The Countdown to Election Day: What’s Ahead for Markets?
As the United States prepares to head to the polls on November 5, investors are bracing themselves for a potentially volatile week. The outcome of the presidential election will undoubtedly have a significant impact on the market narrative, but it’s not the only major event on the horizon.
A Week of High Stakes
The Federal Reserve is set to announce its latest policy decision on Thursday, with markets widely expecting a quarter-point interest rate cut. This move could have significant implications for the economy and investor sentiment. Meanwhile, earnings season continues to roll on, with a slew of major companies set to report their quarterly results.
Election Day: A Risk Event for Markets?
Despite the importance of the election, some market strategists believe that the outcome may not have a clear impact on the markets. “I think the market would do fine with Harris,” says Eric Wallerstein, chief markets strategist at Yardeni Research. “I think the market would do fine with Trump. I don’t think the stock market is really pricing any presidential odds.”
Others believe that the key to a positive market reaction lies in simply getting past the event itself. “Just having those elections settled, whichever way it goes, would be positive,” says Stephen Dover, chief markets strategist at Franklin Templeton.
The Federal Reserve’s Next Move
Markets are pricing in fewer interest rate cuts over the next year than initially thought, thanks to data showing solid economic growth and a bumpy path to the Fed’s 2% inflation goal. However, Morgan Stanley chief global economist Seth Carpenter doesn’t expect much clarity on the Fed’s path forward from next week’s meeting.
“The strength in growth gives the Fed patience as it allows policy easing to be gradual,” Carpenter wrote in a note to clients. “Neither inflation nor unemployment is forcing the Fed’s hand. We do not expect Powell to give specific guidance on the size or cadence of future cuts. Policy remains data-dependent, and neither the September 50 [basis point] cut nor the November 25 [basis point] cut indicates the future pace.”
Earnings Season: A Bright Spot?
Despite the uncertainty surrounding the election and the Fed’s next move, earnings season continues to be a bright spot for markets. With 70% of the S&P 500 having reported quarterly results, the benchmark index is pacing for year-over-year earnings growth of 5.1%. This would mark the fifth straight quarter of earnings growth as the index continues to rebound from the earnings recession seen in 2023.
“We went through a two-year period where earnings were flat,” says Ross Mayfield, investment strategist at Baird. “They were volatile. Now we have earnings on the rise again. They’re beating analyst expectations at a pretty solid clip. Profit margins are expanding. So the big picture is things look pretty good.”
Weekly Calendar:
Monday:
- Economic data: Factory orders, September; Durable goods orders, September
- Earnings: Berkshire Hathaway, Cleveland-Cliffs, Constellation Energy, Goodyear, Hims & Hers, Marriott International, Palantir, Wynn
Tuesday (Election Day):
- Economic data: ISM services index, October
- Earnings: Apollo Global Management, Devon Energy, Ferrari, Super Micro Computer
Wednesday:
- Economic data: MBA Mortgage Applications; S&P Global US services PMI, October final; S&P Global US composite PMI, October final
- Earnings: Arm Holdings, AMC, Aurora Cannabis, Celsius Holdings, CVS, Elf, Novo Nordisk, Qualcomm, Toyota
Thursday:
- Economic data: Federal Reserve interest rate decision; Initial jobless claims, week ending Nov. 2
- Earnings: Affirm, Airbnb, Block, Datadog, DraftKings, Halliburton, Hershey, Moderna, Pinterest, Rivian, The Trade Desk
Friday:
- Economic data: University of Michigan consumer sentiment, November preliminary
- Earnings: Canopy Growth, Icahn Enterprises, Sony
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