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Morning Notes — Early 2020 Catalysts and More

Early 2020 Catalysts and More

December 27, 2019

Now: Light attendance, low volume and an absence of incremental catalysts keeps the prevailing trend in place until something big enough comes along to challenge the current narrative. Thin liquidity conditions contribute to melt-up price action with yesterday’s move higher in AMZN as a good example for the current dynamic.

Next: The opening weeks of 2020 include some catalysts with ample density: 1) the text of US-China ‘phase one’ is expected following a signing ceremony that’s expected to occur sometime in early January. Details on the trade agreement have been sparse and trade is still the overwhelming swing factor for growth expectations and equity sentiment; 2) December data on global growth will trickle out next week starting with China PMIs on Tuesday (first look as China no longer releases flash data) followed by US manufacturing ISM on Friday. It’s probably too soon to expect a significant bounce, but the reports have the potential to challenge the narrative on improving global growth; 3) CQ4 earnings season will probably be the most significant catalyst for the first few months of 2020 as the reports come with calendar year guidance. The top-down ‘consensus’ 2020 SPX EPS estimate is presently ~$175, while the bottom’s up estimate stands at ~$180. Top-down estimates can change with a key stroke, so strategists expect disappointing guidance when earnings season kicks off on January 14 and; 4) geopolitical event risk around North Korea’s threat to launch an ICBM test as early as 1/1 and Iran’s threat to increase uranium enrichment to ~20% by 1/6.

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