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DataTrek’s Nicholas Colas points out that the financial sector is “much more than just banks,” as investors await JPMorgan’s third-quarter earnings report, expected Friday. Last week, all three major U.S. stock indexes posted gains for the fourth straight week, driven by a stronger-than-expected jobs report. The financial sector of the S&P 500 rose about 1%, while energy stocks jumped 7% as concerns grew over oil supply risks due to the conflict in the Middle East. As earnings season begins, investors are closely watching JPMorgan Chase and Wells Fargo, set to release third-quarter results on October 11. According to a DataTrek Research note, the financial sector’s earnings outlook isn’t particularly strong, with analysts forecasting a slight 0.4% decline from last year, primarily due to an expected 12% drop in bank earnings. However, Colas stresses that the financial sector includes much more than just banks. Non-bank industries, which make up 76% of the sector, are more influential on overall performance. These subsectors include financial services, capital markets, insurance, and consumer finance. The breakdown of weights is as follows: DataTrek sees large-cap financials as a diverse way to play continued U.S. economic growth. While early bank earnings can offer some insight, Colas notes that they represent just a small part of the financial sector’s overall story, with non-bank subsectors expected to show year-over-year earnings growth. So far in 2024, the U.S. stock market has performed well, with the S&P 500 up 19.4% through Monday, while the financial sector has outpaced it slightly with a 19.8% gain. However, the financial sector has fallen 0.5% in October, while energy has surged 6.5%, reflecting concerns over rising tensions in the Middle East. On Monday, U.S. markets closed lower, with energy being the only S&P 500 sector to end the session in the green. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

The SPDR Gold Shares ETF saw a strong surge in the third quarter, fueled by growing investor optimism that the Federal Reserve could successfully achieve a “soft landing” for the U.S. economy. By the end of September, many investors appeared more confident that the Fed could lower inflation without triggering a recession. “There’s more confidence that we’re going to stick the soft landing,” said Michael Arone, chief investment strategist at State Street Global Advisors. However, Arone also noted that such outcomes are rare, and gold’s strong performance suggests that some investors are still hedging against economic risks. The SPDR Gold Shares ETF (GLD), which invests in physical gold, has soared 27.1% this year, including a 13% rise in the third quarter. This outpaced the S&P 500, which gained 5.5% during the same period and is up 20.8% for the year. September marked the start of the Fed’s interest-rate-cutting cycle, with the central bank opting for a larger-than-expected half-point reduction. This move sparked a rally in U.S. bonds, as the iShares Core U.S. Aggregate Bond ETF (AGG), which tracks investment-grade bonds, gained 5.3% in the third quarter. Meanwhile, riskier corporate bonds, like the iShares iBoxx $ High Yield Corporate Bond ETF (HYG), saw a 5.7% gain. Despite the optimism, Arone recommends maintaining a small allocation to gold as a hedge against potential risks. He suggests that long-term investors consider a 3% to 10% allocation, emphasizing that falling interest rates make gold an increasingly attractive asset. As the “opportunity cost” of holding gold declines, it remains a valuable safeguard, especially if the economic outlook shifts unexpectedly. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Investors are increasingly jittery about economic data, even reports that once flew under the radar. As the Federal Reserve works to lower interest rates and guide the economy toward a soft landing, market reactions have become more pronounced. While crucial reports like monthly job numbers still draw attention, even routine data releases now have the power to move markets. Jack Janasiewicz, a portfolio manager at Natixis Investment Managers Solutions, attributes this to investors being “hyper-sensitive” to the constant stream of news, leading to swift and sometimes exaggerated market reactions. Bespoke Investment Group analyzed 25 years of data and found that Wall Street has seen greater volatility in the last four years, especially on days when economic data is released. Before the pandemic, the S&P 500 averaged a daily move of 0.81% on such days, but that figure has risen to 0.94% since March 2020. In their analysis of 34 economic indicators, Bespoke noted that previously overlooked data points have gained importance. Releases like the University of Michigan’s consumer confidence survey, ADP private payrolls, and durable-goods orders now frequently coincide with significant market moves—often 1% or more. Prior to the pandemic, such sharp reactions were rare. Jeffrey Roach, chief economist at LPL Financial, pointed to the Labor Department’s JOLTS report as a prime example of a dataset that has become a focal point during the recent economic tightening. Once ignored, it’s now closely watched, especially as the Fed monitors labor tightness through the openings-to-unemployed ratio. Market volatility has also surged around inflation data and Federal Reserve decision days. Before the pandemic, the average daily market move on Fed-decision days was 0.88%, but this has jumped to 1.17% since 2020. Janasiewicz suggests that rising market leverage and the use of short-term options trading could be fueling these swings. Despite ongoing recession fears, recent economic reports have kept markets buoyant, with the S&P 500 and Dow Jones rallying on the back of strong data. However, Janasiewicz warns that investors remain on edge, poised to exit quickly at any hint of economic weakness, driven by the fear of getting caught in a selloff. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com