U.S. stocks saw substantial gains this week while foreign stocks saw more modest gains. There was a powerful rally on Wednesday following FED Chairman Powell’s comments that the FED has raised interest rates just below neutral and further rate hikes would be data dependent. While one more quarter point hike is nearly certain in December, traders had been expecting possibly three more next year. Now the expectation is for fewer rate hikes going forward, unless inflation increases. Price increases appear to be slowing which may also help curtail future price increases. Incomes are increasing which should help continued growth.
The U.S., Canada and Mexico have signed the USMCA trade agreement to replace NAFTA. The treaty now needs to be ratified by all three government’s legislatures. President Trump and Chinese President XI along with their trade representatives had a dinner meeting at the G20 summit in Argentina Saturday. They agreed to stop adding additional tariffs for 90 days while they try to negotiate a deal. Also, China promised to increase soybean imports right away. A cease fire in the trade war is a positive step. However, it is uncertain at this point if a deal will be reached to end the trade war.
Crude oil prices remained nearly unchanged at low levels despite signals from OPEC and Russia that a production cut may considered. The dollar ended the week stronger and Treasury yields were mixed with short term yields falling and long term yields rising.
In the numbers this week:
- The S&P CoreLogic Case-Shiller National Home Price Index rose 5.5% in September from a year earlier, down from 5.7% Y-O-Y in August.
- The Labor Department reported initial jobless claims rose 10,000 in the prior week to a seasonally adjusted 234,000. The four-week moving average of claims rose 4,750 to 223,250.
- The Commerce Department reported:
- No change from the first estimate of 3rd Quarter GDP growth annual rate of 3.5%. This first revision however, showed stronger business spending and private inventory gains but slower consumer spending and state and local investment.
- Purchases of newly built single-family homes fell 8.9% in October, the biggest monthly decline since December 2017. October was also down 12% from a year earlier. Inventory of new homes has increased to a 7.4 months of supply. Higher mortgage rates were blamed for the slowdown.
- Consumer spending rose 0.6% in October while September’s spending increase was revised from 0.4% to 0.2%.
- The personal consumption expenditure price index (The FED’s preferred measure of inflation) rose 0.1% in October following at 0.2% increase in September. Over the past year the PCE price index has risen only 1.8%, below the Fed’s target of 2.0%.
- Personal income increased 0.5% in October following a 0.3% in crease in September.
- The National Association of Realtors reported that pending home sales fell 2.6% in October and 6.7% from October of last year. Increasing mortgage rates and low inventory of existing houses have weighed on the markets.
- The Energy Information Administration weekly report is here: wpsrsummary. Also, the EIA reported
- U.S. Crude oil production remained unchanged at 11.7MM barrels per day.
- Storage of natural gas fell 59BN cubic. Natural gas storage is below the minimum for this date during the past five years.
- According to Baker Hughes, In the past week, the number of active oil rigs rose 3 to 888 and natural gas rigs fell 5 to 189.
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Loren C. Rex, CFP®, AIF®, MA Erik A Smith
President Managing Partner
Generations Financial Planning & Wealth Management 269-441-4143
77 E. Michigan Ave, Suite 140
Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
Visit our Website: www.genfinplan.com
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These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly.