{"id":7810,"date":"2018-11-05T18:57:05","date_gmt":"2018-11-05T18:57:05","guid":{"rendered":"http:\/\/zackspcg.com\/blog\/?p=7810"},"modified":"2022-02-26T13:07:26","modified_gmt":"2022-02-26T13:07:26","slug":"3-factors-that-could-shape-the-markets-in-q4","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/3-factors-that-could-shape-the-markets-in-q4\/","title":{"rendered":"3 Factors that Could Shape the Markets in Q4"},"content":{"rendered":"<p>Q4 has gotten off to a rocky start. With the benefit of hindsight, we can now see that the downside volatility actually started on October 3, when the S&amp;P 500 traded near its all-time high for the last time in October. As the month draws to a close, the S&amp;P 500 is teetering on the edge of correction territory and would officially become a correction with a total decline of 10% or more. The Nasdaq is already there.<sup>1<\/sup><\/p>\n<p>Looking ahead, no one <em>can say with<\/em> <em>certainty <\/em>how long the S&amp;P 500 will endure this selling pressure, or how deep the correction may go. But what we <em>can say with<\/em> <em>confidence <\/em>is that we believe the downside pressure is less a function of economic fundamentals breaking down and more a function of cyclical, normal bull market volatility. The likelihood of a recession in the next six months remains very low, in our view.<\/p>\n<p>_____________________________________________________________________________<\/p>\n<p><a href=\"http:\/\/go.steadyinvestor.com\/zacks-blog-stock-market-outlook?medium=zim_website_blog_leads&amp;content=stock_market_outlook_report\"><strong><u>Prepare for the Next Bear Market &#8211; Base Your Investing Decisions on Hard Data!<\/u><\/strong><\/a><\/p>\n<p>While we do not see the likelihood of a recession in the next six months as strong, it is still important to prepare your investments for a potential recession or bear market. In order to do so, we recommend keeping an eye on key economic indicators. To help you do this, we are offering all readers a look into our just-released\u00a0 Stock Market Outlook report.<\/p>\n<p>This report will provide you with our forecasts along with additional factors to consider:<\/p>\n<ul>\n<li>Forecast for the S&amp;P<\/li>\n<li>Small-cap vs. large-cap returns<\/li>\n<li>Which sectors are hot and which are not?<\/li>\n<li>What industries within those sectors most merit your attention?<\/li>\n<li>Odds of recession<\/li>\n<li>And much more.<\/li>\n<\/ul>\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!<\/p>\n<p><a href=\"http:\/\/go.steadyinvestor.com\/zacks-blog-stock-market-outlook?medium=zim_website_blog_leads&amp;content=stock_market_outlook_report\"><strong><u>IT&#8217;S FREE. Download the Just-Released November 2018 Stock Market Outlook<sup>2<\/sup> &gt;&gt;<\/u><\/strong><\/a><\/p>\n<p>____________________________________________________________________________<\/p>\n<p>That being said, the volatility in the equity markets seems likely to continue, in my view, and there are three factors that could shape the \u2018give and take\u2019 equity markets experience in the final months of the year. Investors should see these three factors as potential negatives but also as potential positives, since any outcome that\u2019s better than expected or not as bad as originally feared could give a boost to markets.<\/p>\n<p><strong>1. Midterm Elections and the Mueller Report<\/strong> \u2013 there are a few key statistics worth noting when it comes to midterm elections. The first is that historically, during the summer months leading up to midterms, the market has felt downward pressure (seems that history is somewhat repeating itself in 2018). But history also suggests that the twelve months following a midterm election have been strong for stocks, with an average gain of 31.2% in midterm years from 1962 \u2013 2016. Even if power gets redistributed in Congress and Democrats gain control of the House and Senate, with Trump in the White House it is doubtful that any large-scale legislation would pass. And the markets like gridlock, in my view.<sup>3<\/sup><\/p>\n<p>The wild card this time around, however, could be the Mueller report, which is scheduled for release shortly after the election. To the extent that Mueller\u2019s report results in some history-making legal and power struggle in the White House, the markets might arguably respond with volatility to the uncertainty.<\/p>\n<p><strong>2. The Federal Open Market Committee Meeting on December 19th \u00ad\u00ad\u2013 <\/strong>the Federal Reserve and particularly its chairman, Jerome Powell, have come under some recent criticism from the Trump Administration for raising interest rates too much and too quickly. I\u2019ve argued before that I see the Federal Reserve\u2019s moves as not only widely telegraphed and expected, but also consistent with what the economic data suggests. The Federal Reserve, in my view, should be ticking the interest rate up to a point at or beyond the neutral rate, to preserve economic growth, control inflation, and re-establish a tool in the toolbox to fight the next recession.<\/p>\n<p>Regardless of the economic and fundamental rationale for interest rate increases, the market is not likely to be thrilled about another rate increase in December, particularly if the Fed in their minutes indicates a commitment to more hikes throughout 2019.<\/p>\n<p><strong>3. Bolder Actions Against China \u2013 <\/strong>the tension between the United States and China has continued to ratchet higher, to the point where some analysts are uttering the term \u201ccold war\u201d in opining about future relations. An October 4 speech by Vice President Mike Pence at the Hudson Institute in Washington certainly seemed to be an indication that the United States is digging in their heels and will not budge until the Chinese make concessions. The <em>Wall St. Journal <\/em>referred to the speech as the \u201cbroadest and deepest in its criticism of China\u201d by the U.S. government in the past several decades.<sup>4<\/sup><\/p>\n<p><em>Bloomberg <\/em>also reported that by early December, the U.S. is prepared to announce tariffs on all remaining Chinese imports if the talks between Xi Jinping and President Trump at next month\u2019s G-20 meeting go nowhere, which is essentially the baseline expectation from where we sit today.<sup>5<\/sup> It\u2019s a tenuous situation between the two largest economies in the world.<\/p>\n<p><strong>Bottom Line for Investors <\/strong><\/p>\n<p>I think there\u2019s a good probability that the outcomes on all three factors above will not be as bad as the \u2018worst-case scenario,\u2019 which can actually be a positive for stocks. That being said, I chose these three factors because I\u2019d argue they are the three that are least certain, and could really end up going in a direction that many don\u2019t expect. They\u2019ll be at the top of my radar in the next two months.<\/p>\n<p>In addition to these three factors, there are many other economic indicators to keep on your radar. Our Stock Market Outlook report can help you get a deeper look into these &#8211; <a href=\"http:\/\/go.steadyinvestor.com\/zacks-blog-stock-market-outlook?medium=zim_website_blog_leads&amp;content=stock_market_outlook_report\"><strong><u>download our Just-Released Stock Market Outlook Report &gt;&gt;.<\/u><\/strong><\/a><\/p>\n<p>This Special Report is packed with newly revised predictions that can help you base your next investment move on hard data. For example, you&#8217;ll discover Zacks\u2019 view on:<\/p>\n<ul>\n<li>Which sectors are hot\u2026and which are not<\/li>\n<li>Why global oil prices are rising again<\/li>\n<li>Small cap vs. large cap returns<\/li>\n<li>Our view on the odds for a recession<\/li>\n<li>And much more\u2026<\/li>\n<\/ul>\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Q4 has gotten off to a rocky start. With the benefit of hindsight, we can now see that the downside [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":7430,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-7810","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/7810","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=7810"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/7810\/revisions"}],"predecessor-version":[{"id":10818,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/7810\/revisions\/10818"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=7810"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=7810"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=7810"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}