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US equity markets had another strong week, with the S&P 500 index gaining 0.86% and closing at a record high. The benchmark index has now gone 30 sessions without back-to-back losses, marking one of the longest such streaks since 1928. Ten out of the S&P’s eleven sectors ended the week higher, led by utilities, real estate and financials. Energy was the only sector that had a negative return, pressured by a drop in oil prices. Crude oil retreated after reports suggested Israel would refrain from targeting Iranian oil facilities, easing concerns over supply disruptions in the Middle East.
In a surprising departure from historical trends, the VIX index, Wall Street’s so-called “fear gauge” of market volatility, hovered around 20 despite the market’s robust performance. Typically, the VIX spikes above 20 when markets decline. With the U.S. presidential election just two weeks away, market volatility could subside post-election. However, some analysts argue that corporate earnings may be the more significant driver of market movements in the coming month.
Election Update
National polls show Vice President Kamala Harris maintaining a lead over former President Donald Trump, though the margin has tightened in recent weeks. In early October, Harris led by almost 2%, but that advantage has now shrunk to less than 1%. Harris also boasts a stronger favorability rating, standing at -0.6 compared to Trump’s -7.2.
However, the popular vote will not determine the winner. The outcome hinges on the Electoral College, where each state’s electoral votes are roughly proportional to its population. The candidate who secures at least 270 of the 538 total electoral votes will win the presidency. Trump holds a slight edge in the Electoral College but has not yet locked in the necessary votes. Swing states such as Pennsylvania, North Carolina, and Georgia are expected to play decisive roles in the outcome. In 2016, Trump secured an Electoral College victory over Hillary Clinton despite losing the popular vote.
Gold
In the commodities market, gold has led the gains by rallying 25.5% year-to-date, outperforming all major US equity indices. The precious metal reached an all-time high of $2,719 per ounce last week. Traditionally viewed as a hedge against inflation and a safe-haven asset in times of geopolitical risk, gold has rallied in response to the ongoing conflict in the Middle East. Yet, the surge is unusual given the backdrop of high U.S. interest rates.
Foreign central banks have been important buyers of gold, indicating their desire to gradually diversify their reserve holdings away from the U.S. dollar. Additionally, there is growing interest in exploring alternatives to the dollar-based global payments system.
Week Ahead
Looking ahead, key economic data to watch this week include existing and new home sales, speeches from several Federal Reserve officials, and September’s durable goods orders. The third-quarter earnings season is also in full swing, with major companies such as Tesla, Coca-Cola, 3M, Boeing, and GM set to release their results. Roughly 20% of S&P 500 companies are expected to report earnings in the coming week.
The information contained in this article is for information purposes only, and represent the views of the author. It is not intended as specific investment or financial advice, or a recommendation or solicitation to buy or sell any security. Any investments or strategies listed in this article may not be suitable for all investors. Past performance is not indicative of future performance, and as with any investment, prices may fluctuate. It is recommended that advice is sought from a qualified investment professional prior to implementing any financial plan. LOM has made every effort to ensure that the contents herein have been compiled from sources believed reliable, however LOM does not warrant the accuracy, adequacy, timeliness, or completeness of this information expressly disclaims liability for errors or omissions in this information.
