Weekly Stock Market Update 11/11/19
Investors have a lot to ponder as the year begins to wind down:
For starters, there is the economy, where the picture is mixed. For example, the job market remains resilient, with employment rising at a faster pace than forecast in October. That advance, coupled with upward revisions for August and September, pushed the average monthly jobs gain so far this year to 167,000—a healthy tally for this late in the business upturn. Also, wages continue to edge higher, as does the labor-force participation rate. However, manufacturing activity is contracting (with order backlogs especially weak); business spending is declining; and the non-manufacturing sector, while improving, retains pockets of weakness. This combination suggests that economic growth, which totaled just 2.0% and 1.9%, respectively, in the second and third quarters, may remain understated for some time.
Then, there are the trade winds to navigate. Here, though, the picture is becoming notably brighter, as the United States and China are reportedly making progress toward reaching at least a short term arrangement, with the two nations now agreeing to roll back existing tariffs in phases. Securing a longer-term understanding probably will be a more complicated process, however.
The Federal Reserve also is in the mix. Here, as well, the outlook is uneven. To wit, the Fed has cut interest rates three times since July in an effort to stimulate economic growth, particularly in manufacturing, which has been pressured by the continued trade conflict. Still, the Fed is suggesting that it may pause before lowering interest rates further, unless the economy loses additional traction.
Finally, there is earnings season, which is winding down in reassuring fashion, with more than 75% of S&P 500 companies topping expectations. This credible showing is helping to underpin a stock market that continues to set all-time records.
Through it all, spirits remain high. Strong earnings, a responsive Fed, better trade news, and the ability of this resilient market to overcome periodic headwinds are pushing stocks steadily higher.
Conclusion: This optimism remains warranted—particularly with the investment fundamentals still reassuring.