Chief Economist Scott Brown discusses the latest market data.
Earnings reports were generally supportive and the economic data remained consistent with moderate economic growth in the near term, but financial market participants remained focused on election uncertainty and rising COVID-19 cases.
Real GDP rose 7.4% (q/q) in the advance estimate for 3Q20 (+33.1% at an annual rate, vs. -5.0% in 1Q20 and -31.4% in 2Q20), leaving GDP down 3.5% from the end of last year. Personal income and spending rose more than anticipated in September, with mixed results through the pandemic (spending on autos and other consumer durable goods is significantly higher than in February, while spending on consumer services remains depressed). Jobless claims continued to trend lower, although still high by historical standards (751,000 in the week ending October 24). UM Consumer Sentiment was little changed in October, as gains among Democrats offset declines among Republicans. Durable goods orders rose more than expected (+1.9%), reflecting a pickup in civilian aircraft orders (+0.8% ex-transportation).
Next week: Who will win the White House? Who will control the Senate? Will we even find out? Elections may be contested and lawyers are standing by to hash it out. In the meantime, the economic data are expected to remain consistent with a moderate pace of recovery. Nonfarm payrolls will be restrained by the exit of temporary census workers (moderately strong otherwise). No change is expected from the Federal Open Market Committee. In his press conference, Fed Chair Powell should easily steer away from any political questions, although he is still in favor of further fiscal stimulus.
|Last||Last Week||YTD return %|
Consumer Money Rates
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.293||1.290|
|Dollars per Euro||1.1674||1.115|
|Japanese Yen per Dollar||104.61||108.850|
|Canadian Dollars per Dollar||1.333||1.316|
|Mexican Peso per Dollar||21.362||19.083|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||1.45||1.31|
Treasury Yield Curve – 10/30/2020
As of close of business 10/29/2020
S&P Sector Performance (YTD) – 10/30/2020
|November 2||—||ISM Manufacturing Index (October)|
|November 3||—||Election Day|
|—||Factory Orders (September)|
|November 4||—||ADP Payroll Estimate (October)|
|—||Trade Balance (September)|
|—||ISM Non-Manufacturing Index (October)|
|November 5||—||Jobless Claims (week ending November 1)|
|—||FOMC Policy Decision|
|November 6||—||Employment Report (October)|
|November 11||—||Veterans Day (bond market closed)|
|November 12||—||Consumer Price Index (October)|
|November 17||—||Retail Sales (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 29, 2020.