, spending on everything from dining out to new gadgets. But when sales stumble, it’s a warning sign, a potential indicator of economic headwinds and tightened purse strings.

For a state’s economy and housing market, home sales trends are like a crystal ball, offering insights into what’s to come. Okay, so existing home sales might not typically be the data that makes markets jump… but they’re a vital piece of the economic puzzle. When the numbers significantly surprise (either way), get ready for market ripples. A report that aligns with expectations? That’s more like smooth sailing.

From analyzing previous historical correlations, I noticed that a rising tide of existing home sales could also boost the U.S. dollar on the global stage. And here’s where things get interesting: housing market trends, as seen through existing home sales, can create a ripple effect on the stock market. Imagine this: a “lock-in effect” where homeowners, eager to hang onto low interest rates, become reluctant sellers. The result? A stagnating housing market and a stock market that feels the impact.

New Home sales: The U.S. new home sales data for September 2024 is scheduled for release on Thursday, October 24. Market forecasts anticipate a slight increase in new home sales, rising from 716,000 the previous month to 717,000.

Crude Oil Inventories

Wednesday, October 23. Crude oil inventories are a key piece of data that can significantly impact the stock market. Last week (ending October 20), inventories surprisingly dropped by 2.19 million barrels. Despite this surprise, the price of WTI futures fell from $74.95 to $69.75. In my view, if inventories decline again, the price could rebound. Historically, sudden spikes in crude oil prices have negatively affected the stock market, except for oil and energy stocks.

Initial Jobless claims

The Initial Jobless Claims report is scheduled for release on Thursday, October 24. Analysts anticipate a slight uptick in claims, from 241,000 to 243,000. I believe this modest increase would have a negligible impact on the stock market.

S&P Global U.S. Manufacturing (PMI)

We’ll be keeping an eye on the S&P Global Manufacturing PMI index, set for release on Thursday, October 24. While the consensus suggests a slight improvement from 47.3 to 47.5, the figure remains below the crucial 50.0 threshold, indicating ongoing contraction in the manufacturing sector.Imagine having a crystal ball that reveals the future of the stock market.The S&P Global manufacturing PMI is the next best thing, in my opinion. It providesvital cluesinto the current state and future direction of the manufacturing sector,a powerhouse that drives a significant chunk of the overall economyin the USA. It’s like having aroadmapfor financial and corporate professionals, helping them navigate where economies and markets are headed.

The manufacturing sector is aGDP heavyweight, so its performance sends shockwaves through business conditions and the overall economic outlook. The PMI is like aseismograph, picking up on economic tremors before they become full-blown earthquakes visible in other data. Shifts in the PMI can be acanary in the coal mine, warning of changes in economic activity before they show up in other indicators like GDP growth or employment numbers.

The PMI doesn’t just report on the present – it’s also afortune teller. Forward-looking indicators within the PMI, such as the orders-to-inventory ratio, suggest that the index canpredict economic trends months in advance. It’s like having insider information on the economy.

So, the S&P Global manufacturing PMI is both arearview mirrorreflecting current economic conditions in the manufacturing sector and acrystal ballgazing into the economy’s future.With its insights, investors can make informed decisions and stay one step ahead in the stock market.

Durable Goods Orders (Sep)

Durable Goods Orders are another important forward-looking economic indicator of the economy’s trajectory. In September 2024, they are expected to decline by 1.1% compared to the previous month. When durable goods orders are weaker than expected, the US dollar may weaken, and the bond market could rally. Conversely, stronger orders may lead to a stronger dollar and a bond market slump.

Durable goods orders offer more insight into the supply chain than most indicators. This can be especially useful for investors trying to understand earnings in machinery, technology manufacturing, and transportation industries.

Earnings for the week

This week will be a busy earnings week, in my view. There will be some valuable insights for the financial releases of the following companies:

Monday: LOGI, NUE, LMT

Tuesday: VZ, ENPH, GE, MMM, FCX, SHW, STX

Wednesday: TSLA, T, KO, NEE, TMUS, IBM, NOW, LVS, ALGN, VRT, MMYT, LRCX

Thursday: WDC, UPS, TSCO, DOW, HOG, SAM, TXRH, DECK, SKX

Friday: SNY, HCA, CL, BAH, NWL, NYCB, NWL

I share in-depth analysis and research on my top investment picks with the Premium and Professional Community. PleaseSUBSCRIBEand join.

November Effect & the U.S. Elections

Picture this: The leaves are turning brilliant shades of orange and red, the air is crisp with the promise of the holiday season, and your investment portfolio is primed for a boost. Welcome to the “November effect,” a historical trend that has seen the stock market soar during the eleventh month of the year.

Since 1950, November has emerged as the strongest month for stocks, with the S&P 500 consistently delivering impressive returns. This phenomenon is often linked to the “Halloween strategy,” a theory suggesting that the S&P 500 performs significantly better from November through April than from May through October. In fact, over the past five decades, the returns from November through April have averaged awhopping 6.25% higherthan those from May through October.

Following the losses typically experienced in September, some savvy investors view October as a prime buying opportunity. Indeed, if we look at the broad stock market performance in October, we notice theS&P500 Index surged by 3.75% MoM. Among the top performing companies, we see Vistra (VST: + 42.8%), Constellation Energy (CEG: +33.8%), Micron (MU: +26.32%), and many other companies, which delivered earnings surprises and provided better-than-expected guidance. As the year draws to a close, strategies for maximizing gains and minimizing losses come into play. However, it’s important to note that the market often experiences a dip in November and December due to year-end rebalancing and tax optimization.

Looking at the seasonal performance, the S&P 500 Index is currently at its highest level. The stock market dipped in November in 2022 and 2023, while in 2021, we saw a continuing upward trend until early December. Based on this historical seasonal performance, it is difficult to confidently say that we will see a continuing bull trend going into the end of October and the beginning of November 2024. The difficulty in predicting the market moves with confidence is also based on the forthcoming U.S. presidential elections on November 5.

From history, we know that when Donald Trump won the 2016 elections, the stock market reacted positively, with the S&P 500 rising by 5% in the month following his victory. The rally was driven by investors’ optimism about potential tax cuts, deregulation, and infrastructure spending. Among the best-performing sectors were financials, industrials, and energy. When Joe Biden won the elections in 2020, we also saw a positive stock market reaction, with S&P 500 Index surging by 7% in the month. The positive response was driven by investors’ optimism about a more stable market environment, expectations for fiscal stimulus, and focus on economic recovery after COVID-19. We saw healthcare, technology, and renewable energy among the winning sectors.

As the November 5, 2024, election draws near, investors grapple with the potential market implications of a Donald Trump presidency. The picture is complex, with a mix of factors influencing sentiment and a wide range of possible outcomes.

Scenario 1: Trump wins the elections

Historically, elections have triggered varied market reactions, but a Trump win could usher in significant policy shifts. Tax cuts, deregulation, and a hardline stance on trade, particularly with China, were hallmarks of his previous administration. Such moves could buoy sectors like energy, defense, and certain materials, which have historically thrived under these conditions, as I underlined above in my research. However, this also raises red flags about potential trade tensions and economic volatility.

Given Trump’s past support for these industries, drilling down into specific sectors, defense, and energy could see a boost. However, recent performance has been uneven, with defense stocks failing to rally despite geopolitical flashpoints. On the other hand, tech andclean energygiants like Nvidia, Tesla, and Apple may face headwinds. Trump’s policies could create challenges for sectors heavily reliant on international trade or vulnerable to deteriorating relations with China. Nvidia has already faced restrictions on its China exports, and Apple’s manufacturing operations in the country could be at risk.

Small-cap stocks are one area where Trump’s policies might ignite growth. Lower interest rates and reduced regulation could create a favorable environment for these companies, leading to increased investment and expansion. However, the unpredictability surrounding Trump’s economic agenda, including his threats to oust the Federal Reserve chair and impose strict controls on interest rates, injects a note of caution. Investors may be bracing for a bumpy ride, especially if Trump follows through on campaign promises to dismantle certain environmental regulations or radically reshape trade agreements.

History shows that election uncertainty can send markets into a spin, with the VIX index spiking during past contests with unpredictable outcomes. A nail-biter race could prolong this volatility, keeping investors on edge as they await a clear result.

The long-term implications of Trump’s policies also have investors divided. While some sectors may see immediate gains from policy shifts, the potential for trade wars, fiscal recklessness, and strained international relations could have lasting consequences. The question is whether short-term boosts will outweigh longer-term risks. Trump’s sweeping endorsements from the Republican Party suggest his policies may face little resistance, potentially paving the way for rapid implementation of his economic agenda. But for investors, the outlook remains fraught with complexity and uncertainty.

Scenario 2: Harris wins the election

The prospect of a Kamala Harris presidency has investors on high alert, with mixed emotions swirling around the potential impact on the markets. As of October 20, 2024, here’s where things stand:

Tech and Progressives, Rejoice?
Harris’s background and the Democratic platform’s tilt toward tech, cannabis, and clean energy have some investors salivating. They envision a market rotation that puts these sectors in the spotlight, fueling growth and innovation. It’s all about aligning with the policies of a potential Harris administration.

In my opinion, if Kamala Harris wins the elections, the specter of increased regulations, higher taxes, and aggressive climate change policies will put investors on edge. They worry about squeezed corporate profits, dampened economic growth, and the potential for a regulatory environment hostile to certain sectors. Caution is the name of the game for those fretting about Harris’s economic agenda.

Market Reactions: My Study in Contrasts
Picture this: Some investors are bracing for a market downturn, spooked by the threat of regulatory shake-ups. Others? They’re licking their chops, ready to pounce on what they see as buying opportunities in the event of an overblown sell-off. Cryptocurrency investors, in particular, seem to think a Harris presidency might be a blessing in disguise. It’s all about perspective and where you place your bets.
Harris’s stance on housing, infrastructure, and social issues resonates with investors prioritizing long-term societal benefits. They see a potential win as a catalyst for positive change. But others can’t help but focus on the fiscal implications, the specter of ballooning budget deficits, and how a Harris administration would navigate economic crises. It’s a tug-of-war between ideals and financial realities.

Volatility: The Only Constant
One thing is certain for me: A Harris win would mean a wild ride for the markets. Investors are girding their loins for fluctuations galore, driven by policy uncertainty. A Democratic sweep or a nail-biter election could spell significant policy shifts, keeping investors up at night.

Harris has racked up endorsements across the Democratic spectrum, signaling broad support for her policies. This is a green light for some investors, indicating a favorable environment for certain industries. Others see only political maneuvering, questioning the economic wisdom behind the endorsements. It’s a matter of trust.

Harrisomics: Boom or Bust?
The million-dollar question: Would a Harris presidency be an economic elixir or poison? According to my latest research, I noticed that some supporters believe that Harris’s policies would tackle the nation’s ills, driving long-term prosperity. Detractors, particularly those of a conservative bent, fear a recipe for inflation, profligate spending, and a hostile business environment at best. It’s a clash of fundamentally different economic worldviews.

So, where does this leave us? Investor sentiment is a study in contrasts:

The Optimists:
These investors are ready to ride the wave of a Harris presidency, betting on a boom in tech, renewables, and infrastructure. They see opportunities in the market fallout and envision a buying spree amidst the post-election dust settling.

The Pessimists:
For these investors, a Harris win spells danger. They foresee regulatory overreach, punishing taxes, and radical policies that would have them scrambling for safe havens like gold or cash. It’s all about damage control and playing defense.

I think a Kamala Harris presidency would be a wild card, pushing the markets in unpredictable directions. One thing is certain: Investors will be on the edge of their seats as the election unfolds.

So, to summarize, investors should be prepared for higher stock market volatility in November.

For detailed insights, pleaseSUBSCRIBEto our Premium or Professional Service

Investment Picks for November