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Here’s a summary of last week’s key economic data: the Federal Reserve ended a two-day meeting by dropping short-term interest rates by 25 basis points, its third consecutive meeting that has ended in a rate cut; the U.S. economy grew by +1.9% in the third quarter 2019, a measurement that will be tweaked two additional times over the next two months; American employers hired a net +128,000 new employees in October 2019, and our country’s jobless rate rose fractionally to 3.6%; and finally, the S&P 500 closed last week at 3067, an alltime record
Ambassador and former U.S. Congressman William (Bill) J. Hughes, Sr. of Ocean City, NJ, passed away on Wednesday, October 30, 2019 at his home. He was 87 years old. Born on October 17, 1932 in Penns Grove, New Jersey, where he graduated from Penns Grove High School in 1955.
Stock market investors are voting with their dollars and apparently, they believe a U.S.-China trade deal is more likely than not. The S&P 500 rallied to close at 3023 last Friday (10/25/19), within 0.1% of its all-time closing high set three months ago on 7/26/19. The venerable stock index is up +22.5% YTD (total return) (source: BTN Research).
If the U.S. is looking for leverage in its ongoing trade war with China, it’s in the numbers. China’s economy grew by +6.0% in the third quarter 2019, i.e., a year-over-year growth rate, its lowest performance result since the fourth quarter of 1989, or nearly 30 years ago.
It was a “good” jobs number, but apparently not “too good” of a number for stock market watchers. A “good” number suggests the U.S.A. is not sliding towards a recession, while a “too good” number might result in the Federal Reserve deciding that another interest rate cut is not needed at their next scheduled meeting.
Congress managed to turn back from the precipice of a government shutdown last week by agreeing to delay the legislative fight to another day. The signing of a “continuing resolution” by the House of Representatives (on 9/19/19) and by the Senate (on 9/26/19) will permit fiscal year 2020 to begin tomorrow (on 10/01/19) as scheduled, albeit with a spending plan carried over from fiscal year 2019.
Hurricane Dorian caused life-altering damage to the Bahamas but failed to inflict the same level of destruction to the United States. The storm, reaching 185 mph of sustained winds as it lingered over the Bahamas for 40 hours early in the week, moved slowly northward along the Eastern Seaboard until it crossed land on North Carolina’s Outer Banks on Friday 9/06/19.
They may not be household names, but when they speak, Wall Street listens. Three regional Federal Reserve presidents - Esther George of Kansas City, Patrick Harker of Philadelphia and Eric Rosengren of Boston - all see the U.S. economy as healthy and stable, characteristics that may stop the Fed from implementing any additional cuts to short-term rates in the coming months.
The latest reason making stock investors nervous: an “inverted” yield curve. Usually, the yield on longer-term bonds is higher than that of shorter-term bills, i.e., bond investors anticipate inflation in the future and want to be compensated for it. But if bond investors don’t foresee inflation down-the-road, it suggests they think a period of slow growth is on the horizon, possibly even a recession.