Special Market Update - November

October was one of the busiest news months of the year. Despite moderately slowing GDP, mixed corporate earnings results, Brexit drama, US/China trade war developments and impeachment noise the equity markets marched higher after some early month weakness and surprised even the most ardent bulls with a 2.17% return on the S&P 500. Adding potential fuel to the "bulls' case" was the October 30th Federal Reserve interest rate cut of 0.25% — the third such cut in 2019.

US GDP Was Better Than Expected

U.S. gross domestic product (GDP) — the broadest measure of the health of the U.S. economy — grew faster than expected in the third quarter (Q3), but slowed slightly from the second quarter (Q2) as business investment continued to decline.

Real GDN: Percent change from preceding quarter





The Commerce Department announced on October 30th that economic activity grew at an annualized rate of 1.9% in the third quarter, down slightly from the 2.0% pace in the second quarter. Economists polled by CNBC had expected the third-quarter economic growth to come in at 1.6%. (1)

The better-than-expected data was the result of continued consumer spending as well as government expenditures. Personal consumption expenditures, a gauge of spending by American households, rose at a 2.9% annualized rate while government spending grew at a 2.0% rate.

Spotlight on Earnings

With 40% of the companies in the S&P 500 already reporting Q3 2019 results, 80% have reported earnings per share results above analyst expectations and 64% have reported a positive revenue surprise (compared to expectations). To date, the market is rewarding positive earnings surprises more than average and punishing negative earnings surprises more than average.

The blended Q3 2019 earnings decline for the S&P 500 is -3.7%. If -3.7% is finalized as the actual decline for the quarter, it will mark the first time the index has reported three straight quarters of year-over-year earnings declines since the period Q4 2015 through Q2 2016. (2)

Brexit Extension

The European Union (EU) granted the British government's request to delay Brexit for three more months beyond its scheduled October 31st deadline. British citizens will go back to the polls on December 12th to elect a new Parliament that may, or may not, be able to settle on a Brexit plan. (3)

It is not at all clear that the December election will settle the Brexit question. Prime Minister Boris Johnson and the Conservatives would need to win a majority in Parliament to implement a Brexit plan by the EU's deadline of Jan. 31, 2020. British voters could also deliver a Parliament that is still gridlocked on the issue. Either way, the outlook for European markets is likely to remain uncertain.

US/China Trade War Developments

On October 11th, President Trump announced that the United States had reached a Phase 1 trade deal with China that would forestall a tariff increase slated for November, providing a temporary de-escalation to the trade war.

This represents a reversal from both countries' previous positions that a "complete" deal would be the only one worth exploring. But the economic pain appears to have softened both sides' appetite for a continued fight, who have now agreed to work on the deal in phases.

The latest news on the impeachment inquiry

A bitterly divided House of Representatives voted Thursday, October 31st to approve the resolution that lays out the rules for the "public facing phase" of the impeachment process. The tally foreshadowed the battle to come as Democrats take their case against the president fully into public view, sending both parties into uncharted territory and reshaping the nation's political landscape. (4)

Meanwhile Republicans have been highly critical of the process. The White House said the resolution "confirms" the inquiry "has been an illegitimate sham from the start." President Trump is urging his allies to defend him on the substance of the allegations against him, arguing he did nothing wrong during the July call in which he pressed the Ukrainian President to investigate former vice president Joe Biden and his son Hunter Biden.

Federal Reserve Eases Again

The Federal Reserve, as expected, cut rates by a quarter-point (0.25%) to a range of 1.50% to 1.75% on Wednesday, October 30th. This was the third cut this year as part of what Fed Chairman Jerome Powell characterized as a "mid-cycle adjustment" in a maturing economic expansion.

Along with the decrease came language pointing to a higher bar for future easing — in other words, we may be nearing a pause in further rate cuts. The FOMC statement read, "The Committee will continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate" (5), removing a key clause that had appeared in post-meeting statements since June saying that it was committed to "act as appropriate to sustain the expansion."

Conclusion:

There's an old adage in investing that says "don't fight the Fed". An easing, dovish, Fed is a nice tailwind for owners of most financial instruments, from stocks to bonds to REITs. If Phase 1 of the China/US trade resolution comes to fruition and the current impeachment inquiry goes nowhere, most impediments to moving higher would be cleared and the markets could expand into early 2020 until we all turn our attention to the 2020 Presidential Election.


Sources
(1) https://www.cnbc.com/2019/10/30/us-gdp-q3-2019-first-reading.html
(2) https://www.zacks.com/earnings
(3) https://www.bbc.com/news/uk-politics-46393399
(4) https://www.nytimes.com/2019/10/31/us/politics/house-impeachment-vote.html
(5) https://www.cnbc.com/2019/10/30/fed-decision-interest-rates-cut.html




WARRANTIES & DISCLAIMERS

There are no warranties implied.
Any opinions expressed on this website are the opinions of WT Wealth Management and its associates only. Material listed on this website is neither an offer to buy or sell securities nor should it be interpreted as personal financial advice. You should always seek out the advice of a qualified investment professional before deciding to invest. Investing in stocks, bonds, mutual funds and ETF’s carry certain specific risks and part or all of your account value can be lost.

At WT Wealth Management we strongly suggest having a personal financial plan in place before making any investment decisions including understanding your personal risk tolerance and having clearly outlined investment objectives.

View Disclosure
WT Wealth Management is an SEC registered investment adviser, with in excess of $100 million in assets under management (AUM) with offices in Flagstaff, Scottsdale, Sedona and Tucson, AZ along with Jackson Hole, WY and Las Vegas, NV. WT Wealth Management is a manager of Separately Managed Accounts (SMAs). With SMAs, performance can vary widely from investor to investor as each portfolio is individually constructed and managed. Asset allocation weightings are determined based on a wide array of economic and market conditions the day the funds are invested. In an SMA, each investor may own individual Exchange Traded Funds (ETFs), individual equities or mutual funds. As the manager we have the freedom and flexibility to tailor the portfolio to address an individual investor's personal risk tolerance and investment objectives – thus making the account “separate” and distinct from all others we manage. An investment with WT Wealth Management is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Any opinions expressed are the opinions of WT Wealth Management and its associates only. Information offered is neither an offer to buy or sell securities nor should it be interpreted as personal financial advice. Always seek out the advice of a qualified investment professional before deciding to invest. Investing in stocks, bonds, mutual funds and ETFs carries certain specific risks and part or all of an account's value can be lost. In addition to the normal risks associated with investing, narrowly focused investments, investments in smaller companies, sector and/or thematic ETFs and investments in single countries typically exhibit higher volatility. International, Emerging Market and Frontier Market ETFs, mutual funds and individual securities may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability that other nations experience. Individual bonds, bond mutual funds and bond ETFs will typically decrease in value as interest rates rise. A portion of a municipal bond fund's income may be subject to federal or state income taxes or the alternative minimum tax. Capital gains (short and long-term), if any, are subject to capital gains tax. Diversification and asset allocation may not protect against market risk or investment losses. At WT Wealth Management, we strongly suggest having a personal financial plan in place before making any investment decisions including understanding personal risk tolerance, having clearly outlined investment objectives and a clearly defined investment time horizon. WT Wealth Management may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Individualized responses to persons that involve either the effecting of transactions in securities, or the rendering of personalized investment advice for compensation, will not be made without registration or exemption. WT Wealth Management's website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of WT Wealth Management's website should not be construed by any consumer and/or prospective client as WT Wealth Management's solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the internet. Any subsequent, direct communication by WT Wealth Management with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. A copy of WT Wealth Management's current written disclosure statement discussing WT Wealth Management's registrations, business operations, services, and fees is available at the SEC's investment adviser public information website (www. adviserinfo.sec.gov) or from WT Wealth Management directly. WT Wealth Management does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to WT Wealth Management's web site or incorporated therein, and takes no responsibility therefor. All such information is provided solely for convenience purposes and all users thereof should be guided accordingly.

Contact Us Today

Call us directly at 800-825-0616
or Contact us by using the contact form below:

Your message has been sent. Thank you!


Cancel