Growth is slowing. China, Canada, Australia pose serious risks today. Will Q4 be ‘deja vu all over again’?

Stormy start to October has stock investors worried: Will Q4 be ‘deja vu all over again’?

If you somehow forgot the stock market turmoil of the last few months of 2018, the first few days of this quarter may have been a stomach-churning reminder.

But there are some fundamental differences now compared to then, analysts say, and while it doesn’t necessarily guarantee smooth sailing, it’s also possible we’ll avoid the worst of last year’s market carnage.

As a refresher: the Dow Jones Industrial Average DJIA, -0.36%   opened on October 1, 2018 at 26,598. Three months later, shell-shocked traders were rummaging for dusty “Dow 24,000” sunglasses, with the index down 12%.

Put another way, as of Tuesday this week, all three U.S. stock indexes were up handily since the start of the calendar year, but over the past 12 months, with the dismal showing from last year’s fourth quarter baked in, they were negative.

Low continued: “The Fed missed their September opportunity, but it is not necessarily too late to act forcefully in October. Keep kicking the can with timid policy responses for too long, however, and there will be a recession.”

T. Rowe’s Dillon splits the difference. He thinks earnings growth may be about 4%, but isn’t sure how markets will respond to results like that, especially in the face of “geopolitical unknowns and atrophying data.”

That sets up “an uncertain intersection” between central bank support and “deteriorating economic fundamentals,” that will result in “choppy” markets, Dillon said.

In the week ahead, investors may get some early clues on the U.S. – China trade dispute also, as high-level talks resume Thursday in Washington. On tap next week too: data on September consumer price inflation.

 

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