Markets, Economy

Weekly Kickstart (10/29/2018-11/02/2018)

10/29/18 8:00 AM

iStock-626627280.jpgSelling resumed last week, as the S&P 500 fell by 3.94 percent to 2,658.69. That left the benchmark index down 0.56 percent year-to-date, and 9.28 percent below the record close hit just one month earlier. Some investors interpret recent price action as the start of a new bear market, while others remain optimistic that this selloff is simply a healthy pullback that the bull market desperately needed after a prolonged period of extremely low volatility. Regardless, any traders looking for excuses to take profits (sell) in October have not had to look too far. For example, the corporate earnings season for the third quarter of 2018 has seen the majority of companies reporting better-than-expected results, but several key leaders have disappointed forecasts. This is especially true in the technology sector, where weak revenue data from Amazon and Google exacerbated last week’s decline in the NASDAQ.

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Many companies are blaming U.S. trade policy for their lackluster profits, as evidenced by the surge in the number of times “tariffs” have been mentioned in earnings conference calls recently. Another purported reason for the weakness in the market is the potential for a “blue wave” in the upcoming midterm elections. The concern among some investors is that if Democrats take control of Congress, they may try to repeal the Tax Cuts and Jobs Act that helped lift stocks to record highs. However, even if Democrats "swept the floor" and won every Senate seat up for reelection, they still would fall short of the total votes needed to overcome a filibuster and override a Presidential veto. Altogether, though, there remains a lot of uncertainty surrounding these and other issues, meaning that the wild swings in the market may not be going away anytime soon. Individual investors worried about navigating this environment should consider consulting with a professional financial advisor and as always, we are here to help with any questions you may have.

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To recap a few of the things we learned about the economy last week, the positives included that mortgage applications rebounded, pending home sales increased, housing inflation moderated, services sector activity expanded at a faster rate, and first-time claims for unemployment benefits held near a half-century low. As for the negatives, the nation’s trade deficit widened to an all-time high, mortgage rates rose, new home sales plunged, regional manufacturing activity weakened, core durable goods orders fell, important measures of business investment deteriorated, and U.S. gross domestic product (GDP) growth during the third quarter of 2018 cooled. This week the pace of economic data picks up slightly, with a few important reports on consumers, household inflation, productivity, and employment scheduled to be released. That includes the potentially market-moving October job report from the Bureau of Labor Statistics due out on Friday.

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**A more detailed snapshot of the U.S. economy can be found here.**

What To Watch:

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Sources: Econoday, FactSet, Twitter, Wells Fargo, FRBSL

Post author: Charles Couch

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