9 key macro events this week, but Treasury refunding most important arguably. Incoming data likely soft-ish which should help break negative doom loop on stocks. Array ( [cookie] => bfa273-b09a75-e9f768-6db9b8-84c586 [current_usage] => 2 [max_usage] => 2 [current_usage_crypto] => 1 [max_usage_crypto] => 2 [lock] => [message] => [error] => [active_member] => 0 [subscriber] => 0 [role] => [visitor_id] => 44922 [user_id] => [reason] => Usage under limits [method] => ) 1 and can accesss 1

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We discuss: Tireless Ken and team analyzed earnings transcripts and found 360 references to Israel-Gaza connected to headwinds, uncertainty, compared to ~45 to 50 past 5 quarters.  So the war is even top of mind for CEOs and their caution.  This week there are 9 key macro events and the could trigger a large convergence between bonds and stocks.

Please click below to view our Macro Minute (Duration: 7:16).

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Over the weekend, I spoke with a few of my larger macro clients (common on Sunday afternoons) and one was puzzled about why bonds have been relatively stable in the past week, yet equities fell -2.5% in the past week. In fact, this is the story this entire month, since the start of October, US 10-year yields have moved from 4.679% to 4.835% (up 16bp modest) while S&P 500 has fallen 4% (4,288 to 4,117).

• Some of these fixed income clients are puzzled because the incoming economic data had leaned dovish and hence, flattish rates. When I mentioned that equity investors seem to be bothered by the uncertainty around the Israel-Gaza war and threat of regional expansion, they noted this was not seen in the behavior of rates. If the bond market was bothered by “war risk,” interest rates would be falling (bonds rally on risk-off).
• At the heart of discussion is whether it is possible for equities to come under selling pressure stemming from war risks, even if the bond market seems to be largely ignoring geopolitical risk? To me, this is possible because:
  – Equities are a sensitive to “uncertainty” of the GROWTH of future cash flows
  – While bonds are concerned about economic stability –> war risks less for bonds
  – Equities impacted by “risk premia” and mounting risks of war –> higher premia
  – Companies can become cautious due to “war risks” –> slowing spending
• Our data science team, led by “tireless Ken,” analyzed earnings transcripts and found a staggering 358 references to Israel-Gaza (combined with words like “headwinds” or “uncertainty”). This was 46-50 seen in the past 4 quarters. So this is a massive increase and sort of corroborates the above point.
• Anecdotally, it seems like Israel-Gaza and the divisive views dominate my conversations with friends and family in recent weeks. And this is obvious to anyone on social media or watching the news. My X.com feed has moved from primarily #fintwit to dominated by posts related to:
  – the war,
  – related protests somewhere in the World
  – or a strongly divisive view representing one side or the other
• In other words, this war impacts all of us personally and I think it also impacts how individuals (and even portfolio managers) view their own personal risk preferences. And as such, this seems like it would show up in equity markets more than the bond market. And add in that the bond market is largely institutional. So, there may be more “emotional spillover” in equities.
• Does this mean we believe stocks are stuck in a doom loop into year-end? I think stocks have become a good risk/reward as we head into November. There are multiple drivers including:
  (i) earnings proving to be better (see past notes);
  (ii) Fed likely to shift incrementally dovish;
  (iii) incoming economic data likely soft-ish this week (below);
  (iv) positioning and sentiment so cautious
  (v) stocks more fearful of war risks than bonds (positive catchup)
  (vi) positive seasonals
• This week is a huge macro week for incoming data and we highlight 9 key events this week. This is a very packed week for macro:
  1. 10/31 8:30am ET: 3Q23 Employment Cost Index    +1.0%
  2. 10/31 9am ET: Augst CoreLogic CS 20-city MoM  +0.70%
  3. 11/1 10am ET: Sept JOLTS       9.265 million
  4. 11/1 10am ET: Oct ISM Manufacturing   49.0
  5. 11/1 10am ET: Treasury 4Q23 Quarterly Refunding Press Conference
  6. 11/1 2pm ET: Nov FOMC Rate Decision   Pause
  7. 11/2 8:30am ET: 3Q23 Nonfarm Productivity   +4.3%
  8. 11/3 8:30am ET: October Nonfarm Payrolls    +190k
  9. 11/3 10am ET: Oct ISM Services        53.0
• Financial Conditions (per Goldman Sachs Financial Conditions Index) have moved to the highest levels of 2023 and the tightest since November 2022. Analysis by Goldman Sachs Economics team estimates this is equivalent to 4 rate hikes by the Fed. By their model, this is enough to bring inflation back to target (potentially faster) and this is also why Fed-speak has shifted to a more patient mode recently.
• Because of this, our macro clients note that the Treasury Quarterly Refunding is arguably more important than the FOMC meeting. Normally, the November FOMC meeting (11/1) would be the most important event. This is a “supply” event for bonds and as we know, interest rates have been rising. So how the Treasury announces its upcoming mix of bonds, this will be market moving. Bloomberg story here.
• We also get the sense that employment market should be softer (despite jobless claims staying low) and we will get plenty of data this week:
  – JOLTS, ECI, Non-farm productivity and payrolls report
  – plus: Employment series of ISM manufacturing and services

BOTTOM LINE: A major week for macro data but as we expect this to lean “soft” should be supportive of equities

I think there is enough incoming data this week along with the negative positioning for stocks to finally break this doom loop. We may have to wait until month end (tax loss selling this month). And our bigger message is to not get too negative. We realize the war issues are flaming many divisive conversations and raises risk. But as we noted above, it seems like equities have become far more cautious than bonds around war risks.

Key incoming data November

• 11/01 9:45am ET S&P Global PMI October Final 
• 11/01 10am ET JOLTS Job Openings September
• 11/01 10am ET October ISM Manufacturing
• 11/01 10am ET Treasury 4Q23 Quarterly Refunding Press Conference
• 11/01 2pm ET FOMC Rate Decision
• 11/02 8:30am ET: 3Q23 Nonfarm Productivity
• 11/03 8:30am ET October Jobs Report 
• 11/03 8:30am ET: October Nonfarm Payrolls
• 11/03 10am ET October ISM Services
• 11/07 9am ET Manheim Used Vehicle Index October Final
• 11/10 10am ET U. Mich. November prelim Sentiment and Inflation Expectation 
• 11/14 8:30am ET October CPI 
• 11/15 8:30am ET October PPI
• 11/15 8:30am ET November Empire Manufacturing Survey 
• 11/15 8:30am ET October Retail Sales Data
• 11/16 8:30am ET November New York Fed Business Activity Survey
• 11/16 8:30am ET November Philly Fed Business Outlook Survey 
• 11/16 10am ET November NAHB Housing Market Index 
• 11/17 9am ET Manheim Used Vehicle Index November Mid-Month
• 11/21 2pm ET Nov FOMC Meeting Minutes
• 11/22 10am ET: U. Mich. November final Sentiment and Inflation Expectation
• 11/24 9:45am ET S&P Global PMI November Prelim 
• 11/27 10:30am ET Dallas Fed November Manufacturing Activity Survey
• 11/28 9am ET November S&P CoreLogic CS home price 
• 11/28 10am ET November Conference Board Consumer Confidence
• 11/29 8:30am ET 3QS 2023 GDP
• 11/29 2pm ET Fed Releases Beige Book
• 11/30 8:30am ET October PCE

Key incoming data October

•  10/2 10am ET September ISM Manufacturing Tame
•  10/3 10am ET JOLTS Job Openings August Hot
•  10/4 10am ET September ISM Services Tame
•  10/6 8:30am ET September Jobs Report Mixed
•  10/6 9am ET Manheim Used Vehicle Index September Final Tame
• 10/10 11am NY Fed Inflation Expectations Mixed
•  10/11 8:30am ET September PPI Mixed
•  10/11 2pm ET Sep FOMC Meeting Minutes Tame
•  10/12 8:30am ET September CPI Mixed
•  10/13 10am ET U. Mich. September prelim 1-yr inflation Mixed
•  10/16 8:30am ET October Empire Manufacturing Survey Tame
•  10/17 8:30am ET October New York Fed Business Activity Survey Tame
• 10/17 8:30am ET September Retail Sales Data Hot
•  10/17 9am ET Manheim October Mid-Month Used Vehicle Value Index Tame
•  10/17 10am ET October NAHB Housing Market Index Tame
• 10/18 8:30am ET September Housing Starts Tame
• 10/18 2pm ET Fed releases Beige Book Tame
•  10/19 8:30am ET October Philly Fed Business Outlook Survey Tame
• 10/19 10am ET Existing Home Sales Tame
• 10/19 12pm ET Fed (including Powell) at Economic Club of New York
•  10/24 9:45am ET S&P Global PMI October Prelim Tame
•  10/26 8:30am ET 3Q 2023 GDP Advance Strong
•  10/27 8:30am ET September PCE Tame
•  10/27 10am ET Oct F UMich Sentiment and Inflation expectation Tame
•  10/30 10:30am ET Dallas Fed September Manufacturing Activity Survey
• 10/31 8:30am ET 3Q23 Employment Cost Index
•  10/31 9am ET August S&P CoreLogic CS home price
•  10/31 10am ET October Conference Board Consumer Confidence

Key incoming data September

•  9/1 8:30am ET August Jobs Report Tame
•  9/1 10am ET August ISM Manufacturing Tame
•  9/6 10am ET August ISM Services Mixed
•  9/6 2pm ET Fed releases Beige Book Tame
•  9/8 9am ET Manheim Used Vehicle Index August Final Tame
•  9/8 2Q23 Fed Flow of Funds Report Tame
•   9/13 8:30am ET August CPI Mixed
•  9/14 8:30am ET August PPI Tame
•  9/15 8:30am ET September Empire Manufacturing Survey Tame
•  9/15 10am ET U. Mich. September prelim 1-yr inflation Tame
•  9/18 8:30am ET September New York Fed Business Activity Survey Tame
•  9/18 10am ET September NAHB Housing Market Index Tame
•  9/19 9am ET Manheim September Mid-Month Used Vehicle Value Index Mixed
•  9/20 2pm ET September FOMC rates decision Market saw Hawkish
•  9/21 8:30am ET September Philly Fed Business Outlook Survey Mixed
•  9/22 9:45am ET S&P Global PMI September Prelim
•  9/25 10:30am ET Dallas Fed September Manufacturing Activity Survey
•  9/26 9am ET July S&P CoreLogic CS home price
•  9/26 10am ET September Conference Board Consumer Confidence

Key incoming data August

• 8/1 10am ET July ISM Manufacturing Tame
• 8/1 10am ET JOLTS Job Openings Jun Tame
• 8/2 8:15am ADP National Employment Report Hot
• 8/3 10am ET July ISM Services Tame
• 8/4 8:30am ET July Jobs report Tame
• 8/7 11am ET Manheim Used Vehicle Index July Final Tame
• 8/10 8:30am ET July CPI Tame
• 8/11 8:30am ET July PPI Tame
• 8/11 10am ET U. Mich. July prelim 1-yr inflation Tame
• 8/11 Atlanta Fed Wage Tracker July Tame
• 8/15 8:30am ET Aug Empire Manufacturing SurveyMixed 
• 8/15 10am ET Aug NAHB Housing Market IndexTame
• 8/16 8:30am ET Aug New York Fed Business Activity SurveyNeutral
• 8/16 2pm ET FOMC MinutesMixed 
• 8/17 8:30am ET Aug Philly Fed Business Outlook Survey Positive
• 8/17 Manheim Aug Mid-Month Used Vehicle Value IndexTame
• 8/23 9:45am ET S&P Global PMI Aug PrelimWeak
• 8/25 10am ET Aug Final U Mich 1-yr inflationMixed
• 8/28 10:30am ET Dallas Fed Aug Manufacturing Activity Survey Tame
• 8/29 9am ET June S&P CoreLogic CS home price Tame
• 8/29 10am ET Aug Conference Board Consumer Confidence Tame
• 8/29 10 am ET Jul JOLTS Tame
• 8/31 8:30am ET July PCE Tame

Key incoming data July

• 7/3 10am ET June ISM Manufacturing Tame
• 7/6 8:15am ADP National Employment Report Hot
• 7/6 10am ET June ISM Services Tame
• 7/6 10 am ET May JOLTS Tame
• 7/7 8:30am ET June Jobs report Mixed
• 7/10 11am ET Manheim Used Vehicle Index June Final Tame
• 7/12 8:30am ET June CPI Tame
• 7/13 8:30am ET June PPI Tame
• 7/13 Atlanta Fed Wage Tracker June Tame
• 7/14 10am ET U. Mich. June prelim 1-yr inflation Mixed
• 7/17 8:30am July Empire Manufacturing Survey
• 7/18 8:30am July New York Fed Business Activity Survey
• 7/18 10am July NAHB Housing Market Index in-line
• 7/18 Manheim July Mid-Month Used Vehicle Value Index Tame
• 7/25 9am ET May S&P CoreLogic CS home price Tame
• 7/25 10am ET July Conference Board Consumer Confidence Tame
• 7/26 2pm ET July FOMC rates decision Tame
• 7/28 8:30am ET June PCE Tame
• 7/28 8:30am ET 2Q ECI Employment Cost Index Tame
• 7/28 10am ET July Final U Mich 1-yr inflation Tame

Key data from June

• 6/1 10am ET May ISM Manufacturing Tame
• 6/2 8:30am ET May Jobs report Tame
• 6/5 10am ET May ISM Services Tame
• 6/7 Manheim Used Vehicle Value Index May Tame
• 6/9 Atlanta Fed Wage Tracker April Tame
• 6/13 8:30am ET May CPI Tame
• 6/14 8:30am ET May PPI Tame
• 6/14 2pm ET April FOMC rates decision Tame
• 6/16 10am ET U. Mich. May prelim 1-yr inflation Tame
• 6/27 9am ET April S&P CoreLogic CS home price Tame
• 6/27 10am ET June Conference Board Consumer Confidence Tame
• 6/30 8:30am ET May PCE Tame
• 6/30 10am ET June Final U Mich 1-yr inflation Tame

Key data from May

• 5/1 10am ET April ISM Manufacturing (PMIs turn up) Positive inflection
• 5/2 10am ET Mar JOLTS Softer than consensus
• 5/3 10am ET April ISM Services Tame
• 5/3 2pm Fed May FOMC rates decision Dovish
• 5/5 8:30am ET April Jobs report Tame
• 5/5 Manheim Used Vehicle Value Index April Tame
• 5/8 2pm ET April 2023 Senior Loan Officer Opinion Survey Better than feared
• 5/10 8:30am ET April CPI Tame
• 5/11 8:30am ET April PPI Tame
• 5/12 10am ET U. Mich. April prelim 1-yr inflation Tame
• 5/12 Atlanta Fed Wage Tracker April Tame
• 5/24 2pm ET May FOMC minutes Dovish
• 5/26 8:30am ET PCE April Tame
• 5/26 10am ET U. Mich. April final 1-yr inflation Tame
• 5/31 10am ET JOLTS April job openings

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