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Markets Rally as October Offsets September: Mixed Economic Signals Thumbnail

Markets Rally as October Offsets September: Mixed Economic Signals

The Dow (+0.4%), NASDAQ (+2.7%), and S&P 500 (+1.3%) all posted gains last week, and reached new all time highs.  Taxable and tax-free bonds rebounded from a 3-month slide by gaining about 0.2% - 0.5%.  For the month of October, the US stock markets were up about 6% - 7%, but last week’s rally in bonds wasn’t enough to pull them into positive territory.  Investors should be receiving their October statements soon, and it appears that October’s gains should offset losses experienced in September, bringing balanced portfolios back to their levels seen at the end of August.

 

Economic data continues to pour in, particularly as we are at the height of corporate earnings reporting season.  On the surface, earnings reports are very strong and exceeding expectations, but the five largest companies reported earnings last week that barely exceeded their expectations.  Consumer spending increased by 0.6% last month, which would seem to be good news, as 2/3 of the economy is based on consumer spending.  However, are they spending more, or is the price of what they’re paying gone up by about the same amount?  Conversely, personal income dropped by 1% in October, so that’s not a good combination and cannot persist.  Initial jobless claims decreased and continued unemployment claims also decreased, both to pandemic lows.  Here’s my concern with the preceding data – many people are now losing their jobs because of vaccination mandates, and they aren’t allowed to apply for unemployment.  This could adversely impact consumer spending, personal income, and be hidden by the unemployment numbers.  Time will tell with this.



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