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Weekly Market Snapshot

November 9, 2018

Market Commentary
by Scott J. Brown, Ph.D., Chief Economist

The midterm election results were about as expected, with the Democrats taking control of the House and Republicans increasing their majority in the Senate. Stock market participants embraced the idea of a split Congress, at least temporarily.

The Federal Open Market Committee left short-term interest rates unchanged (federal funds rate target at 2-2.25%). In its policy statement, the FOMC repeated that “the labor market has continued to strengthen and that economic activity has been rising at a strong rate.” The unemployment rate “has declined” (vs. “stayed low” in the previous statement). Officials recognized that “growth of business fixed investment has moderated from its rapid pace earlier in the year.” The FOMC expects that “further gradual increases” in the federal funds rate will be required to achieve its goals.

The economic data calendar was thin and uneventful. The Producer Price Index rose more than expected in October, reflecting higher energy prices and increased wholesaler margins (both expected to be temporary). Pipeline inflation pressures were mixed.

Next week, the bond market will be closed for the Veterans Day holiday (observed). Retail sales figures (Thursday) will add color to the consumer spending outlook. Results were weak in August and September, but we should see improvement in October (but watch for revisions). Unit autos sales ticked up last month, but retail employment has been weak over the last four months.


Indices

  Last Last Week YTD return %
DJIA 26191.22 25380.74 5.95%
NASDAQ 7530.89 7434.06 9.09%
S&P 500 2806.83 2740.37 4.98%
MSCI EAFE 1856.93 1826.25 -9.45%
Russell 2000 1578.21 1544.98 2.78%

Consumer Money Rates

  Last 1 year ago
Prime Rate 5.25 4.25
Fed Funds 2.18 1.16
30-year mortgage 5.05 3.96

Currencies

  Last 1 year ago
Dollars per British Pound 1.306 1.315
Dollars per Euro 1.136 1.164
Japanese Yen per Dollar 114.07 113.47
Canadian Dollars per Dollar 1.316 1.268
Mexican Peso per Dollar 19.197 19.045

Commodities

  Last 1 year ago
Crude Oil 60.67 57.17
Gold 1225.10 1287.50

Bond Rates

  Last 1 month ago
2-year treasury 2.95 2.87
10-year treasury 3.21 3.17
10-year municipal (TEY) 4.29 4.25

Treasury Yield Curve – 11/09/2018

Chart

As of close of business 11/08/2018


S&P Sector Performance (YTD) – 11/09/2018


Chart

As of close of business 11/08/2018


Economic Calendar

November 12  —  Veterans Day (bond market closed)
November 14  —  Small Business Optimism (October)
November 14  —  Consumer Price Index (October)
 —  Fed Chairman Powell speaks (“global perspectives”)
November 15  —  Jobless Claims (week ending November 10)
 —  Retail Sales (October)
November 16  —  Industrial Production (October)
November 20  —  Building Permits, Housing Starts (October)
November 21  —  Durable Goods Orders (October)
 —  Existing Home Sales (October)
 —  Leading Economic Indicators (October)
November 22  —  Thanksgiving (markets closed)
December 7  —  Employment Report (November)
December 19  —  FOMC Policy Decision (Powell press conference)
January 30  —  FOMC Policy Decision (Powell press conference)
March 20  —  FOMC Policy Decision (Powell press conference)

 

All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.

The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor's returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.

Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business November 8, 2018.