Yogi Berra, the great Yankees catcher, passed away in September. Known for his witty one liners, it’s only fitting that his quote about déjà vu seems to sum up where we believe the markets currently sit at the end of the 3rd quarter 2015.
The red lines in the charts presented below track the S&P 500 year to date. That is overlaid on the 2011 and 1987 S&P 500 markets to illustrate that history looks to be repeating itself given a late summer early fall market swoon. Time will tell if a November/December “Santa Claus” rally pulls the market off its year to date lows in Q4 like 2011 and 1987.
The points below capture what is on our minds going into the last quarter of the year:
The Fed: The Fed is in a weak place somewhere between “we need to hike” and “we’re afraid to hike”. By the January Fed meeting, we should have clarity on what the Fed will do. Odds favor a 25 basis point increase.
Earnings: 3rd quarter earnings season kicks off September 29th. Consistent with recent quarters, we expect more positive than negative surprises.
China: Markets have likely already overreacted to slowing fixed investment growth out of China. While data is hard to come by, consumer consumption growth does not appear to be nearly as bad as the pessimists theorize.
Global Economic Growth: Global economic growth has slowed but risks of a global recession remain low.
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