The global markets experienced significant gains in October, successfully recovering much of the considerable losses incurred in September. Leading this resurgence were equities, particularly US stocks, which achieved a robust total return of 7.9% as indicated by the Russell 3000 Index for the month. Despite this promising start to the fourth quarter, losses still heavily influence year-to-date comparisons, with some sectors reporting mild gains.
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● US consumer spending growth slowed to an eight-month low in September | USA Today
● US personal income growth in September was the slowest since March | USN&WR
● Consumer sentiment in the US improved slightly in October | CNBC
● US Employment Cost Index growth accelerated in Q3 | US Labor Dept
● Chicago PMI showed a positive reading in October | ISM Chicago
● PMI indicates a slower rate of decline for China’s manufacturing sector in October | Markit
● China’s official PMI for manufacturing reflected slight contraction in October | MarketWatch
● The Money Makers: How Roosevelt and Keynes Ended the Depression, Defeated Fascism, and Secured a Prosperous Peace
By Eric Rauchway
Review via The Economist
Traditional historians often shy away from the idea of using the past to inform current strategies. However, in “The Money Makers,” Eric Rauchway, a historian at the University of California, Davis, sets out to do precisely that. The book explores Franklin Delano Roosevelt’s economic policies and the influence of British economist John Maynard Keynes. Rauchway asserts that modern policymakers could extract “valuable lessons” from Roosevelt, who disrupted established economic principles to revive America during the Great Depression and sustain the Allies during World War II.
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According to a recent update from the Bureau of Economic Analysis, personal income and spending growth in the US faced a decline last month. Consumer spending only increased by 0.1% in September — the smallest growth observed in eight months. Additionally, disposable personal income growth was stagnant, rising by just 0.1% in September, marking the slowest increase since April. Notably, private-sector wage growth, which underpins consumer spending and the larger US economy, experienced its first monthly decrease in over a year, and year-over-year figures continued to trend lower.
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The recent fluctuations in global markets indicate an increasing macro risk potential. One effective method to assess the threat to the US economy is through monitoring four financial stress indexes published by regional Federal Reserve banks. Although these indicators suggest a recent uptick in risk levels, they remain significantly below their respective danger thresholds. While this doesn’t ensure a trouble-free outlook, the current “normal,” though somewhat elevated level of financial stress implies that risks stemming from this area are not a pressing concern for the US economy at this time. However, risks from other sources could still pose threats, though the likelihood of a financial-driven issue emerging soon seems low.
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● US Q3 GDP growth recorded a slowdown to 1.5% | Reuters
● The US economy is stronger than what GDP suggests | The Economist
● US jobless claims remain close to a 40-year low | MarketWatch
● Bloomberg’s US Consumer Comfort Index dropped to a five-week low | Bloomberg
● The Pending Home Sales Index in the US decreased for the second consecutive month in September | The Hill
● Eurozone economic sentiment showed improvement in October | Reuters
● German retail spending remained flat in September but increased by 3.4% year-on-year | Reuters
● The Bank of Japan opted not to implement additional monetary stimulus | Guardian
The US economy exhibited a notable slowdown in the third quarter, according to the initial estimate of GDP for the period spanning July to September. In alignment with market expectations, output increased at a modest 1.5% annual rate, a significant drop from the 3.9% rise seen in Q2. A critical factor contributing to this deceleration was a sluggish rise in inventories, which reduced the headline GDP growth rate by 1.44 percentage points, marking the largest inventory-driven deduction since Q4 2012.
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Various indexes, fund products, and timeframes can yield nearly any result you desire. Ignoring data mining challenges, the concept of the “sweet spot” within the capitalization spectrum persists, albeit inconsistently. A common explanation is that mid-cap stocks combine the best characteristics of both small-cap and large-cap stocks while minimizing the respective disadvantages. The suggestion, then, is to allocate a portion of investments specifically to mid-cap stocks. While this notion holds some appeal, it is crucial to acknowledge that, much like other risk premiums, mid-cap equities experience fluctuations over time.
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● The Federal Reserve maintains the current interest rate but hints at a possible hike in December | Reuters
● The US trade deficit fell to a seven-month low in September | Bloomberg
● Inventories are expected to put pressure on today’s GDP report | Reuters
● US trucking growth has seen weakness this fall, according to executives | MNI
● Germany’s unemployment rate decreased in September | Reuters
● Japan’s industrial output surprised with an upside in September | Bloomberg
Expectations are being recalibrated ahead of tomorrow’s preliminary release of the US government’s third-quarter GDP report, according to the latest update from the Atlanta Fed’s unofficial estimate. While the consensus forecast from Econoday.com suggested a 1.7% rise in Q3 output, the Atlanta Fed’s GDPNow model has revised its forecast to a modest 0.8%, a decrease from the previously forecasted 0.9% and well below the 3.9% rise recorded in Q2.
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