U.S. stocks’ best week in six months capped an otherwise rough October for U.S. equity investors. The S&P 500 Index climbed 2.4% during the week, its biggest weekly gain since May, as the benchmark rebounded to close the month down 6.9%. The S&P 500 also gained more than 1% for three straight days, the first such streak since June 2016 (after the Brexit vote). Investors re-assessed risk following hawkish comments from the Federal Reserve (Fed) that implied that interest rates were far from neutral, and concerns of slower global growth amid trade tensions between U.S. and China. However, LPL Chief Investment Strategist John Lynch noted "While we may not again achieve the near 5% growth seen in the second and third quarters of 2015, we think the expansion is durable at least into 2019—and possibly beyond—as the growing impact of deficit-financed stimulus and deregulation outpace headwinds from trade, slower global growth, and Fed tightening." Despite the weakness seen through most of October, earnings releases certainly were not a cause of the weakness, with 74% of S&P 500 companies having reported, putting the index on pace for 24.85% blended earnings growth rate for the third-quarter, according to FactSet.
International stocks rose during the week, closing out a losing October. The MSCI EAFE Index climbed 2.7%, while the MSCI Emerging Markets Index jumped 3.4%. Trade tensions continued to weigh on Chinese data, as the official purchasing managers’ index (PMI) dipped to 50.2, the largest drop in eight months. In Europe, a renewed appetite for risk assets from encouraging trade news overshadowed signs of weakening economic growth. Third-quarter Eurozone gross domestic product (GDP) grew at the slowest pace in four years, while Markit data showed Eurozone PMI fell to the lowest level since August 2016.
In the week ahead, earnings season begins to wind down for S&P 500 companies, though 78 are still set to report. Looking at the economic calendar, much of the focus will be on producers, as Markit PMI data and Producer Price Index (PPI) data is slated to be released next week. It’s a quiet week for economic releases in Europe, although the U.K. will be releasing headline GDP figures for the third quarter. In China, the attention will be on consumer and producer pricing data, as well as trade reports. Track these and other important events on our Weekly Global Economic & Policy Calendar.
###
Important Disclosures
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
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.
Indices 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.
Past performance is not indicative of future results. The tax loss harvesting and other tax strategies discussed should not be interpreted as tax advice and there is no representation that such strategies will result in any particular tax consequence. Clients should consult with their personal tax advisors regarding the tax consequences of investing.
Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.
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.
Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit
Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor
Member FINRA/SIPC
For Client Use - Tracking #1-789255 (Exp. 10/19)