David Santschi, CEO TrimTabs, reflects on how he sees November unfolding:
We wrote a month ago that we would be watching to see if financial markets could hold up even as central bank stimulus continued to diminish and the U.S. Treasury issued growing amounts of debt. Obviously global stock markets stumbled badly last month, with the S&P 500 posting its steepest monthly decline since February 2009 and the Nasdaq 100 posting its biggest monthly loss since October 2008. We will be watching to see if any developed market central bank officials start making more dovish noises in the wake of the sell-off. We suspect stock prices will have to drop at least 10% from current levels for policymakers to consider changing course.
Bond funds shed more than $20 billion in October, their biggest monthly outflow in nearly three years, and corporate bond funds suffered their biggest five-day outflow on record. We will be watching to see if bonds are able to rally during any further equity sell-offs with both the Federal Reserve and fund investors lightening up on their bond holdings.
Many of our key macroeconomic indicators have been soft lately. Our proprietary macroeconomic index barely budged in the past six months, withheld income and employment taxes have been rising only about 1% year-over-year in real terms adjusting for our estimate of tax changes, and narrow money supply growth remains depressed. We will be watching to see if buoyant sentiment starts to catch down to weaker hard data.