Last week the S & P 500 gained .77%[1], ending at a new high. This marks 3 consecutive weeks of gains after a rough start to the 4th quarter. There was plenty of upbeat data domestically, however the global economy is still showing signs of slowing…
US Data
There was much to celebrate domestically as ISM Manufacturing PMI increased from 56.6 in September to 59.0 in October[2]. Later in the week ISM non-manufacturing PMI decreased to 57.1 in October from 58.6 in September[3]. It is important to remember that while this was a decrease, it is well above the 50 mark, which denotes an expansionary economy.
Next came the elections, republicans taking control of the senate lays out a landscape last seen in the late 90’s; a period of strong economic prosperity. Granted the back drop is very different today in comparison, however recent history led to investor optimism.
Initial jobless claims fell by 10,000, continuing jobless claims fell by 39,000, and the unemployment rate fell to 5.8%[4]. Unlike other times, this time the participation rate actually increased by 0.1%. This is essentially the amount of people actively in the work force divided by the general population; which has been steadily falling due to the baby boomer generation retiring and also as a result of poor job prospects. An increase in participation could signal strengthening optimism in the job market.
Internationally…
The landscape is less optimistic in Europe. Both Manufacturing and Services PMI’s decreased by .1 to 50.6 and 52.3 respectively in October[5]. Again both figures are above 50 indicating expansion, however Italy and France both had PMI indicators below 50. Retails sales in September were weaker than anticipated, coming in at -1.3% vs. an expected drop of -0.8%[6]. German factory orders were weak as well.
This data culminated in European Central Bank (ECB) President, Mario Draghi, restating the complete commitment of the ECB and its members towards economic growth. This was necessary as concerns of diverging views have risen. This could also signal additional easing by the ECB.
Additional sanctions are being considered by Germany against Russia after a pro-Russian election in Ukraine. Sanctions have led to a plummeting Ruble and high inflation for Russia. Increased sanctions will also have further consequences for Europe, who is very reliant on the German economy.
China’s Trade balances expanded in October, however HSBC Services PMI was 52.9, down 0.6[7]. It is likely China will miss its 7.5% GDP projection for 2014.
For more information:
If you would like an in-depth analysis of your current portfolio, please click here.
Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long term holding strategy is the best strategy in any market environment.
Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.
[1] www.jpmorganfunds.com – market insights
[2] www.investing.com – economic calendar
[3] www.investing.com – economic calendar
[4] www.mfs.com – week in review
[5] www.investing.com – economic calendar
[6] www.putnam.com – economic update
[7] www.investing.com – economic calendar