After a rough October, the S&P 500 went into rally mode last week. Positive rumors on trade and a general recognition that the investing environment remains positive boosted stocks. The S&P 500 soared 2.4%. Global stocks rose, too, pushing the MSCI ACWI 3.1% higher. The good news in stocks, along with healthy job growth, pushed the Bloomberg BarCap Aggregate Bond Index 0.7% lower.
October was a difficult month. Stocks fell sharply, and most other asset classes also dropped. The S&P 500 fell 6.9%, its worst performance since 2011. Global stocks dropped 7.6%. The Aggregate Bond Index and Bloomberg Commodity Index also fell. The brightest spots were consumer staple stocks, utilities, and Brazil’s market. Consumer staple stocks and utilities are often less volatile than other sectors, and Brazil benefitted from the election of a more market-friendly president.
While last week was positive, we encourage investors to prepare for more volatility ahead. Volatility often takes time to wear off. The elections on Tuesday may create some short-term volatility, but if the results are as expected, i.e., Democrats taking the House and Republicans retaining the Senate, we believe the outcome is already reflected in the markets.
Key Points for the Week
- Global stocks rallied last week after a decline in October.
- October was the worst month for the S&P 500 since September 2011.
- U.S. hiring and wage growth was strong last month.
Employment data for October show the U.S. economy continues to hum along. The economy produced 250,000 new jobs, beating expectations by a wide margin. October’s growth reflects a bounce back from the negative effects of hurricanes on the September data.
Unemployment held steady at 3.7% as additional workers entered or reentered the labor force. Wages increased by 3.1%, which was the first time wages rose by 3% since 2009. The strong data points were a mixed blessing for investors. The data show the economy is strong, but that increases the likelihood the Federal Reserve will raise interest rates.
Julia Talbot, a 9-year-old girl from New Jersey, had one of the best Halloween costumes this year. Julia has microcephaly, a condition that causes learning disabilities and has confined her to a wheelchair. But every year, her mother picks a positive female role model and designs a costume that incorporates her wheelchair. This year she decided on U.S. Supreme Court Justice Ruth Bader Ginsburg and turned Julia’s wheelchair into the justice’s bench. Julia’s costume got lots of attention, which her mother says she enjoys.
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
S&P 500 INDEX
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
MSCI ACWI INDEX
The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 23 emerging markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.
Bloomberg U.S. Aggregate Bond Index
The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.
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