David Santschi, CEO TrimTabs, reflects on how he sees October unfolding:
Our U.S. equity demand indicators have been neutral to bullish for almost all of this year, even as central banks have been withdrawing some liquidity from the global financial system and the U.S. Treasury has been selling growing amounts of debt to cover ballooning federal budget deficits. We will be watching to see if the markets can hold up as well in the fourth quarter as central bank stimulus continues to diminish.
Companies have committed much less cash to shrink the float in the third quarter than they did in the first and second quarters. Announced corporate buying (new cash takeovers + new stock buybacks) has totaled $180.0 billion in Q3 2018, down from $305.2 billion in Q1 2018 and $561.0 billion in Q2 2018. While some of the slowdown is likely seasonal, it comes amid softness in several key macroeconomic indicators. We will be watching to see if corporate buying picks up again.
Real wage and salary growth remains very low. Withheld income and employment taxes increased only about 1% year-over-year in real terms in the past five months, which is far below last year’s average of about 4% year-over-year. We will be watching to see if tax collections start to reflect more of the optimism in many sentiment surveys.