Stock markets showed mixed action this week as investors searched for direction amid slowing global growth and better-than-expected corporate earnings. It’s understandable that investors are weary about layering into a market at all-time highs considering the current volatility of U.S. governmental action. While political testimony may stir the market in the short-term, facts are what dictate true market direction. For the most part, U.S. data this week was better than expected. Durable goods data and jobless claims helped boost U.S. economic sentiment, in addition to Friday morning’s GDP report coming out at 2.1%, beating expectations of 1.9%. Furthermore, the IMF downgraded global growth forecasts while raising expectations for the

U.S. Housing data lagged, accompanied by manufacturing data from every corner of the globe. There’s no denying the manufacturing recession that has gripped the world economy because of the tariff war raging between the world’s two largest economies. This production slowdown is no doubt aiding Federal Reserve dovishness going into next Wednesday’s FOMC meeting. The Fed has all but guaranteed a quarter point cut, supporting the market at elevated levels. It is now a question of how dovish the Fed will be next week.

Bank earnings kicked off the earnings season stronger than expected, followed by revenue beats by Amazon, Google, and Intel on Thursday after the market close. Analysts were calling for slowed Q2 earnings, given last year’s accelerated growth due to 2017 tax cuts. But so far, growth remains strong. Almost half of S&P companies have reported thus far, so the story is not yet finished, but investors do not seem to be worried. Given strong data this week in conjunction with strong earnings, will the Fed adopt a “one-and-done” policy? Or will they satisfy market expectations and indicate a path to further rate cuts in Q3 and Q4? The rhetoric of officials at next week’s Fed meeting will be the directional dictator for stock markets. Tread carefully, one misstep just might cause a landslide.

E-mini S&P 500 Sep ’19 Daily Chart

Ian Bannon

Ian’s interest in trading began with the stock market after graduating from Purdue University with a degree in Economics and a focus in international business. A natural strength for numbers, trends, and pattern recognition, in conjunction with a curiosity to understand the big picture has enabled a desire to understand market behavior. Ian managed his own stock account before moving into the futures arena because of the wide scope of trade-able sectors and the ample amount of fundamental support behind these larger-scope markets.