Blog Post

US Stock indexes were mostly up this week while foreign markets were mixed in this news filled week.  So far this quarter about 80% of Standard & Poors 500 companies’ earnings reports have beaten expectations.  Three major news items this week included:


  1. The European Central Bank announced its intent to grow its balance sheet by a trillion Euros.  Unlike the US and Japan expanding their central bank’s balance sheet, the ECB’s balance sheet has shrunk by this amount since 2012.  This European style Quantitative Easing should help bolster the European economy and prevent deflation.  Still the ECB is reluctant to buy sovereign debt over fears of sparking irresponsible borrowing within the ECB.
  2. OPEC’s Secretary General indicated that OPEC is looking to respond with production cuts if oil prices hit $70 per barrel but they don’t expect to see prices fall below $75 per barrel this year.  That’s a relief for energy production in the US which is a major component of growth in the US economy.  While these prices may slow drilling in the US they are likely not going to derail US energy production.

New Picture

  1. I believe the US election will likely have a modest effect on US economic policy.  The two areas where they may be changes are in trade and corporate taxes.  These are areas where the president and the congressional Republicans may align in part if not totally.  The president has pushed for trade pact approvals and these have been stalled by his own party.  Both President Obama and congressional Republicans have expressed an interest in reforming US corporate taxes, the highest in the industrialized world.  Don’t expect significant changes in personal taxes, immigration legislation or the Affordable Healthcare Act as Senate Republicans do not have a large enough majority to override a presidential veto.


In the economic numbers this week:


  • The Commerce Department reported that the US trade gap rose in September.  Exports fell the most since February.  Petroleum imports fell in September to their lowest level since late 2009.  Non-petroleum imports set a record.
  • Inflation in the 34 member Organization for Economic Cooperation and Development fell to an annual rate of 1.7% in September from 1.8% in August.  In the G-20 countries the inflation rate fell from 2.7% to 2.6%.  The G20 makes up about 90% of the global economy.
  • Autodata reported that US Auto sales rose 6.1% in October.
  • ISM reported that the nonmanufacturing purchasing manager’s index (services) declined to 57.1 last month from 58.6 in September.  Anything over 50 indicates expansion.
  • The Labor Department reported that initial jobless claims fell in the prior week by 10,000 to 278,000 better than forecast.  Claims in the previous week were revised at 288,000.  The four week moving average fell by 2,250 to 279,000.
  • The Labor Department also reported that nonfarm payrolls grew a seasonally adjusted 214,000 in October, less than expected.  The prior two months were revised up with September adding 256,000 jobs and August adding 203,000 jobs.  The unemployment rate fell to 5.8%.



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