Weekly Market Snapshot – October 21, 2019
Created by: Sam Tenney
On black Friday in 2008 I went to the outlet mall in Castle Rock to score some big holiday deals. You may remember, in the weeks leading up to the 2008 shopping season Lehman Brothers had gone bankrupt, AIG, GM, and Ford all received or were in the process of requesting a massive bailout from the government and the stock market was fluctuating 500 to 800 points up and down it seemed daily.
To my surprise, the activity at the outlet mall was incredible. There were cars parked everywhere and there was a line of lights from cars backed up for miles on I-25 to get to the outlets. I thought to myself, “This doesn’t seem like the type of activity you’d see if the economy is struggling that badly.” Perhaps I was naive, or maybe more activity was focused on discount retailers given the recent events and shoppers were seeking “deals” anticipating harder times ahead. Either way, sometimes what we observe and what is happening don’t seem to align.
Consumer confidence can sometimes be misleading. For example, the chart below takes the University of Michigan Consumer Confidence Index (which measures how individuals feel about their own financial situation) versus the Conference Board’s Consumer Confidence Index (which measures how they feel about the overall economy). This chart takes the reading from the U of M index minus the Conference Board’s index. When consumers are concerned about their own situation but feel better about the overall economy the measures diverge and the chart plummets. The composite indicator typically reaches a low prior to recessions, and it currently is lower than at any other time since 1979. We see this as an additional indicator to stay defensive at this time.
- Chinese Gross Domestic Product growth has slowed again to 6.0% year over year, the lowest in two decades. This has been impacted by Chinese policy maker efforts to slow down on excessive credit growth.¹
- Market rates for 2-year treasuries have completely priced in another rate cut at the Federal Reserve Open Committee meeting for October 29th. As of October 18th, the yield curve has flattened on the 3-month to 10-year marks and is less than a 10 basis-point spread on the 3-month to 2-year.²
- The S&P finished the week at 0.55% growth, with the Dow slightly trailing at 0.30% growth. High trade expectations and earnings led early gains, but were cut short end of week by Boeing and Johnson & Johnson legal troubles.³
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