In the markets, as in life, there are no guarantees but everyone is entitled to their opinion. Here’s my opinion on the financial markets today.
The markets opened flat this morning on a quiet news day. Not so for next week, where the market will be “fully focused” on a significant amount of economic data. Metrics on inflation, housing, manufacturing, retail sales and leading indicators will all be coming out next week. Market expectations for next week are high, with about 85% of the data pointing towards acceleration in the aforementioned categories versus prior months. For today, there is not much out there to move markets one way or another, with only international trade and consumer sentiment numbers available.
Here are four items that we were discussing in our offices this morning that we thought that our readers would be interested in:
The U.S. trade gap narrowed in October, which could mean an “upward adjustment” in the fourth quarter GDP estimate. Exports of American products reached a two-year high in October. If the increase in “net trade” maintains its momentum through the end of this month, Q4 GDP could be up to .5% higher than was thought, as many experts expected this to be a “weight” rather than a benefit.
In the “it’s really good to see this” category, the Financials Sector of the market had a good week. Although the mortgage problems keep an air of caution here, improving yield curves and expectations for improved first quarter 2011 dividends are getting our attention. After getting “bashed” as a sector for nearly two years, the possibility of improvement is welcome news.
10-year Treasury Yields have been moving higher over the past week, which means that 10-Year Treasury Bond prices are moving lower. The 10-Year Treasury yield is at 3.23, and a move above that would establish a significant likelihood that yields will move to 3.4 over a short term horizon.
Eight global central banks – including the Federal Reserve – will meet next week to set policy for the final time in 2010. Only two banks out of the eight, Chile and Sweden, are expected to raise their rates.
As always, email me here with questions or comments. I love to hear from you and thoroughly enjoy the “intellectual debate” with our clients and friends that these opinions generate.
Greg Powell, CIMA