Statistic of the Week:
With Hurricane Nate hitting the gulf coast over the weekend, the economic toll of Hurricanes Harvey and Irma are just being tallied. Together they are expected to surpass $170 billion in damage. We will see a dip in third quarter GDP as a result, but, expect an acceleration in the fourth as rebuilding commences.
The British economy is starting to feel the weight of Brexit and an over-extended consumer. GDP was revised lower to a rate of 1.5% during the second quarter. Debt at the consumer level is higher than analysts had predicted, sitting at about £200 billion (mostly in credit cards and car loans). This figure surpasses 2008 levels.
Market Moving Events:
Monday: Bond Market Closed Wednesday: FOMC Meeting Minutes, JOLTS Thursday: Jobless Claims, Producer Price Index Friday: Consumer Price Index, Retail Sales, Business Inventories, Consumer Sentiment
Had it not been for weaker-than-expected payrolls (chart right), the S&P 500 might still be on a winning streak. It was up for eight consecutive days before retreating on Friday.1 The DJIA, S&P 500, and NASDAQ all rose on the week. The Dow was the leader, up 1.65%.2 The NASDAQ closed Friday at a record high,3 while the Dow has logged gains four weeks in a row.4 These come together to make for generally happy equity investors. Fixed income markets were relatively stable in trading; the 10-year Treasury finished Friday with a yield of 2.37%.5 “How long can this rally keep going?” That seems to be the question on everyone’s mind – or at least every news publication’s. Volatility has been notably low for months. Despite international tensions, Twitter jabs, and changes to Federal Reserve policy, investors have been complacent, if not outright bullish, in their equity holdings. The S&P 500 has gone 332 days without a 5% drop, the second-longest run (the longest is 333 days) in market history.6 Should we be overly concerned? History would tell us “no.” Be prudent, but not worried. The fundamentals of the economy are undoubtedly strong (even with the impact of the hurricanes). Given sentiment and valuations, history would suggest we have a 61% chance of seeing markets at higher levels this time next year.7 Volatility may pick up, and we may see a healthy pullback, but so far, the light is still flashing green. - Dan McElwee, CFP®
Chart of the Week: