The Market Bull – November 22, 2019
The major averages closed a busy week essentially unchanged with the Standard and Poors 500 Index down 8 points while the NASDAQ fell 9 points.
I have been asked several times of late about the effect the impeachment will have on the markets. Given the gravity of the situation and its highly unusual nature, certainly this is a very fair and legitimate question. Purely from a statistical perspective there is very little to go on as impeachment has happened only twice. The first time with President Nixon in 1974 and the second time with President Clinton in 1998. Then there is of course the current round of impeachment hearings involving President Trump. With just 2 completed and 1 pending impeachment process to go on it is very difficult, if not impossible, to draw any meaningful conclusions with respect to the financial markets. With both Nixon and Clintons impeachments the markets more or less shrugged off both events without any wild swings either up or down. Same was true for the economy. Fast forward to the present and the same patterns are also evident, at least so far. While the economic data is softening somewhat. I would think that this is largely attributable to the ongoing trade war with the Chinese and other major trading partners and all the uncertainty that it has engendered. As this makes it very difficult for businesses to invest and plan for the future amongst other items.
The latest Risk of Recession data set released on November 1st showed that the risk of recession in the next 6-months has continued to recede since early 2019 and stands at a very low 11% as per data from Moody’s Analytics. Of course, the trade war remains the largest downside risk to this forecast. Historically this series has averaged a 22% recession risk probability at any given time, so the current 11% figure is actually very low. While the incoming economic data has softened of late it is far from worrisome. Further this series would have to show a value of 60% or better before a recession was imminent based on past experience.
The Kansas City Fed Regional Index stayed in the red for a 5th consecutive month in November, unchanged at -3. New orders, employment and production were all negative as well. The trade war was cited as the primary culprit for the negative numbers.
Standard and Poors 500 Index closed at: 3,110.29 up 6.75
NASDAQ finished the day: 8,519.88 up 13.67
Gold ended trading at: $1,462.30 down $1.30