In the coming week, there are three key factors that investors should monitor regarding the U.S. stock market, as highlighted by Franklin Templeton Investments. First, speeches from Federal Reserve officials will be crucial. Investors should pay attention to their perspectives on the economy, labor market, inflation, and interest rates.
The second factor to watch is economic data. Next week will see the release of significant reports, including September retail sales, industrial production, building permits, and new housing starts.
The third critical element is corporate earnings reports. A total of 45 companies are set to release their earnings next week, including major names like Netflix, Essilor, Collins Aerospace, Citigroup, Bank of America, Goldman Sachs, Morgan Stanley, BlackRock, Procter & Gamble, American Express, American Airlines, United Airlines, Las Vegas Sands, Schlumberger, UnitedHealth, Johnson & Johnson, Abbott Laboratories, and Intuitive Surgical.
Additionally, the political landscape is heating up with the U.S. presidential election approaching. According to Real Clear Politics data from October 10, the probability of Kamala Harris winning has dropped to 44.7%, while Donald Trump has risen to 53.9%.
Looking at future corporate earnings, FactSet’s data as of October 4 indicates that S&P 500 companies are expected to see a 4.2% growth in the third quarter. Growth sectors like technology, healthcare, and communication services are projected to lead the charge with growth rates of 15.2%, 10.9%, and 10.5%, respectively. Conversely, materials and energy sectors are anticipated to struggle, with declines of 2.7% and 20.9%.
Notably, the Fed lowered interest rates by 50 basis points on September 18, officially kicking off a rate-cutting cycle. Franklin Templeton suggests that based on historical trends, this indicates a likelihood of a soft landing for the U.S. economy, which could support a bullish trend for the stock market in the medium to long term. During this rate-cutting period, high-quality bonds are also expected to perform well. Investors are encouraged to consider diversification and selective investments in income-oriented bond funds to participate in the market while minimizing volatility.
