Back to Market Commentaries

Weekly Market Review | Oct. 27

29 October 2019

Clint McGarvin, CFA® | Portfolio Manager

Week Ending October 27, 2019


Durable goods orders declined in September by 1.1% as transportation orders fell 2.7%. Core capital goods orders, a good proxy for business spending, declined 1.2%, which is particularly concerning since it feeds directly into the Gross Domestic Product (GDP) report and indicates that the business component of the 3rd quarter GDP may come in below expectations. Seven of the twelve components of durable goods orders declined in September, while three were either flat or showed very little growth. However, technology, electronic and communications equipment orders expanded in the month, a positive sign since the technology sector declined significantly on a year-over-year basis.[i] On the other hand, the IHS Markit Manufacturing Purchasing Managers’ Index (PMI) increased in October, rising from 51.1 in September to an estimated 51.5 in October, while IHS Markit Services PMI increased marginally from 50.9 to 51.0.[ii] Within the Markit PMIs, we see that businesses appear to be beginning to feel more confident in the outlook as the negative effects from the trade war work their way through the economy as well as because of the delay in the most recent round of tariffs. Manufacturing saw the first increase in export orders in four months, and overall new orders increased marginally in October. Inflation pressures continue to fall in manufacturing and factory charges declined for the first time since September 2016. The services sector saw a decline in new orders and many firms indicated weak overall demand, suggesting the improvement may be short-lived.

The University of Michigan Consumer Sentiment Index showed that the consumer remains optimistic regarding the U.S. economy and their situation. The index increased from 93.2 in September to 95.5 in October, and importantly consumers believe the outlook has improved.[iii] The improvement in consumer outlook is directly tied to reduced fears surrounding the trade war with China. Last month 36% of consumers worried about the trade war, and that number has declined to 27% in October. Consumer sentiment has been highly correlated with jobs and wage growth, which have continued to expand though at a slower pace this year compared to 2018.

Corporate earnings reports came fast and furious last week with positive results. We have seen most of the big banks such as JP Morgan, Citigroup, and Bank of America and we are now getting companies from the technology, industrial and healthcare sectors. The banks largely reported revenues and earnings above expectations as loans and deposits increased in the third quarter. Tech bellwethers Microsoft and Intel reported earnings that resoundingly beat expectations in what was believed to be a very tough environment. Earnings were mostly lower from third quarter 2018 levels, but they have still been better than expectations overall. Much like the data considered above, this bodes well for the U.S. and global economy. Equity market performance followed the more encouraging earnings outcomes with U.S. large-caps up about 1.2% and small-caps up approximately 1.5%.

Other news last week:

The housing market remains weak as existing home sales hit 5.38 million in September below the 5.4 million expected and the 5.5 million in August, while new home sales were 701,000 units, down from 706,000 in August.


International equities, like the U.S., were higher on the week with developed markets rising about 1.3% and emerging markets up about 1.2% on increased optimism that a trade deal can be reached and positive earnings news out of Europe. However, the European economy has stagnated as the fourth quarter opens with manufacturing contracting and services barely expanding in October. The outlook is for continued stagnation as new orders in both manufacturing and services declined in the month from September levels, and demand is at its lowest level since mid-2013.[iv] Corporate earnings reports that show positive underlying trends have helped give a positive spin to the European economy. For example, Barclays reported a loss of $1.8 billion, but the report showed positive business trends in loans. Consumer stocks in Europe were also positive, with clothing and luxury retailers posting a solid third quarter.

Fixed Income

Treasury yields were mostly stable last week with the 10-year up four basis points and the 2-year up five basis points.


The underlying data of the U.S. economy is more positive in October after showing threats of dipping into recession. The manufacturing sector appears to be in the early stages of rebounding while the consumer has appeared to slow down but remains very optimistic. Corporate earnings have thus far been better than expected although a bit below last year’s levels. We still have several large corporations to report over the next two weeks and using history as our guide we would anticipate earnings to move above last year’s levels as more firms report. If this occurs once again it ould be positive for the economic outlook. In the coming week, we will get another peek at consumer spending and inflation with Personal Consumption Expenditures data; the October nonfarm payrolls also comes out at the end of this week. The Institute for Supply Management (ISM) manufacturing index and the final IHS Markit Manufacturing PMI will also be reported with expectations looking for slightly improved conditions in the sector.

Past performance is no guarantee of future returns.  Performance discussed represents total returns that include income, realized and unrealized gains and losses. Nothing presented herein is or is intended to constitute investment advice or recommendations to buy or sell any types of securities and no investment decision should be made based solely on information provided herein. There is a risk of loss from an investment in securities, including the risk of loss of principal. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for an investor’s financial situation or risk tolerance. Diversification and asset allocation do not ensure a profit or protect against a loss. All performance results should be considered in light of the market and economic conditions that prevailed at the time those results were generated. Before investing, consider investment objectives, risks, fees and expenses.
Frontier does not directly use economic data as a part of its investment process.
Information provided herein reflects Frontier’s views as of the date of this newsletter and can change at any time without notice.  Frontier obtained some of the information provided herein from third party sources believed to be reliable, but it is not guaranteed, and Frontier does not warrant or guarantee the accuracy or completeness of such information. The use of such sources does not constitute an endorsement. Frontier’s use of external articles should in no way be considered a validation. The views and opinions of these authors are theirs alone. Reader accesses the links or websites at their own risk. Frontier is not responsible for any adverse outcomes from references provided and cannot guarantee their safety. Frontier does not have a position on the contents of these articles. Frontier does not have an affiliation with any author, company or security noted within.
Exclusive reliance on the information herein is not advised. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance.  References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Assumptions, opinions and estimates are provided for illustrative purposes only. They should not be relied upon as recommendations to buy or sell any securities, commodities, treasuries or financial instruments of any kind.  This material has been prepared for information purposes only and is not intended to provide, and should not be relied on for, accounting, legal, investment or tax advice.
Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision.
In reviewing the performance information presented here, we recommend that you consider both the returns generated and the level of risk that was assumed in generating those results. We believe that performance information cannot be properly assessed without understanding the amount of risk that was taken in delivering that performance. The performance information presented here covers different time periods. We present performance information for short time periods because we understand that clients and potential Investors are interested in this information, however, we recommend against making any investment decisions based on short-term performance information. For any investment products mentioned herein, a complete description of their investment objectives, along with details of the risks and fees involved is contained in their respective prospectus and statement of additional information, which is available on their websites and should be read fully.
It is generally not possible to invest directly in an index. Exposure to an asset class or trading strategy or other category represented by an index is only available through third party investable instruments (if any) based on that index.

[i] U.S. Census Bureau (2019), Monthly Advance Report On Manufacturers’ Shipments, Inventories And Orders September 2019. Retrieved from

[ii] Markit Economics (2019), IHS Markit Flash U.S. Composite PMI™. Retrieved from

[iii] CNBC (2019) Consumer Sentiment Dips Slightly at the End of October. Retrieved from

[iv] CNBC (2019), European Stocks Close Slightly Higher as Investors Digest a Fresh Round of Corporate Earnings. Retrieved from


Market Commentaries

Emerging Markets, Today's Markets, U.S. Markets