After a tumultuous week marked by volatile markets and political uncertainty, the upcoming week on Wall Street promises to be equally compelling.
All eyes will be on the election, writes Freedom Capital Markets (NASDAQ:FRHC) chief global strategist Jay Woods in his weekly newsletter.
“The headlines and uncertainty surrounding the potential outcome, let alone the final candidates, seem to change moment to moment,” Woods writes.
That said, the Federal Reserve and fiscal policy will ultimately drive the markets, irrespective of political developments.
“At the end of the day it is the Fed and fiscal policy that will drive the markets,” Woods notes. “The market doesn’t care about your politics.”
The upcoming Personal Consumption Expenditures (PCE) report is particularly crucial, as it could influence the Fed's decision on interest rates. A PCE figure that meets or exceeds the 2.5% expectation could prompt the Fed to consider a rate cut, aligning with its target inflation rate of 2%.
In terms of small caps, recent gains suggest a positive trend, though opinions differ on whether this momentum will sustain.
Key earnings reports from major companies, including GM, Ford, Verizon, IBM, AT&T, Tesla, and Alphabet, will also be closely watched. Tesla stock has surged 95% since April. Key points for Tuesday’s conference call include Tesla’s sales, deliveries, and the postponed Robotaxi event.
Meanwhile, Alphabet shares have dipped 8% from their recent high but remain up 27.2% year-to-date, with investors watching closely for Tuesday's earnings report to gauge if the pullback is temporary.
With 14% of the S&P 500 having reported, the results have been mixed.
Jay Woods notes that 80% of those reporting has beaten earnings estimates, but the degree with which they are beating is below average levels.
“Granted the sample size is still small, but it’s not the ideal start comparatively speaking,” Woods writes.
“The good news is that the projected overall earnings growth rate for the quarter is 9.7% and there’s a very long way to go. If that number rings true, it will be the highest year-over-year growth rate since the fourth quarter of 2021.”
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