Market Update: Friday, October 26, 2018

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Daily Insights

  • Strongest two quarters of GDP growth since 2014. Gross domestic product (GDP) grew 3.5% last quarter, beating consensus estimates for a 3.3% gain. Together, GDP growth over the last two quarters has averaged 3.9%, the strongest pace since 2014. Consumer spending, which has strengthened from accelerating wages and fiscal stimulus, contributed 2.7% to the headline figure, while inventories comprised 2.1%. Net exports were the biggest drag, which was expected given the U.S.-China trade dispute. Overall, we expect growth to moderate further in the fourth quarter, with the economy poised to expand 3% for the full year.

  • Yuan near decade lows. China’s currency, the yuan, has fallen against the U.S. dollar every day this week and now hovers near 7 USD/CNY, a key support level last breeched in 2008. However, Chinese officials have said they will step in to stabilize the yuan if necessary to prevent a precipitous fall below the key psychological level. While a weaker yuan helps boost China’s exports, it’s also spurring capital outflows from the country as investors look to stem losses on the currency component of their investments. The situation highlights the balancing act China faces as it looks to counter the impact of U.S. tariffs and bolster economic growth without spooking investors.

  • When do markets get volatile? The past few weeks have been among the most volatile we’ve seen from equity markets over the years. Today on the LPL Research blog, available now, we take a look at why most of the volatility happens beneath the 200-day moving average, as some of the largest gains and losses have taken place beneath this long-term trendline.

  • LPL Market Signals Podcast. In the latest episode of the Market Signals Podcast, listen to Equity Strategist & Portfolio Manager Jeff Buchbinder and Chief Investment Strategist John Lynch discuss the signs pointing to Q3 economic growth and into 2019. Market Signals by LPL Financial is now available on iTunes, Google Play and Spotify. Please join our discussion on social via #LPLMarketSignals.

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Click Here for our detailed Weekly Economic Calendar

Friday

  • GDP Report (QoQ, 3Q)
  • Core PCE (QoQ, 3Q)


IMPORTANT DISCLOSURES

*For additional disclosure, please see the Outlook 2018: Return of the Business Cycle publication

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