While in New York morning trade, we are looking at the major US stock averages trying to hold on to gains above the flat line.
Well, US stocks did slide midweek as new moves out of DC added fresh uncertainty to US-China trade relations.
Now pressure mounted after Treasury Secretary Besson confirmed that the White House is considering curbs on exports to China involving US software.
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Trump's recent statement that export restrictions on critical software could take effect by November 1st.
Third quarter earnings season is in full swing, with 86% of companies so far beating Wall Street estimates.
Now analysts now expect S&P 500 earnings to grow more than 9% from a year ago, up from the forecast at the start of this month.
Well, joining me to weigh in this morning is Katie Kaminski, chief.
Research strategist and portfolio manager at Alpha Siplex.
Good morning, Katie.
Thank you so much for joining me.
There's a lot going on here and equity markets have been fluctuating amid trade uncertainty as well as geopolitical tensions and of course the government shutdown.
So how much weight should investors actually give to these macro risks compared to the underlying strength in equity trend signals?
Well, I think the macro risks are still very important, and that is because the market has been very focused on potential rate cuts.
So obviously the CPI data is going to be very integral because if you do see some chances that the Fed might have to pull back.
Definitely be a negative signal for the market.
So I think that's something we're paying attention to and watching and you're also seeing the US dollar has been bouncing a little bit recently, so you kind of wonder if that's just an indication of a little bit of jitters regarding that macro data.
Yeah, and Katie, as you mentioned, we will be getting inflation figures out tomorrow morning, some insight into what's happening in the economy at 8:30 a.m. tomorrow morning, but fixed income sentiment has shifted toward rate cut expectations, and we do expect a rate cut at the meeting next week.
But could the US shutdown, as well as lack of overall data create enough uncertainty to potentially trigger a short term sell-off?
I definitely think so because one of the challenges is we need the data to make policy decisions and so hopefully we'll have that data and that data will be in line to give enough support for the Fed to cut rates because the market has really already priced in and sort of focused on that.
So I think it's more.
That reaction to a potential that that might not happen that could be negative, particularly for bonds.
You've already seen yields up today, for example.
So I think it shows there's definitely some risk in reliance on that narrative, and the shutdown just really adds to the level of ambiguity.
And I do want to shift our focus on over to the currency markets.
So in New York morning trade, we are looking at the dollar index hovering right above the 99% level, but when it comes to the US currency, we have recently seen that strengthen after a weak run.
So do you see this as a temporary move that's driven by some of that rate policy uncertainty that you talked about or a potential shift in the longer term US dollar trend?
This is actually a really good point.
I think the fact that the dollar has sort of found its floor in what's been a very long weaker dollar trend is something to pay attention to.
In particular, clearly the US, you know, growth numbers have been very strong.
That's very pro-dollar.
But in addition, you have to start thinking if there's some risk for policy uncertainty, that's definitely going to boost the dollar because in general the dollar has remained weaker with the anticipation of rate cuts.
So I think right now the dollar is definitely a tricky one, but there is some chance that we may have that floor on the dollar, that we don't see a weaker dollar going forward.
Yeah, and now I do want to get your take on precious metals.
So this morning we are looking at gold up by about 2.5%, hovering right around the 4160 level.
And some people have been talking about this recent reversal, but I think it's so important to keep in mind that gold is up over 50% year to today, outperforming equities as well as crypto.
So what do you make of what we've been seeing when it comes to the precious metals market?
This is a really good question, and a lot of people are following the precious metals market very closely, and I think given the backdrop of a weak dollar, it has definitely been that sort of go to hedge against uncertainty, go to hedge against, you know, concerns for geopolitical tensions.
It seems to be sort of the safe haven bet of the year.
I think what happened this week was definitely causing some concern for those people that have really been.
Following gold, just given the size of the reversal that we saw, but of course you're starting to see some strength again in gold.
So I think it's really potentially a sign that there could be a limit for how much demand there is for gold at some point.
I think rate uncertainty also, you know, is featured into that as well.
So gold has been just one of the most interesting trends to follow this year.
It's really the hedge against if things don't go well in the equity market.
And Katie, finally, before I let you go, I do want to get your take on the mixed performance that we're seeing in commodities.
So whether we're talking about soy or energy, and this morning we are looking at oil higher as well, especially with WTI.
But ahead of next week's APEC summit here, what are your expectations when it comes to these different commodities?
Yes, this is a very good point.
If you look at oil right now, oil has, you know, really bounced a lot on geopolitical news right now.
But to be honest, oil prices this year for those of us that follow trends in oil have been very mean reverting.
So we haven't seen sort of a breakout type of move in a strong direction.
So I think it's been a hard market to kind of time and trade this year.
On the other On hand, you mentioned soy and obviously soybeans and the soy complex has been tricky because it is also intertwined in the US-China narrative as well.
So we have seen sort of mixed signals across different types of soy products, and I think they're going to continue to have increased uncertainty and, you know, an effect of this particular issues between the US and China.
OK, Katie, well, we will have to leave it there but thank you so much for joining us this morning and thank you so much for breaking down what's happening underneath the surface.
Thank you.
