Chief Economist Scott Brown discusses the latest market data.
The odds of a further fiscal support package rose and fell and rose again. Fed Chair Powell cautioned that “too little [fiscal] support would lead to a weak recovery.” The FOMC minutes from the September 15-16 policy meeting noted that the economy appeared to be recovering faster than expected, but “the labor market was a long way from being fully recovered” and “delinquency rates on business loans had risen noticeably.”
The ISM Services Index rose to 57.8 in September (vs. 56.9 in August), reflecting improvement in business activity and new orders. Jobless claims were little changed at 840,000 in the week ending October 3 – still very high – although California remained in a two-week pause in processing claims. The merchandise trade deficit hit another record high in August, as imports have rebounded faster than exports.
Next week, the monthly inflation reports may reflect further rebounds from prices that were depressed during March and April, as well as some supply chain issues, but the year-over-year trends should remain low. Unit motor vehicle sales were reported higher again last month, which should lead the headline retail sales figure. The IMF will release its World Economic Outlook. Treasury budget figures for September are expected to be released sometime this week (the fiscal year total is subject to certain reporting requirements) – the FY20 total is expected to be over $3 trillion.
|Last||Last Week||YTD return %|
Consumer Money Rates
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.2938||1.221|
|Dollars per Euro||1.1759||1.097|
|Japanese Yen per Dollar||106.00||107.48|
|Canadian Dollars per Dollar||1.320||1.333|
|Mexican Peso per Dollar||21.398||19.571|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||1.43||1.26|
Treasury Yield Curve – 10/09/2020
As of close of business 10/08/2020
S&P Sector Performance (YTD) – 10/09/2020
|October 12||—||Columbus Day (bond market closed)|
|October 13||—||Consumer Price Index (September)|
|—||IMF World Economic Outlook|
|—||Treasury Budget (September and FY20)|
|October 14||—||Producer Price Index (September)|
|October 15||—||Jobless Claims (week ending October 10)|
|—||2nd Presidential Debate (tentative)|
|October 16||—||Retail Sales (September)|
|—||Industrial Production (September)|
|—||Consumer Sentiment (mid-October)|
|October 20||—||Building Permits, Housing Starts (September)|
|October 29||—||Real GDP (3Q20, advance estimate)|
|November 3||—||Election Day|
|November 5||—||FOMC Policy Decision|
|November 5||—||Employment Report (October)|
All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.
The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor’s returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business October 8, 2020.