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Weekly Market Review | Nov. 3

05 November 2019

Clint McGarvin, CFA® | Portfolio Manager

Weekly Commentary for the Week Ending November 3, 2019

The week ending November 3rd was loaded with big economic reports, each report indicating the U.S. and global economies seem to be chugging along nicely, in the case of the consumer, or improving, in the case of manufacturing. The global manufacturing sector has been in a recession for most of this year as the trade war between the U.S. and China drags on; the consumer showed resilience and spent money despite the slowdown in manufacturing. However, September’s consumer spending and retail sales data suggested the consumer may be losing steam. October’s data indicates that both the consumer and manufacturing sectors appear to be strong and improving.


The biggest news last week was the third rate cut by the U.S. Federal Reserve, lowering the target federal funds rate from 2.0% to 1.75% The Fed indicated that there will now be a pause in changes in the target rate. The three Fed cuts have come at a time when labor markets are still expanding, and we are beginning to see at least a small rebound in manufacturing. Third-quarter GDP declined slightly from the second quarter as consumer and government spending growth declined from second-quarter levels, while business spending remained negative but moved closer to zero. These changes in component growth rates resulted in GDP growth of 1.9% compared to 2.0% in the second quarter.[i] Perhaps the most important report out last week was October nonfarm payrolls, which increased by 128,000. Importantly, the August and September job numbers were revised higher by a total of 95,000 thus indicating the labor markets remain fairly robust despite an overall hiring slowdown this year.[ii] Job growth in 2018 averaged 223,000 each month compared to 167,000 per month this year. The decline in the growth rate has influenced consumer spending and inflation. The personal consumption expenditure index (PCE) increased by 0.2% in September following a 0.2% increase in August which is the slowest growth this year. Inflation pressures have receded as well. The PCE price index was unchanged in September while the year-over-year change fell from 1.4% to 1.3%.[iii] Consumer confidence has likewise followed the lower growth rate in jobs, falling from 126.3 in August to 125.9 in September. The more important expectations index within the confidence report also fell from 96.8 to 94.9 as the percentage of consumers who believe economic conditions will worsen over the next six months is rising.[iv]

The manufacturing sector is starting to see an improvement in conditions as the Institute for Supply Management manufacturing index moved from 47.8 to 48.3. New orders, a leading indicator within the index, increased to 49.1 in October which helped fuel the improvement in the overall index last month.[v]

Through all the economic reports last week, U.S. equity markets continued to march higher with large-caps rising about 1.5% and small-caps up near 2.0%. Earnings have been better than expected.

Other reports out last week:

The IHS Manufacturing index indicated operating conditions improved in the U.S. manufacturing sector, rising to 51.3 as new order increased in October.

Pending home sales increased 1.5%, accelerating from the 1.4% growth rate in August, so the housing market, like the manufacturing sector, may see an upturn.


The Chinese manufacturing, similar to the U.S., improved in October with the Chinese Markit Purchasing Managers’ Index (PMI) showing the greatest improvement in operating conditions since February 2017. The index rose from 51.4 in September to 51.7 in October as new orders increased last month, rising at the fastest pace in 81 months.[vi] Other areas of Asia such as Japan, South Korea, and Vietnam continue to see weakness in their manufacturing sectors, but in all cases but Japan, activity in October was largely stable and near 50. We will get a look into the health of the European manufacturing sector this week as well as the services sectors in Europe and Asia. Equity performance in the emerging markets was positive, rising about 1.3% last week with developed equities increasing just less than 1.2%.

Fixed Income

Performance in the fixed income markets was positive last week as the broad-based bond index rose just less than 0.5% while long-term Treasuries rose a little more than 1.4%. The positive performance in the indices was due to a decline in yields with the 10-year Treasury falling 7 basis points to 1.73% on Friday and the 2-year also down 7 basis points.


The global economy appears to be entering a period of synchronous growth as the major manufacturing regions experience improving conditions (with some yet to report October activity) and others beginning to stabilize. Central Banks around the world have moved into more accommodative policies cutting rates and injecting additional cash into the global economy in an effort to reaccelerate growth, which as noted above seems to be working, for now.

Reports of note this week

ISM and IHS Markit Services Sector activity will be released on Tuesday.

U.S. Unit Labor Costs and Productivity data will be out Wednesday.

Consumer Sentiment will be released on Friday.


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[i] Bureau of Economic Analysis (2019), Gross Domestic Product, Third Quarter 2019 (Advance Estimate). Retrieved from
[ii] Bureau of Labor Statistics (2019), The Employment Situation – October 2019. Retrieved from
[iii]Bureau of Economic Analysis (2019), Personal Income and Outlays, September 2019. Retrieved from
[iv] The Conference Board (2019), The Conference Board Consumer Confidence Index Edged Down in October. Retrieved from
[v] Institute for Supply Management (2019), October 2019 Manufacturing  ISM® Report On Business®. Retrieved from
[vi] IHS Markit (2019), PMI Releases. Retrieved from









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