Three Things to Watch
- The fourth quarter starts this week with the S&P 500 up more than 13% year to date. Stocks have posted above-average returns year to date despite the ongoing conflict with Iran. The Strait of Hormuz will again be in the headlines, with President Trump sending mixed signals on the latest proposal to reopen the waterway. The path forward is unclear, but investors are expecting additional negotiations rather than more hostilities. Oil fell on Friday and remains just above $90/barrel.
- The September jobs report will be released on Friday, with non-farm payrolls up 100,000 and the unemployment rate steady at 4.1%. That would do little to change U.S. Federal Reserve (Fed) expectations, which are currently priced for three to four additional rate hikes over the next 12 months.
- Core personal consumption expenditures (PCE) are expected to show a 3.3% year-over-year increase, well above the Fed’s 2% target. The October Institute for Supply Management manufacturing reading is expected to accelerate to 55, the highest level since 2022 and a level consistent with the Fed hiking rates.
Three Things to Know
- In 1942, German submarines were sinking ships throughout the Caribbean and the Gulf of Mexico. Ernest Hemingway, living in Cuba, had a plan. He fitted out his 38-foot fishing boat, the Pilar, with a radio, machine guns and grenades and crewed it with friends, among them a jai alai player and a Cuban fisherman. The U.S. Embassy gave its approval and fuel. The idea was that a U-boat would stop the Pilar to seize its fish and water. When it did, Hemingway’s crew would pull alongside and toss grenades down the conning tower hatch. They patrolled on and off for more than a year. They never engaged a submarine. His wife, the war correspondent Martha Gellhorn, was unimpressed. She suspected it was mostly an excuse to go fishing on rationed gasoline. (Source: @fasc1nate)
- The ratio of the equal-weighted S&P 500 to the S&P 500 Index is down to 1.11, its third-lowest level since April 2003. This ratio has declined for five consecutive weeks by a total of -5.5%. Over this period, the equal-weighted S&P 500 has fallen -4.4% while the S&P 500 has increased by +0.8%. This also puts the ratio on track for its fourth consecutive annual decline, the longest streak since 1999. By comparison, this metric peaked at 1.60 in April 2015. (Source: The Kobeissi Letter)
- The fourth quarter has been higher 18 out of 21 times with above-average returns when the S&P 500 is up between 10% to 20% year to date (the sweet spot) heading into the quarter. (Source Ryan Detrick)
The above information reflects the current opinion of the author. It is based upon sources and data believed to be accurate and reliable. Opinions and forward-looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security mentioned.
5965809 – EXP: 09/30/2029