Monthly Market Insights | November 2019

U.S. Markets

Following an early-month stumble, stocks rallied in October on news of progress in U.S.-China trade negotiations as well as a solid kickoff to earnings season.

The Dow Jones Industrial Average picked up 0.48 percent, while the Standard & Poor’s 500 Index gained 2.04 percent. The NASDAQ Composite, which lagged last month, jumped 3.68 percent.1

Attitude is a little thing that makes a big difference. Sir Winston Churchill, former British Prime Minister

A weak manufacturing report sent stocks lower at the start of the month, with traders fearing an economic slowdown. But moods turned upbeat once trade talks resumed. When news hit that the U.S. and China might soon reach a tentative trade deal, stock prices surged.

Earnings Season

Earnings season kicked off with a number of companies reporting upside earnings surprises. But the rally lost momentum as traders again focused on economic data, especially an unexpected drop in retail sales.

Stocks moved decisively higher as earnings season shifted into high gear. It’s important to remember that expectations for third-quarter earnings were low; analysts had revised their estimates lower over the summer due to economic concerns. However, through November 1, with 71 percent of S&P 500 companies reporting, 76 percent reported earnings above consensus estimates.2

Eyes on S&P 500

The S&P 500 touched a new all-time high in the final week of trading, powered by technology stocks and a new-found enthusiasm for cyclical stocks. Stocks continued their climb following a widely expected Fed rate cut, with the S&P 500 recording yet another historical high in the final days of trading.

Sector Scorecard

Most industry sectors ended the month in positive territory, with gains in Communication Services (+1.92 percent), Consumer Discretionary (+0.66 percent), Financials (+3.00 percent), Health Care (+5.25 percent), Industrials (+2.23 percent), Materials (+1.12 percent), Real Estate (+0.31 percent), and Technology (+3.96 percent). Three sectors, Consumer Staples (-0.28 percent), Energy (-1.67 percent), and Utilities (-1.30 percent), saw losses in October.3

U.S. Market Recap for October 2019
S&P 500 2.04% Month ‌ 21.17% Year-to-Date	NASDAQ 3.68% Month ‌ 24.99% Year-to-Date	Russell 1000 2.00% Month ‌ 21.15% Year-to-Date	10-Year Treasury 1.73% Month ‌ -0.96% Year-to-Date
Yahoo Finance, October 31, 2019. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid.

What Investors May Be Talking About in November

Investors are expected to be focused on two key developments in November.

The first is a “phase one” trade deal with China. Markets surged on talk of a trade truce, and a signed deal could help reassure investors even more. It was expected that President Trump and President Xi might sign a phase one accord in Chile, but the trade team is looking for a new venue after the APEC meeting was canceled due to civil protests.

Avoid a Shutdown

The second is a potential budget battle on the domestic front. Investors are hoping that elected officials in Washington are able to avoid a replay of last year’s 35-day shutdown of the federal government, which furloughed federal employees and impacted domestic commerce.

With temperatures between the parties running high, the ability to strike a budget accord may be more difficult than in past years. While investors would prefer a budget passed by Congress and signed by the president, they may be satisfied with a resolution, as long as it prevents a federal shutdown over the holiday season.

World Markets

The MSCI-EAFE Index surged 3.43 percent, benefiting from a relaxation in trade tensions between the U.S. and China and an improving outlook for a Brexit agreement.4

European stocks were mixed, with export-sensitive Germany’s DAX index jumping 3.53 percent and France’s CAC 40 gaining 0.92%. Great Britain’s FTSE index, however, lost 2.16.5

Pacific Rim stocks enjoyed a solid performance, with Japan’s Nikkei index picking up 5.54 percent and China’s Hang Seng adding 3.12 percent. Argentina’s volatile Merval index jumped 20.4 percent and is now up for the year.6

World Market Recap for October 2019
Emerging Markets	October	Year-to-Date
Hang Seng (China)	3.12%	4.11%
Kospi (Korea)	0.99%	2.08%
Nikkei (Japan)	5.54%	14.55%
Sensex (India)	3.78%	11.26%
Jakarta Composite (Indonesia)	0.96%	0.55%
Bovespa (Brazil)	3.65%	23.53%
IPC All-Share (Mexico)	-1.31%	4.08%
Merval (Argentina)	20.40%	15.52%
ASX 200 (Australia)	-0.37%	18.01%
Europe
DAX (Germany)	3.53%	21.86%
CAC 40 (France)	0.92%	21.12%
Dow Jones Russia Index (Russia)	6.67%	33.14%
FTSE 100 (Great Britain)	-2.16%	7.85%
Yahoo Finance, October 31, 2019. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

Indicators

Gross Domestic Product

Economic growth in the third quarter slowed to 1.9 percent as business investment continued to lag. The initial estimate of GDP growth was largely propelled by consumer and government spending.7

Employment

The unemployment rate hit a 50-year low, falling to 3.5 percent in September. Nonfarm payrolls grew by a modest 136,000, while wage growth slowed to 2.9 percent from a year earlier.8

Retail Sales

Retail sales softened in September, sliding 0.3 percent on a nearly one percent drop in vehicle sales. It was the first monthly decline since February.9

Industrial Production

Output at U.S. mines, utilities, and factories declined by 0.4 percent, dragged lower by a strike at General Motors.10

Housing

Housing starts declined 9.4 percent. Single home starts rose, indicating that housing remained in recovery mode.11 Existing home sales slid 2.2 percent in September, as low inventory and higher prices dampened buyer enthusiasm.12 New homes sales fell by 0.7 percent, with low inventory remaining a drag on results.13

Consumer Price Index

Prices of consumer goods were unchanged in September. Core inflation, which excludes the more-volatile energy and food categories, was higher by 0.1 percent.14

Durable Goods Orders

Durable goods orders slipped 1.1 percent, as declines in business investment spending continued to weigh on overall results.15

The Fed

Last month, the Federal Reserve cut interest rates for the third time in 2019, reducing the federal funds rate by a quarter of a percentage point.

In its statement accompanying the announcement and the subsequent press conference, Fed Chair Jerome Powell tempered expectations of further rate cuts in the near term.

The voting among members for a rate cut was more unified than in the past, with 8 of 10 members agreeing to this most recent 0.25 percent rate cut.16

By the Numbers