Investors are feeling an autumn chill in the markets, and the start of the fourth quarter has been bumpy. The latest negative manufacturing readings, combined with ongoing trade tensions, political wrangling and an overall global slowdown, are joining forces to keep investors on edge. Naturally, more defensive sectors such as utilities and consumer staples have performed better amid the uncertainty. Investors are looking forward to the start of the 3Q19 earnings season in a few weeks. Earnings should provide a more accurate view of the true economic backdrop.
Companies have been guiding downward, with some sectors such as energy and technology forecasting year-over-year declines in earnings. Current expectations are for a slight decline for overall S&P 500 earnings, but this has been the case in the last two quarters: companies put forth an overly negative scenario, only to surpass expectations and post growth. In the meantime, industrial weakness has not yet significantly affected labor trends; consumer confidence and spending remain elevated and central banks are keeping monetary policy firmly supportive.
Remember what happened last December? Investors ran for the hills only to miss out on the best January in 30 years. No need to hibernate yet, just grab a sweater and enjoy the cool autumn air.
Please see the latest Voya Global Macro Views – Recession or Slowdown, Three Indicators to Watch.
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