Investors Take Note of the Positive Outlook for Global Growth

Stocks continued to march higher last week, although the gains were modest. The S&P 500 rose just 0.2 percent. But it was the sixth straight week of gains, during which time the index has climbed almost 4 percent. The complexion of last week’s gain was different, however, from the past month and a half. The rotation back toward the so-called reflation trade paused last week. In contrast to the leadership since early September that included financials, materials, energy and industrials, last week’s leaders were real estate, staples and utilities.

Hurricanes’ Ripple Effect on the Economy

Hurricanes Harvey and Irma continued to make their presence felt last week – this time in economic data, as the economy reportedly shed 33,000 non-farm jobs in September, the first monthly decline since September, 2010, according to the U.S. Department of Labor. The jobs count will no doubt show a corresponding outsize gain over the next couple of months as these weather-related impacts dissipate.

The Fed, German Elections and Tax Reform – Markets Take the Latest News in Stride

As expected, the Federal Reserve announced the commencement of its balance sheet runoff at last week’s meeting. The meeting did, however, contain a few surprises. First, the Fed maintained its expectation of another rate hike in December. Prior to the meeting, the odds of a rate hike in December were 53 percent, according to Bloomberg’s world interest rate probability, as investors weighed the Fed’s previously stated intention of a hike in December against persistently low inflation readings. Following the meeting, however, those odds spiked to 64 percent.

Several Signs Point to Strong Economic Conditions


The S&P 500 enjoyed its best week since the first week in January, adding 1.6 percent to close at 2500 for the first time. Most of the gains came early in the week after a weekend in which North Korea refrained from another missile launch, and the destruction from Hurricane Irma, as bad as it was, was not as devastating as feared. As it turned out, North Korea was simply waiting for a different launch date, this time on Friday. But stocks held onto their gains anyway, rising fractionally on Friday to close at a new record high. Although markets took this latest provocation in stride, the North Korean threat has certainly not gone away, and will be the topic of discussion this week at the UN.