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The Markets
Keep your eyes on the data.
There was much to be said for U.S. stock markets' performance during October. Both the Dow Jones Industrial Average and the Standard & Poor's 500 Index delivered their best monthly performance in four years, according to Barron's.
Any celebration of strong market performance was cut short when the Commerce Department's estimate of third quarter U.S. gross domestic product (GDP) growth was released last week. GDP was in positive territory, up 1.5 percent for the period, but growth fell short of second quarter's 3.9 percent, according to the BBC.
The primary reason for the decline was falling inventories. During third quarter both individuals and companies were worried about a possible slowdown in global growth. The Economist reported one reason companies may have reduced inventories is because they feared demand for goods would not be strong if the world economy weakens. That didn't prove out as sales of American goods and services grew by 3 percent during the third quarter. When inventories are excluded, U.S. GDP growth was 2.9 percent, which many experts would say is pretty healthy growth.
Consumer spending comprises a much bigger part of U.S. GDP (68 percent) than does private investment by businesses and financial institutions (17 percent). Consumer spending numbers also were released last Friday and showed a 0.1 percent increase, which was smaller than many had expected. Experts cited by BloombergBusiness suggest that number could move higher if wages improve. The Economist concurred:
"...if the American consumer defies firms' gloomy forecasts and continues to spend, investment will eventually return. There is good reason to believe that will happen. In cash terms, disposable personal income grew at an annualized pace of 4.8 percent, helped by cheap fuel. Consumers are more confident about their personal finances than at any time since 2007, according to the University of Michigan's latest survey."
Stay tuned. Information about U.S. jobs will be released next week. In theory, each piece of data should help investors gain a better understanding of what's happening economically.
Data as of 10/30/15
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1-Week
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Y-T-D
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1-Year
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3-Year
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5-Year
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10-Year
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Standard & Poor's 500 (Domestic Stocks)
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0.2%
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1.0%
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4.3%
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13.8%
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11.9%
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5.6%
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Dow Jones Global ex-U.S.
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-0.7
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-3.2
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-5.3
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2.9
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0.4
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1.8
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10-year Treasury Note (Yield Only)
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2.2
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NA
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2.3
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1.7
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2.6
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4.6
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Gold (per ounce)
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-1.6
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-4.8
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-5.0
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-12.7
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-3.4
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9.3
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Bloomberg Commodity Index
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0.0
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-16.2
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-25.9
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-15.0
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-10.0
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-6.2
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DJ Equity All REIT Total Return Index
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-0.7
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1.7
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6.2
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11.4
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11.8
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7.7
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S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron's, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
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