Through September, the S&P 500® Index posted a year-to-date gain of 19%, its best performance since 1997; these results, though, mask the modest 2.2% one-year performance. The equity markets reversed course last Tuesday following the release of the September ISM Manufacturing Index; the 47.8 reading, the lowest level in ten years, heightening recessionary fears. On Friday, the equity markets recovered with a “goldilocks” jobs report. The economy added 136,000 jobs in September and unemployment declined to 3.5%, the lowest level since December 1969. For the week, the Nasdaq rose 0.54% while the other indices, the S&P 500® Index (‑0.33%), Dow jones Industrial Average (-0.92%) and Russell 2000® Index (-1.30%), declined.
The global economy continues to reflect on-going tariff-related stresses as companies endure declines in business activity while others have tabled growth initiatives while awaiting a resolution to the trade disputes. The World Trade Organization ruled in favor of the U.S. in a long-simmering dispute with the European Union related to its Airbus subsidies; as of October 18th, the U.S. can impose up to $7.5 billion in offsetting tariffs on EU products. Scheduled trade talks between the U.S. and China resume this week; some expect an interim agreement as both countries face the prospect of an economic slowdown and the potential for a global recession. Commentaries from each country are somewhat encouraging yet the details remain unknown.
Consumer spending remains the bright spot in the economy; strong September auto sales project annual sales of 17 million, an increase over earlier estimates. The Technology sector received a boost on reports that Apple has asked suppliers for a 10% production increase for its new iPhone. Higher employment across all sectors, with modest wage gains, continue to fuel consumer spending despite the shadow of tariffs. Not exactly a sign of an economy about to go into recession as the news media has predicted.
This week will focus on prospects for an interim trade agreement. The slowing economy also raises the possibility of further Federal Reserve interest rate cuts during the fourth quarter. Trading volumes remain low as investors take a wait and see attitude. Trade issues, and quarterly earnings reports, will determine the markets’ direction entering the fourth quarter.
Source: Pacific Global Investment Management Company
Powell Says Economy Faces Risks But Is in a Good Place
Federal Reserve Chairman Jerome Powell speaks about the outlook for the U.S. economy during opening remarks to a "Fed Listens" event in Washington.
Only geopolitics can sink the US into recession, Blacksto...
The U.S. economy is actually looking "quite robust" thanks to a healthy labor market and higher consumer spending, Steve Schwarzman told CNBC Monday.