Week of November 4 - 8, 2019

Maureen Kelliher, CFA

Maureen Kelliher, CFA

November 14, 2019

Weekly Economic Review

Weekly Macro Updates

Initial Jobless Claims (Oct 26) 215k est., 211k actual, 219k prior
Continuing Claims (Oct 26) 1682k est., 1689k actual, 1692k prior
Nonfarm Productivity (3Q P) 0.9% est., -0.3% actual, 2.5% prior: R+
Unit Labor Costs (3Q P) 2.2% est., 3.6% actual, 2.4% prior: R+
JOLTS Job Openings (Sep) 7063 est., 7024 actual, 7031 prior: R+
Markit US Composite PMI (OCT F) 50.9 actual, 51.2 prior
ISM Non-Manufacturing Index (Oct) 53.5 est., 54.7 actual, 52.6 prior
Consumer Credit (Sep) $15.000b est., $9.513b actual, $17.842 prior
University of Michigan Sentiment Index (Nov P) 95.5 est., 95.7 actual, 95.5 prior
U. of Michigan Current Conditions (Nov P) 113.5 est., 110.9 actual, 113.2 prior
U. of Michigan Expectations (Nov P) 80.5 est., 85.9 actual, 84.2 prior
U. of Michigan 1 Year Inflation Expectation (Nov P) 2.5% actual, 2.5% prior
U. of Michigan 5-10 Yr. Inflation Expectation (Nov P) 2.4% actual, 2.3% prior
NFIB Small Business Optimism (Oct) 102.0 est., 102.4 actual, 101.8 prior
 
 Strong or Improving
 Inconclusive or lacking trend
 Weak or declining
R+ Revised up
R- Revised down

Directional change based on general
long-term tends.

Capital Market Implications

Steady wage gains and higher stock levels helped boost consumer confidence recently, as the University of Michigan Sentiment Index remained close to the top of its 40-year range (95.7). According to the U. of Michigan survey: “The strongest aspect of the current economy has been jobs and wage gains. Although consumers have become somewhat more cautious spenders, they see no reason to engage in the type of retrenchment that causes recessions.” Consumers’ long-term inflation expectations edged slightly higher in November, nonetheless, they remain near historically low levels at 2.4%. Finally, less than 2% of consumers in the survey referenced the impact of impeachment on their economic outlook.

Last week, with limited news regarding the US-China trade negotiations and Washington’s impeachment efforts grinding on, stocks managed to rally for the fifth consecutive week. Thus, last week, the S&P 500 Index gained 0.9% while the Dow Jones Industrial Average increased 1.4%. In general, cyclical sectors advanced while interest-rate sensitive sectors such as real estate and utilities retreated. International markets also remained buoyant, as developed foreign markets rose 0.5% and emerging markets climbed 1.5%. Longer-dated interest rates surged last week sending the yield on the 10-year Treasury to a 5-week high of 1.9%. When yields rise bond prices fall and that was the case last week. By the end of the week, only high yield bonds managed to remain in the black, as they closed flat overall. On the other hand, the Barclay’s US Aggregate Index and US corporate bonds lost nearly -1.0% while 10-year municipals bonds were off -0.6%.