J.P.Morgan Insights (audio)

There is a famous old John Wayne movie, set in Ireland, called The Quiet Man. It is, to be honest, not a particularly authentic portrayal of my native land, but the plot is strong and includes a long drawn out brawl between Sean Thornton (played by Wayne) and his brother-in-law, Squire Danaher.

The week ahead will be dominated by fourth-quarter earnings reports and increasing concerns about the damage being inflicted upon the economy by the government shutdown.

Last summer, as part of my long-standing goal to get more cultured, I read the novel War and Peace by Leo Tolstoy. While many people make fun of its extravagant length, it is actually a great yarn, full of wisdom, intrigue and the flavor of old Russia.

Every stock market correction is different, but the equity market swoon of the fourth quarter of 2018 seems particularly unusual in the disconnect between the fundamental forces driving markets and the change in markets themselves. 

We wanted to wish you a happy holiday season from all of us here on the global Market Insights strategy team. Please tune in again next week for a new Notes on the week ahead.

Rudyard Kipling’s first qualification for manhood could equally be applied to the nerve required of the members of the Federal Open Market Committee, who meet this week to decide whether to hike interest rates for a fourth time this year.

Like the fishermen of old, many investors today are looking at relatively crude indicators such as recent market volatility or the shape of the yield curve to forecast the path for the U.S. economy and they have become worried by the behavior of both in recent weeks.

The week ahead will be dominated by a reassessment of risks which, for the most part, appear to be diminishing. In particular, markets should react well to some easing in trade tensions and greater clarity on U.S. monetary policy.

"Hey, Toreador!" Buzz yells. "She signals. We head for the edge … and the first man who jumps is a chicken!" In 1955's "Rebel Without a Cause", the most celebrated movie in James Dean's short career, two troubled teenagers drive stolen cars through an alley of headlights and off a bluff near Los Angeles. 

This week, families and friends all over America will be sitting down together to celebrate Thanksgiving. In many homes, there is a tradition of going around the table, with each person saying what they are thankful for. In most homes, I suppose, the answers will be genuine, sometimes funny and sometimes profound. However, if at any table, prosperity is mentioned as a blessing, it should be recognized that this is, in large measure, due to low inflation.

The October unemployment rate, at 3.7%, is at its lowest level since December 1969. Continued unemployment claims last week, at 1.623 million are at their lowest since July 1973. And job openings at the end September totaled over 7 million, which, except for August, amounted to their highest level on record going back to 2000.

The week ahead will be a busy one as investors process the implications of recent strong economic reports, the Federal Reserve holds its seventh FOMC meeting of the year and the nation votes in mid-term elections on Tuesday.

A financial nor'easter blew through global stock markets in October. Through last Friday, the S&P500 had fallen 8.7% for the month, the MSCI EAFE had declined by 9.9% and the MSCI EM had dropped by 10.3%.

Last Friday, as we often do on Fridays, my wife and I had dinner at Legal Sea Foods in the Burlington Mall and afterwards, we strolled around the mall, ice cream in hand, watching the comings and goings.

It’s early Monday morning and I have writer’s block. This is a little frustrating because I should have lots to write about. Last week saw a surge in volatility with the S&P500 falling by 5% on Wednesday and Thursday combined. Even with a rally on Friday, large cap U.S. stocks have now fallen in seven of the last eight sessions.

The great detective stands in front of the drawing-room fire, twirling the ends of his moustache as he ponders the Case of the Rising Rates. He knows who committed the crime – but what to do about it? He surveys the four suspects arrayed on the sofas before him, Inflation, Growth, The Deficit and The Fed. He clears his throat.

I have flown enough over the years to have experienced most normal things that happen on planes. From time to time, I’ve been on smaller, regional jets and when, by chance, they are only half full, I know the routine.

It is some years now since I have been a regular patron of our local arcade, but I have always been fascinated by the financial transactions by which it is maintained.

A few years ago, I read a tragic story in a local newspaper about a young man who was walking along the train tracks with his earphones blasting loud music. Far ahead, he could see a train hurtling towards him and people on the side of the tracks were yelling and waving to get his attention. He ignored them, he had plenty of time to move … and then he was instantly killed by a train coming the other way. As we head towards the mid-term elections, America is bitterly divided politically, and many investors worry that "Chaos in Washington," variously defined, will cause the market to crash.

I was in a meeting recently discussing asset allocation when a much-esteemed British colleague suggested that a certain strategy was like "fixing the roof while the sun shines." Growing up in agricultural Ireland, I had always heard something slightly different, namely that you should "make hay while the sun shines." Truth be told, the sun so rarely makes an appearance in the British Isles, that when it does, the temptation is to down tools, grab a book and a beer and soak in the rays.