LPL Research - John Lynch Chief Investment Strategist, LPL Financial
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Along with the holiday anticipation November can bring, it is also historically a bullish time for equities. The S&P 500 Index is on pace to log another gain in October, marking 7 consecutive monthly gains on a price basis and 12 in a row on a total return basis (including dividends). But the incredible strength does have some potential warnings, as the S&P 500 has now gone nearly a full year since the last 3% correction, the longest such streak in history. During the month, multiple central banks are meeting, earnings season will be winding down, and tax reform is entering a critical stretch.
To help, we’ve created this guide that looks at key events that are set to take place in November 2017.
Late October/Early November - Central Bank Action Picks Up
The European Central Bank (ECB) managed to pull off a dovish taper at its meeting in late October, but the three remaining major central banks will meet over the course of the next week.
The Bank of Japan (BOJ) will announce the details of its latest monetary policy meeting on Tuesday, October 31. Markets aren’t expecting any changes out of the BOJ until at least the end of BOJ President Kuroda’s term in April 2018, even though he is currently expected to be reappointed. There are thoughts that after that date the BOJ could seek to change the shape of the Japanese yield curve as the economy improves, but unlike the Fed and ECB, the BOJ isn’t likely to begin a sustained removal of monetary stimulus for some time.
The Federal Reserve’s (Fed) seventh of eight meetings this year will be in session October 31 through November 1. This meeting isn’t likely to be that impactful given that it doesn’t include updated economic projections, dot plots, or a post-meeting Q&A session. Markets will keep a close eye on the Fed’s statement, but aren’t expecting any changes that would materially alter expectations for a rate hike in December. While the Fed meeting isn’t likely to move markets, President Trump’s announcement of his choice for the next Fed chair, which is expected by November 3, may be more impactful.
The Bank of England (BOE) meets November 2. The United Kingdom recently saw third quarter GDP come in a little above expectations (+0.4% month over month versus +0.3% expected), which, along with an inflation reading of 3% for September, is likely to push the BOE toward a rate hike in November (markets are currently pricing in an 88% chance); however, we don’t expect a prolonged period of tightening policy given the headwind of ongoing Brexit negotiations.