Coming into Year End

Weekly Roadmap for the week 10/27-11/02

I hope you’ve all had a successful start to Q4 as we move into the last two months of the year. Reflecting on last week’s market action, volatility picked up around midweek, though no single piece of news stood out as the catalyst. Instead, it was largely driven by rapidly tightening financial conditions, which had notable impacts across sectors. Small-caps and cyclicals, sensitive to rate changes, faced the steepest declines, while the Nasdaq emerged as the top performer. In challenging times, tighter conditions often push investors to seek stability, leading to a “flight to safety” in mega-cap stocks as appetite for broader risk wanes.

Key Economic Data to Watch This Week

The upcoming week brings a robust lineup of job and economic data. The main focus will be on the Personal Consumption Expenditures (PCE) report on Thursday—widely regarded as the Fed’s preferred measure of inflation—and Friday’s job numbers. The prior jobs report surprised with a notable increase, coming in over 100K above estimates, and the unemployment rate dipped to 4.05%. Friday’s release will be closely watched to see if this upward trend in job growth holds or if it was a temporary spike. The data is especially timely, with the elections and an FOMC meeting right around the corner.

PCE data will provide insight into inflation, which appears to have stabilized. The Fed’s challenge now will be maintaining this stability, supporting economic growth without allowing inflation to resurge. This balancing act is critical to avoid unanticipated labor market weakness as the Fed seeks to uphold its “Fed Put”—a safety net for growth.

Additionally, scattered economic data and job figures will be released throughout the week, alongside a major earnings slate, with 37% of S&P 500 companies reporting.

Market Movements Last Week: A Look at the S&P 500

Midweek volatility in the S&P 500 wasn’t spurred by any one event but was instead influenced by surging dollar and 10-year Treasury yields as financial conditions tightened sharply. At one point, the index was nearly down by 100 points, underscoring the broader market’s sensitivity to these pressures. This dip tested the resolve of bullish investors who have, for some time, operated on the assumption of “markets only going up.” The critical support levels—just below recent all-time highs around 5750/5760 on the SPX—held strong, with the index rebounding precisely from this level, in line with the August support trendline.