Market Update: Friday, November 2, 2018

LPLResearch-Macro-View

Daily Insights

  • LPL Market Signals Podcast. On the latest episode of the LPL Market Signals Podcast, listen to LPL Financial Chief Investment Strategist John Lynch and Senior Market Strategist Ryan Detrick review the S&P 500 Index’s worst month so far this year, European economic concerns, U.S./China trade issues, and Federal Reserve (Fed) policy. Market Signals by LPL Financial is now available on iTunes, Google Play and Spotify. Please join our discussion on social via #LPLMarketSignals.

  • Strong payrolls increase, and wage growth eclipses 3%. Jobs data released this morning showed nonfarm payrolls grew 250,000 in October, beating consensus estimates for a 200,000 gain, while the unemployment rate stayed at a 48-year low. Average hourly earnings grew 3.1% year-over-year last month, the first time that measure of wage growth has eclipsed 3% since April 2009. Overall, we remained encouraged by the labor market’s solid growth, and we think the current pace of wage growth is manageable. We’ll dive more into our thoughts on the jobs report and wage growth in today’s LPL Research blog.

  • Three in a row. The S&P 500 increased 1% yesterday, its third straight gain of 1% or more, the first such streak since June 2016 (after the Brexit vote), and before that, February 2016. Strong gains today would be a rare feat, as the S&P 500 hasn’t been up 1% on 4 consecutive days since 1982. Stocks’ newfound strength also took place after the S&P 500 closed at a new 5-month low on October 29. We will take a closer look at why this rare event is extremely bullish in next week’s Weekly Market Commentary.

  • Sentiment turns with the calendar. After U.S. stocks endured their roughest October since 2008, investors may find refuge in the turn of the calendar. November and December are typically the strongest months of the year for the S&P 500, as the index has gained 1.5% on average in November and 1.7% on average in December in data going back to 1990.

  • More trade talks. Encouraging developments in the U.S.-China trade dispute helped lift global stocks yesterday after President Trump announced he had productive trade discussions with Chinese president Xi Jinping, and reports today indicate Trump has asked cabinet members to draft a trade deal. Xi previously said he is willing to resume trade talks with the U.S. at the G-20 summit in Argentina, which is slated to begin on Nov. 30. Just last month, Trump threatened to levy taxes on the remaining ~$275 billion in goods imported by the U.S. We still believe the U.S. and China will reach a trade agreement before the global economy endures any significant implications from tariffs.

  • Europe’s manufacturing health slides further. Trade concerns and political woes continue to weigh on Europe’s manufacturing sector. In October, Markit’s Eurozone manufacturing purchasing managers’ index (PMI) dropped to 52.0, the lowest level since August 2016. Eurozone manufacturing activity has declined this year from record highs reached in December as weakening global trade has weighed on new orders and business confidence in the region. Italy’s PMI fell to 49.2, its lowest level in nearly four years and within contraction territory (below 50), as the country has struggled with political instability combined with implications from the U.S.-China trade dispute. Because of these factors, we remain less optimistic on Europe’s economic growth prospects (relative to its developed-market peers).

LPLResearch-Monitoring-the-Week-Ahead

Click Here for our detailed Weekly Economic Calendar

Friday

  • Nonfarm Payrolls (Oct)
  • Durable Goods Orders (Sep)
  • Markit Germany Manufacturing PMI (Oct)
  • Markit Eurozone Manufacturing PMI (Oct)


IMPORTANT DISCLOSURES

Investing in foreign and emerging markets securities involves special additional risks. these risks include, but are not limited to, currency risk, geopolitical risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

All company names noted herein are for educational purposes only and not an indication of trading intent or a solitication of their products or services. LPL Financial doesn’t provide research on individual equities.

All performance referenced is historical and is no guarantee of future results.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured.  These products are not Bank/Credit Union obligations and are not endorsed, recommended or guaranteed by any Bank/Credit Union or any government agency.  The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.

Index data obtained via FactSet

Member FINRA/SIPC

For Public Use – Tracking #1-788963 (Exp. 10/19)