Markets, GDP and Corporate Earnings on November 1, 2019
This report is written as an executive summary of how we have interpreted recent market, GDP and corporate earnings data. If you have any questions, please do not hesitate to
contact Rick Welch at (215) 603 2976 or firstname.lastname@example.org.
Markets – October was a relatively calm month for investors as the equity markets continued their slow grind to new highs. Investors remained cautious with lingering trade
tensions, ongoing BREXIT drama and a month-end FOMC meeting all garnering attention. The October 29/30 meeting of the FOMC resulted, as widely expected, in a reduction of
25 bps in the central bank’s benchmark federal-funds rate to a range between 1.5% and 1.75%. Concurrent with the rate change, policymakers removed the phrase “will act as
appropriate to sustain the expansion” and replaced it with “will monitor economic activity as it assesses the appropriate path of rates.” In October, domestic and international
equities all moved modestly higher as we saw gains in US Large Caps (S&P 500 was +2.04% and DJIA was +0.48%), US Small Caps (Russell 2000 was +2.49%) and International
(ACWX was +3.08%). Volatility (as measured by VIX) finished the month at 13.21 (with a high mark of 20.46 on October 2nd), below the long run average of 20. The Barclays US
Aggregate Bond Index fell -0.01% as the yield on the benchmark 10-year US Treasury bond rose from 1.67% to 1.69% during the month. For 2019, we see the following year-to-
date performance data: S&P 500 (+21.17%), DJIA (+15.94), Russell 2000 (+15.86%), International (+13.13%) and Barclays US Aggregate Bond Index (+6.27%).
GDP - The Advance Estimate of Q3 GDP growth released by the Bureau of Economic Analysis (www.bea.gov) showed that the US economy grew at an annual rate of 1.9% in the
third quarter of 2019, above consensus forecasts which ranged from 1.2% to 1.6%. The better than expected data was the result of continued consumer spending as well as
government expenditures. Personal consumption expenditures (PCE), a gauge of spending by American households, rose 2.9% while government spending rose 2.0%. The 2.9%
growth in consumption does mark a deceleration from the second quarter’s more robust 4.6% pace. As reported, “the increase in GDP reflected positive contributions from PCE,
federal government spending, residential fixed investment, state and local spending and exports that were partly offset by negative contributions from nonresidential fixed
investment and private inventory investment.” Business sentiment, particularly in the manufacturing sector (about 11% of domestic economic activity) remains weak. The
ongoing trade conflict with China, woes at Boeing and the now resolved UAW strike on General Motors all generated a drag on Q3 GDP.
Earnings - The Q3 earnings season is well underway with over 70% of the companies in the S&P 500 having