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October 02, 2019

Prudential’s market strategist says the market awaits a clear catalyst to propel it out of a tight trading range to higher levels, be it from a viable trade truce, stronger economic data releases, or even a ray of more optimistic corporate guidance during the earnings season.

Highlights

  • Tariffs forming a dark cloud over the global economy
  • ECB may steer members toward fiscal stimulus
  • Global trade, earnings matter more than current political headlines

As the hurricane season—which generally runs from June 1 through November 30 and peaks in mid-September—begins to recede from the headlines, meteorologists will continue to dissect the causes of each event, analyzing whether wind shear, water temperature, monsoon systems, tropical cyclones, environmental influence, climate change, and possible El Niño or La Niña factors strengthened storms or made them last longer. The rest of us get back to business as usual as we lump all of the esoteric scientific explanations that turned us into amateur forecasters into “all of the above” as we breathe a collective sigh of relief that the worst of the season has passed.

And so it is with the cross-section of markets. Seasonality, while not 100% predictable, has a fairly good record of guiding us through the most volatile of times as we look forward to what is generally viewed as the market’s most constructive period, the mid-to-end of the fourth quarter. This year, coming to the close of the third quarter and teasingly close to reaching new market highs after a particularly turbulent August, investors and traders could face a volatile October as the earnings season begins, according to the statistics of seasonality.

But there are exceptions to the rule, both positive and negative.

What’s to blame for moving markets in one direction or another? Trade negotiations? An attack on Saudi Arabia’s oil refining infrastructure and heightened geopolitical/military risk in the region? The efficacy of the latest round of global central bank accommodation? An impeachment inquiry? Earnings reports?

Quincy Krosby calls it "all of the above."

Read Quincy’s full Q4 2019 market commentary: “All of the Above.”

The views and opinions are those of the author at the time of publication and are subject to change at any time due to market or economic conditions. This document has been prepared solely for informational purposes. This is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.

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Lisa M. Bennett

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