“We really need to see the E in PE start to move higher to drive the market… higher on a sustainable basis.” – 03:07
Chris Versace, CIO of Tematica Research, joins Remy Blaire to discuss the current state of the markets, which are recovering from a sluggish week while investors remain attentive to the looming possibility of a government shutdown.
Remy and Chris delve into the potential impacts of a government shutdown on the economy and market sentiment. Chris emphasizes that the duration of any shutdown is crucial; a brief shutdown may have limited effects, but a prolonged one could significantly disrupt economic activity. He notes that the White House may implement larger layoffs if a shutdown occurs, which could exacerbate the economic impact.
The conversation shifts to the flow of economic data, which could be restricted during a shutdown. Chris highlights the importance of upcoming indicators, such as non-farm payrolls and unemployment data, in assessing the health of the job market and determining whether further interest rate cuts by the Federal Reserve are necessary. With the Atlanta Fed’s GDP now model projecting a robust third-quarter growth rate of 3.9 percent, the need for more data becomes increasingly apparent.
As the quarter comes to a close, Remy and Chris discuss the trickling in of earnings reports from major companies, including Nike and ConAgra. Chris points out that consumer spending patterns will be critical to watch, particularly whether consumers are prioritizing discretionary goods or essential items like frozen foods. This analysis could provide valuable insights into broader economic trends and expectations for the upcoming earnings season.
The segment also addresses market sentiment, with Remy noting that positioning data indicates investors are anticipating a year-end rally. Despite record highs in major indices during September, Chris warns of the potential risks of complacency, especially given the low volatility levels. He reminds listeners that while the final months of the year typically yield strong market returns, caution is warranted.