Trend Analysis

Market Strategy Radar Screen Weekly December 3, 2018

In this article:

  • The US and China over the course of the G20 meeting in Buenos Aires managed to agree to disagree for now
  • but not without declaring a 90-day truce on tariff escalation/retaliation action.


Everyday, Everyday I Have the Blues

By John Stoltzfus,
Chief Investment Strategist

Another Brick in the Wall

By John Stoltzfus,
Chief Investment Strategist

Progress Not Perfection

If you try sometimes you just might find you get what you need

Key Takeaways


  • A powerful rally last week could be tested this week as the clock starts ticking on the 90-day tariff truce between US and China.
  • Greater clarity by the Fed on monetary policy contributed to a rally in the 10- year Treasury that took it below 3% on Friday.
  • Oil may have reached in a bottom last Friday after having declined over 30% from early October, after Saudi Arabia and Russia moved closer to restoring production constraints.
  • Last week’s rally saw all 11 sectors making gains, with consumer discretionary and information technology leading the sectors higher.


The US and China over the course of the G20 meeting in Buenos Aires managed to agree to disagree for now, but not without declaring a 90-day truce on tariff escalation/retaliation action. The effects of a truce period should provide investors some relief near term from the day-to-day concerns that have roiled the markets on the risk of a protracted trade war and the damage it could cause to global economic growth and corporate earnings over the course of the next year.


The hope is that both sides will make good use of the truce period to find resolution to the trade dispute and remove the negative overhang that has held international equity market performance hostage since the summer. More recently, this overhang fed the downdrafts in markets stateside that carried the S&P 500 down just over 10% from September 20th through November 23rd .


November ended on an upswing, after Fed Chair Jerome Powell and other Fed officials’ remarks on monetary policy quelled nervousness gripping some investors who feared monetary policy that might be too hawkish in light of recent economic data that has signaled at very least a decent chance of economic slowing.


How long it will take before the fear of “a Fed mistake” becomes “the worry du jour” again for investors is anybody’s guess. For now, it appears to us that the Fed remains on the right track, committed to interest rate normalization but at a pace sensitive to both strengths and vulnerabilities of the economy stateside


Over the weekend, the price of oil caught a bid and moved higher. Prospects for a return to a reduced production regime led by Saudi Arabia and Russia appear imminent. As to how high will this rally take the price oil—in our view ,it will likely be a function of the Saudis’, the Russians’ and other OPEC members’ commitment to return to the program that was successful in supporting the price of oil globally over the last year or so.


“Look for the pace of global growth (whether continuing to slow or ramping higher) to play a significant role as to how far oil’s rally can go. ”


Look for the pace of global growth (whether continuing to slow or ramping higher) to play a significant role as to how far oil’s rally can go.


We would expect a resolution to the trade war between the US and China to be highly conducive to an extended rally in oil prices—albeit not too much above the levels seen prior to the decline that began in October. However, the deeper into the 90 days of the truce period talks between the US and China run without resolution, the less likely we believe that a significant rally in oil prices can persist.


Oh But Then There’s the Fed….


The 10-year Treasury yield fell from a 2018 peak of 3.238% on November 8 to 2.989% last Friday. Likely this reflects concerns about economic slowing stateside and abroad, the potential risk from a protracted trade war on global commerce, as well as relief after Fed Chair Powell’s less hawkish remarks last week caused Treasuries to rally. Heading into the new week, yields on the 10-year US Treasury could recover some on prospects for a successful outcome to the ninety day truce on tariff escalation.


With the New York Stock Exchange closed on Wednesday in honor of the late President George H.W. Bush (who passed away last Friday), market action this week could be somewhat constrained going into and out of the market’s closure on Wednesday.


Nonetheless, the market’s reaction during this abridged week will be under the considerable scrutiny of investors, traders and market observers searching for a hint of its next direction.





Other Disclosures

This report is issued and approved by Oppenheimer & Co. Inc., a member of all Principal Exchanges, and SIPC. This report is distributed by Oppenheimer & Co. Inc., for informational purposes only, to its institutional and retail investor clients. This report does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such offer or solicitation would be prohibited. The securities mentioned in this report may not be suitable for all types of investors. This report does not take into account the investment objectives, financial situation or specific needs of any particular client of Oppenheimer & Co. Inc. Recipients should consider this report as only a single factor in making an investment decision and should not rely solely on investment recommendations contained herein, if any, as a substitution for the exercise of independent judgment of the merits and risks of investments. The strategist writing this report is not a person or company with actual, implied or apparent authority to act on behalf of any issuer mentioned in the report. Before making an investment decision with respect to any security discussed in this report, the recipient should consider whether such investment is appropriate given the recipient's particular investment needs, objectives and financial circumstances. We recommend that investors independently evaluate particular investments and strategies, and encourage investors to seek the advice of a financial advisor. Oppenheimer & Co. Inc. will not treat non-client recipients as its clients solely by virtue of their receiving this report. Past performance is not a guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance of any security mentioned in this report. The price of the securities mentioned in this report and the income they produce may fluctuate and/or be adversely affected by exchange rates, and investors may realize losses on investments in such securities, including the loss of investment principal.


Oppenheimer & Co. Inc. accepts no liability for any loss arising from the use of information contained in this report. All information, opinions and statistical data contained in this report were obtained or derived from public sources believed to be reliable, but Oppenheimer & Co. Inc. does not represent that any such information, opinion or statistical data is accurate or complete and they should not be relied upon as such. All estimates and opinions expressed herein constitute judgments as of the date of this report and are subject to change without notice. Nothing in this report constitutes legal, accounting or tax advice. Since the levels and bases of taxation can change, any reference in this report to the impact of taxation



should not be construed as offering tax advice on the tax consequences of investments. As with any investment having potential tax implications, clients should consult with their own independent tax adviser.


This report may provide addresses of, or contain hyperlinks to, Internet web sites. Oppenheimer & Co. Inc. has not reviewed the linked Internet web site of any third party and takes no responsibility for the contents thereof. Each such address or hyperlink is provided solely for the recipient's convenience and information, and the content of linked third party web sites is not in any way incorporated into this document. Recipients who choose to access such third-party web sites or follow such hyperlinks do so at their own risk. The S&P 500 Index is an unmanaged value-weighted index of 500 common stocks that is generally considered representative of the U.S. stock market. The S&P 500 index figures do not reflect any fees, expenses or taxes. This research is distributed in the UK and elsewhere throughout Europe, as third party research by Oppenheimer Europe Ltd, which is authorized and regulated by the Financial Conduct Authority (FCA). This research is for information purposes only and is not to be construed as a solicitation or an offer to purchase or sell investments or related financial instruments. This report is for distribution only to persons who are eligible counterparties or professional clients and is exempt from the general restrictions in section 21 of the Financial Services and Markets Act 2000 on the communication of invitations or inducements to engage in investment activity on the grounds that it is being distributed in the UK only to persons of a kind described in Article 19(5) (Investment Professionals) and 49(2) High Net Worth companies, unincorporated associations etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended). It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons. In particular, this material is not for distribution to, and should not be relied upon by, retail clients, as defined under the rules of the FCA. Neither the FCA’s protection rules nor compensation scheme may be applied. This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Oppenheimer & Co. Inc. Copyright © Oppenheimer & Co. Inc. 2015.

About John Stoltzfus

John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business channel and other notable networks.

Full Profile