It is November and there is a distinct chill in the air. Following another buoyant October where risk seemed to be universally “on”, markets are now hesitant. It could be due to shifting expectations on tax reform .. as a template for a bill snakes its way through Congress it is clear that significant changes will be made at the Senate stage. Markets that have been priced for perfection might look to cool down now somewhat. It is also clear that investors are not indiscriminate in their enthusiasm – Snap (Snapchat) has endured a series of woes recently, leading to a stock price contraction of almost 20%, as growth projections have waned and they look to adapt their business model to more closely reflect Facebook’s.
The new Fed Chair designate’s very “ordinariness” has also met with a muted response. While “more of the same” promises little disruption, it has also dampened expectations of a brave, revolutionary agenda that seemed to have been promised by President Trump. With little to play with on the interest rate side, and precious little to grasp as far as deregulation is concerned, many financial stocks have lost their luster for now, especially as rates have compressed in the 10 year bond.
Internationally, President Trump’s Asia tour continues, and is shaping up to be filled more with platitudes than controversy. In the Middle East, however, a corruption purge in Saudi Arabia is being viewed as a clear consolidation of power by the new crown prince Mohammed Bin Salman, and is raising some eyebrows among commentators in light of the crack down that seems apparent. This potential flashpoint is arguably one area to watch closely over coming months – particularly as tensions with Iran continued to simmer.
As we approach remembrance day/veteran’s day, there will be multiple invocations of history’s lessons. Perhaps the November chill should be a reminder that market ebullience rarely lasts forever and that it might be wise to make provision for a long and brutal winter.