Monthly Market Insights | November 2017

U.S. Markets

Strong corporate earnings powered stocks higher during the month, establishing new record highs along the way.

The Dow Jones Industrial Average led, picking up 4.3 percent. The Standard & Poor’s 500 Index tacked on 2.2 percent, while the NASDAQ Composite rose nearly 3.6 percent.¹

October’s opening week saw markets race ahead to new historical highs, before September’s employment report slowed them with news of the negative economic impact of Hurricanes Harvey and Irma.

No Distractions

As the curtain raised on the third-quarter earnings season, stock prices continued to advance, although a health-care policy announcement by the White House dragged health-care stocks lower.

The confluence of positive corporate earnings, strong global economic data, and a Senate budget vote that appeared to clear a path for moving forward on tax reform drove markets higher still.

All Eyes on Earnings

Corporate earnings reports picked up steam in the last full week of the month, as did its impact on the markets.

As of October 27th, with 55 percent of the S&P 500 companies reporting earnings, 76 percent have reported actual Earnings Per Share above estimates.² But, it was the earnings coming out of the big technology companies that galvanized investors, propelling the NASDAQ Composite to a record high.

As the month drew to a close, markets slipped a bit on reports that lower corporate tax rates may be on the horizon, but trading concluded on a positive note as the NASDAQ Composite closed at yet another record high.

Sector Scorecard

Most industry sectors moved higher in October, with gains in Technology (+6.06 percent), Utilities (+3.79 percent), Materials (+3.59 percent), and Financials (+3.13 percent) leading the pack. Other sectors advancing included Consumer Discretionary (+2.11 percent), Industrials (+1.15 percent), and Real Estate (+0.47 percent). Losses were experienced in the Consumer Staples (-2.46 percent), Energy (-1.15 percent), and Health Care (-0.58 percent) sectors.³

What Investors May Be Talking About in November

The holiday shopping season is about to get underway. Because holiday sales represent nearly 20 percent of annual retail sales, the season is a critical time for many businesses and a bellwether of economic health.⁴

The National Retail Federation expects holiday sales to increase this year between to 3.6 and 4 percent for a total of around $680 billion.⁵

Real-Time Insight

Investors won’t wait around for government agencies to tally the results. Instead, asset managers, research analysts and others will walk the malls, survey retailers, and even capture aerial photos of shopping centers to gain a real-time insight into the mood of the American consumer.

As this season plays out, investors may pay attention to not just the overall retail spending number, but also to more granular components, including:

• Will retailers need to offer deep discounts? Heavy discounting, even if increased sales follow, may translate into a less profitable season for retailers.
• Will consumer confidence be strong enough to power luxury retail sales, or will Americans opt to shop at mass-market retailers?
• Online sales continue to capture market share, much to the chagrin of brick-and-mortar stores. Will this trend accelerate, or will online efforts by traditional retailers find meaningful traction this holiday season?
• How will actual sales compare to anticipated sales? Markets are anticipatory in nature, so meeting expectations may be critical to how stock prices respond.

And remember, it’s not just retail stocks that may move this time of year. For instance, shipping and transportation companies may benefit from heightened online activity, and credit services’ revenues may jump with increased sales.

World Markets

Overseas markets proved rewarding for investors in October, as the MSCI-EAFE Index rose 1.33 percent.⁶

European stocks were mixed last month, with solid gains in France, Germany and the U.K., while prices slipped in Switzerland, Italy and Spain.⁷

Pacific Rim markets performed considerably better, led by growing investor optimism in Japan, which saw an 8.1 percent jump in stock prices, and also in Australia, which rose 4 percent on firming commodity prices.⁸

Indicators

Gross Domestic Product: Despite the drag of two major hurricanes, the U.S. economy grew at a 3.0 percent rate in the third quarter, posting its first back-to-back 3 percent or higher quarterly growth rate since 2014. While consumer spending and business investment were strong, a major contributor to this quarter’s jump was due to a build-up in inventories, which could depress future growth rates.⁹

Employment: Job growth was negative for the first time in 7 years, with U.S. employers reducing the number of jobs by 33,000. The Labor Department attributed much of this decline to Hurricanes Harvey and Irma. Despite the loss of jobs in September, the unemployment rate still fell to 4.2 percent.¹⁰

Retail Sales: Retail spending surged 1.6 percent in September, the strongest single month increase since March 2015. However, this jump was in large part attributable to the effects of Hurricanes Harvey and Irma, with car and truck sales rising as individuals replaced storm-damaged vehicles and from price increases in gasoline due to a disruption in refining and distribution.¹¹

Industrial Production: The output of American factories, mines, and utilities rose 0.3 percent, while capacity utilization moved 0.2 percentage points to 76.0 percent. It was estimated that Hurricanes Harvey and Irma knocked off 0.25 percent from industrial production growth last month.¹²

Housing: Housing starts declined for the fifth time in the last six months, falling 4.7 percent due to material and labor shortages that were exacerbated by hurricanes in Florida and Texas.¹³

New homes sales increased 18.9 percent, the largest single month jump in 25 years.¹⁴

Sales of existing homes moved 0.7 percent higher, boosted by a strong uptick in the recovering Houston area. Despite the jump, existing home sales remained lackluster, posting a 1.5 percent decline versus September 2017.¹⁵

Consumer Price Index: The cost of living rose 0.5 percent, fueled by a sharp increase in the price of gasoline following Hurricanes Harvey and Irma, which interrupted refining and distribution operations. Absent food and energy costs, the core inflation number rose a more modest 0.1 percent.¹⁶

Durable Goods Orders: Demand for new durable goods rose 2.2 percent in September, reflecting strong business investment in capital goods and an overall solid economic picture heading into the fourth quarter.¹⁷

The Fed

Minutes from September’s Federal Open Market Committee meeting confirmed expectations that the Fed was likely to hike rates one last time before the year’s end. However, several officials indicated that their support for a rate hike was contingent on whether inflation will pick up in the closing months of 2017.¹⁸

By the Numbers: U.S. Veterans

Number of veterans in the United States: 18.8 million¹⁹

Population of New York City: 8.5 million²⁰

Percent of the adult population who are veterans: 7%²¹

Number of US presidents who served in the military: 29 of 44²²

Current members of Congress who are veterans: 102²³

Percent of Congress members who are veterans: 19%²³

Percent who were veterans in 1980-1982: 64%²³

In 1971-1972: 73%²³

Percent of active-duty military personnel who are female: 15%²⁴

Percent of active-duty officers who are female: 17%²⁴

Share of military personnel in the army: 36%²⁴

Navy: 24%²⁴

Air Force: 23%²⁴

Marines: 14%²⁴

Coast Guard: 3%²⁴

Number of active-duty officers who have advanced degrees: 4 out of 10²⁴

World War II veterans still currently living: 558,000 (of 16 million)²⁵

Length of a landing strip at La Guardia International Airport: 7,000 ft.²⁶

Length of the landing strip on the USS Theodore Roosevelt aircraft carrier: 400 ft.²⁷

Length of the USS Theodore Roosevelt: 1,092 feet²⁷

Height of the Chrysler Building: 1,046 feet²⁸

Year the U.S. military purchased its first airplane: 1909²⁹

Manufacturer of the first U.S. military plane: The Wright Brothers²⁹

Length of training required for a Navy Seal: 36 weeks³⁰

Percent of trainees who make it through week 3 (or “Hell Week”): about 25%³⁰

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.

Investing involves risks, and investment decisions should be based on your own goals, time horizon and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

Any companies mentioned are for illustrative purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance.

The forecasts or forward-looking statements are based on assumptions, may not materialize and are subject to revision without notice.

The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.

International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

Please consult your financial advisor for additional information.

Copyright 2017 FMG Suite.

1. The Wall Street Journal, October 31, 2017
2. Factset Research Systems, October 27, 2017
3. Interactive Data Managed Solutions, September 30, 2017
4. National Retail Federation, 2017
5. 5. National Retail Federation, 2017
6. MSCI.com, October 31, 2017
7. MSCI.com, October 31, 2017
8. MSCI.com, October 31, 2017
9. The Wall Street Journal, October 27, 2017
10. The Wall Street Journal, October 6, 2017
11. The Wall Street Journal, October 13, 2017
12. The Wall Street Journal, October 17, 2017
13. The Wall Street Journal, October 18, 2017
14. The Wall Street Journal, October 25, 2017
15. The Wall Street Journal, October 20, 2017
16. The Wall Street Journal, October 13, 2017
17. The Wall Street Journal, October 25, 2017
18. The Wall Street Journal, October 11, 2017
19. U.S. Census Bureau, October 25, 2016
20. NYC.gov, July 2016
21. U.S. Census Bureau, July 1, 2016
22. Business Insider, July 4, 2016
23. Congressional Research Service, March 13, 2017
24. Pew Research Center, April 13, 2017
25. The National WWII Museum, 2017
26. Bloomberg, June 1, 2017
27. U.S. Navy, 2017
28. SkyScraperCenter.com, 2017
29. Wright-Brothers.org, 2017
30. NavySeals.com, 2017