As corporate buyback windows near their November reopening, setting the stage for a potential year-end rally, attention turns to key economic data that could reveal cracks in U.S. consumer resilience. With signs of fatigue growing, next week’s reports will gauge how long consumers can sustain spending under rising financial pressures.
Meanwhile, U.S. election uncertainty keeps market volatility elevated and safe-haven demand for assets like gold high.
Market Overview
U.S. equity markets posted gains across all major indices last week, with small-cap stocks leading the charge. The Russell 2000 surged +1.87%, driven by strong earnings and optimism around the U.S. economy. The Dow Jones rose 0.96%, boosted by defensive sectors like utilities and industrials, while the S&P 500 gained 0.85%, reflecting consumer resilience.
The Nasdaq 100 underperformed, up just 0.26%, as investors rotated into small-caps and industrials due to concerns over tech valuations and a focus on improving market breadth.
Market movements were influenced by stronger-than-expected U.S. retail sales, up 0.4% in September, boosting market confidence. However, geopolitical and political uncertainties ahead of the U.S. elections tempered gains, especially in high-valuation sectors like tech. Declines in housing starts and industrial production pointed to economic weakness, adding caution to the rally.
Fluctuating Treasury yields, driven by heavy bank loan issuance, also played a role. The interplay of economic optimism, sector rotation, and geopolitical risks shaped this week’s modest but broad-based rally across asset classes.
Last Week’s Highlights
- U.S. Retail Sales Surge: September U.S. retail sales rose by 0.4%, beating expectations, driven by broad-based consumer spending.
- Jobless Claims Drop: U.S. initial jobless claims unexpectedly fell by 19,000 to 241,000, reflecting a strong labor market.
- Industrial Production Slows: U.S. industrial production fell by 0.3% in September, weighed down by strikes and hurricane disruptions.
- ECB Cuts Rates Again: The European Central Bank (ECB) cut its deposit rate to 3.25%, marking its second consecutive cut in 13 years.
- U.K. Inflation Falls: U.K. headline inflation dropped to 1.7%, driven by lower transport costs and easing wage pressures.
- China Growth Beats Expectations: China’s economy grew by 4.6% in Q3, surpassing forecasts, but remains below the 5% target.
- China Deflation Pressures: China’s producer price index fell 2.8% YoY in September, deepening from a 1.8% drop in August.
- Japan’s Inflation Eases: Japan’s core CPI rose 2.4% YoY in September, down from 2.8% in August, signaling a slowdown in inflation.
- Energy Prices Fall: Crude oil prices dropped 8.4% to $68.7 as fears of an Israeli attack on Iran’s oil infrastructure subsided.
- Gold Hits Record High: Gold climbed 2.4% to a record $2,721 per ounce, driven by its safe-haven appeal and inflation hedge.
- Treasury Yields Elevated: U.S. Treasury yields fell midweek but rose later, driven by strong retail sales and credit market issuance.
- Corporate Earnings Standouts: Netflix reported strong subscriber growth and margin expansion, while TSMC posted solid earnings.
Week Ahead & Implications
U.S. Corporate Buyback Season: Fuel for a Year-End Rally
As we approach the end of October, corporate buyback windows are reopening following the blackout period, with over $1 trillion in stock buybacks authorized for 2024. According to Goldman Sachs, U.S. corporations are the largest net buyers of equities this year, and with the buyback window reopening next week, this flow of capital is expected to accelerate.
November is historically the biggest month for corporate buybacks, and with nearly $6 billion in expected daily demand, the market could see a significant uplift, particularly in large-cap stocks.
This surge in buybacks presents a clear opportunity for investors to ride the tailwind of corporate demand. As buybacks reduce the supply of available shares, they increase earnings per share, which usually leads to higher stock prices. Look for buyback-heavy sectors such as technology and financials to outperform, as these companies often have the largest authorized buyback programs.
AlphaHero Buyback Picks: JPM (Buy) | GS (Buy)
U.S. Consumer Resilience vs. Fatigue: The Tipping Point?
Next week’s U.S. economic data, particularly the Durable Goods Orders and the University of Michigan Consumer Sentiment reports, will provide further insights into the state of the American consumer. While durable goods orders have shown resilience, largely supported by last week’s robust retail sales numbers, there are growing signs that the consumer is nearing a breaking point.
Former Target executive Gerald Storch’s recent warning of consumer fatigue, highlighted by higher prices, interest rates, and dwindling pandemic-era savings, adds weight to concerns that the holiday shopping season could be significantly weaker.
Durable goods data due on Friday will test how long consumers can keep spending on big-ticket items like cars and appliances with these financial pressures. Signs of weakness could trigger a broader market recalibration, particularly in retail and discretionary stocks, where inflated expectations for holiday sales could come under scrutiny. Similarly, the University of Michigan’s consumer sentiment report will shed light on whether consumer confidence is holding up or starting to crack under the weight of higher costs.
Upcoming Webinars
Market Outlook and Real Estate Investing
Hosted by Sovereign Properties
Gain insights from Sovereign Properties’ CEO Russ Krivor on capitalizing in today’s market. Discover our fund’s strategy for investing in discounted land near thriving Sunbelt cities and the latest trends in multifamily and active adult living. What You’ll Learn: • Market insights for multifamily and senior living • Strategic land acquisition in growth areas • Sovereign’s innovative active adult community model
When: November 13 | 8 am PT | 11 am ET
A significant drop in sentiment could spell trouble for sectors tied to consumer spending.
China’s Stimulus and LPR Cuts: A Lifeline for Global Growth?
China’s economic stimulus efforts, including an expected cut in the Loan Prime Rate (LPR) on Monday, will play a critical role in shaping global market sentiment. The People’s Bank of China (PBoC) has already taken significant easing steps, and the expected 20-25 basis point cut in the LPR is part of a broader strategy to stimulate the slowing economy.
In addition to rate cuts, recent government measures have been aimed at stimulating consumer demand and stabilizing the troubled property market. These moves have significant global implications, as China remains a key driver of demand for commodities, industrial goods, and consumer goods.
Chinese consumer stocks, particularly in the retail and automotive sectors, are likely to benefit from the increased liquidity and government incentives aimed at boosting domestic spending. However, while these stimulus efforts may provide short-term relief, their longer-term effectiveness remains uncertain.
Investors should remain nimble, taking advantage of the initial boost while staying prepared for potential volatility if the measures fail to deliver sustained growth.
AlphaHero China Pick: FXI (Mid-term Buy)
Bank of Canada Rate Cut: A Major Shift in Monetary Policy
Wednesday’s Bank of Canada (BoC) announcement is set to capture market attention, with a likely 50 bps rate cut down to 3.75%. This aggressive move comes in response to weakening inflation data and subdued economic growth, marking a significant shift in Canadian monetary policy.
With 19 out of 29 analysts expecting the cut, and markets pricing in a 92% chance, the outcome appears highly predictable. However, its impact could be far-reaching, particularly for Canadian equities and the currency.
A rate cut of this magnitude will likely continue to weigh on the Canadian dollar (CAD), which could lead to a temporary boost in Canadian export-driven sectors such as manufacturing and natural resources. However, the rate cut also indicates growing concerns about domestic demand.
5 U.S. Election Risks: Volatility and Gold
With the U.S. presidential election just weeks away, the political landscape is becoming an increasingly important market driver. The rising odds of a Republican Red Sweep, as highlighted by prediction markets, have been fueling speculative trades on a range of assets, from equities to currencies.
Investors are pricing in potential market-friendly policies, such as corporate tax cuts and deregulation, which could push U.S. equities higher in the event of a Republican victory. However, the election also brings considerable risks, especially if the results are contested or if political gridlock stalls fiscal stimulus efforts.
Given the heightened political uncertainty, volatility is expected to stay elevated in the coming weeks, and investors should be prepared for sharp market moves. Safe-haven assets like gold are likely to attract further inflows as investors seek to hedge against election-related risks.
AlphaHero Election Picks: EPD (Buy) | GLD (Short-term Buy)
Upcoming Webinars
Market Outlook and Real Estate Investing
Hosted by Sovereign Properties
Gain insights from Sovereign Properties’ CEO Russ Krivor on capitalizing in today’s market. Discover our fund’s strategy for investing in discounted land near thriving Sunbelt cities and the latest trends in multifamily and active adult living. What You’ll Learn: • Market insights for multifamily and senior living • Strategic land acquisition in growth areas • Sovereign’s innovative active adult community model
When: November 13 | 8 am PT | 11 am ET