MW U.S. exceptionalism is now driving markets - if only this jinx can be avoided
By Steve Goldstein
BNP Paribas and UBS Global Wealth Management point to U.S. economy's resilience
Bad news, America - the Economist, on its cover, just said the U.S. economy is the envy of the world.
Brett Donnelly of Spectra Markets did a comprehensive study of magazine covers three years ago and found that Economist covers in particular were contrarian indicators, in both directions.
Then again it's not just the Economist talking of U.S. exceptionalism.
Strategists at BNP Paribas say that will be the theme as policymakers - and market participants - descend on Washington D.C. for the annual International Monetary Fund and World Bank meetings this week.
They note that the Atlanta Fed's Q3 nowcast for GDP growth is up to 3.4% annualized, while their own nowcast for the eurozone is for 0.3% growth on a quarter-on-quarter basis. Measuring the two regions on an apples-to-apples basis, the U.S. is still expected to triple eurozone growth in the third quarter.
This outperformance is showing up in markets, too. They note the spread between one-year forward rates in the U.S. and the Eurozone has widened 60 basis points over the last month, as the dollar index DXY has grown 3% and the S&P 500 SPX has outperformed the Euro Stoxx 50 XX:SX5E.
Another difference they point out is that with so much noise in the data ahead of the next Federal Open Market Committee meeting, the Fed will have to make its decision based on the data already available, which support a quarter-point rate cut in November. By contrast, the European Central Bank will be swayed by the data, just as they were this month when they cut rates only five weeks after such a reduction was reported to be unlikely.
The U.S. economy's resilience also was the driving force why UBS Global Wealth Management upped its June target for the S&P 500 SPX from 6,200 to 6,300 as it introduced a year-end 2025 target of 6,600.
They say the labor market is more resilient than previously thought and the economy is stronger than expected, and that the medium-term trend growth rate is above the Fed's 1.8% long-term projection, which helps to explain why inflation has been able to fall even as the economy has remained robust. "The bottom line is that the improved U.S. macroeconomic outlook increases our degree of certainty about our positive view of equities," they say.
The market
Stock futures (ES00) (NQ00) were leaning lower, after six straight weeks of gains. Bond yields BX:TMUBMUSD10Y were rising, as was oil (CL00) and gold (GC00).
Key asset performance Last 5d 1m YTD 1y S&P 500 5864.67 0.85% 2.84% 22.95% 38.84% Nasdaq Composite 18,489.55 0.80% 3.02% 23.17% 42.40% 10-year Treasury 4.131 2.60 38.00 25.01 -71.82 Gold 2744.6 2.96% 3.44% 32.47% 38.32% Oil 69.92 -2.71% -1.15% -1.98% -18.80% Data: MarketWatch. Treasury yields change expressed in basis points
The buzz
A Q&A session with Dallas Fed President Lorie Logan - also a member of the MarketWatch 50 - at the Securities Industry and Financial Markets Association annual meeting highlights a quiet economics calendar.
Boeing $(BA)$ and its machinists unions reached a tentative agreement to end a strike, sending the struggling planemaker's shares higher.
Activist Starboard Value has taken a stake in Kenvue $(KVUE)$, the Tylenol maker, according to the Wall Street Journal.
Cigna stock $(CI)$ fell and Humana's $(HUM)$ rose after Bloomberg News reported the two health insurers have rekindled merger talks.
McDonald's $(MCD)$ is in the spotlight after former President Donald Trump manned the french-fry machine for 15 minutes at a Pennsylvania restaurant. The company said it didn't endorse either candidate as its core value is that it opens its doors to everyone.
Best of the web
Crises at Boeing and Intel are a national emergency.
Is OpenAI more like WeWork or Theranos?
How Cuba's electrical grid collapsed and what comes next.
The chart
The key non-yielding assets - bitcoin (BTCUSD), gold, and especially of late, silver (SI00), are all rallying. Matthew Tuttle, chief executive and chief investment officer of Tuttle Capital Management, says his firm may be filing for an exchange-traded fund that has all of them, plus Ethereum. "I think right now they are related," he said over email. "Trump is juicing bitcoin, and I think the deficit is juicing all of it."
Top tickers
Here were the top-performing stock-market tickers on MarketWatch as of 6 a.m. Eastern.
Ticker Security name NVDA Nvidia TSLA Tesla GME GameStop TSM Taiwan Semiconductor Manufacturing NIO Nio AAPL Apple DJT Trump Media & Technology DRUG Bright Minds Bioscience PLTR Palantir Technologies AMZN Amazon.com
Random reads
King Charles III was heckled by an Australian senator.
A brand-new fire station in Germany burned down. One thing it lacked: fire alarms.
One airport imposes a maximum hugging time.
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
Check out On Watch by MarketWatch, a weekly podcast about the financial news we're all watching - and how that's affecting the economy and your wallet. MarketWatch's Jeremy Owens trains his eye on what's driving markets and offers insights that will help you make more informed money decisions. Subscribe on Spotify and Apple.
-Steve Goldstein
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
October 21, 2024 06:42 ET (10:42 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
Comments