Global stocks retreated marginally for the second week in a row. The S&P 500 fell 0.1%, and the MSCI ACWI slipped 0.2%. Bonds rose as the Bloomberg BarCap Aggregate Bond Index shed 0.2%.
Markets were disrupted by news from manufacturing giant GE that it plans to restructure its business. The company will focus on three segments: aviation, power and health care. Investors reacted negatively as GE’s stock decreased by 9.5% for the week. Meanwhile, Tesla announced it is releasing a new semi that will offer far superior fuel economy to existing trucks. Other economic data pointed to continued, moderate inflation, healthy growth in the fourth quarter, and a likely interest rate hike in December.
Key points for the week
- We believe the Federal Reserve will raise rates in December.
- Data indicates inflation remains moderate but higher than expected.
- Growth estimates for the fourth quarter remain robust.
- General Electric (GE) is undergoing a massive restructuring.
- Disruptive innovations, such as self-driving trucks, pose risks and benefits to the economy.
What are we reading?
Below are some areas of the market we paid particularly close attention to this week. For further information, we encourage our readers to follow the links.
On Monday, November 13, GE announced plans to restructure its business. While anticipated, investors reacted negatively to the news as GE announced a 50% cut in its dividend and projected 2%–4% organic growth over the next few years. To make the week worse for GE, Moody’s downgraded its credit rating from A1 to A2, pushing investor optimism even lower. GE is now down 42% so far this year.
The Labor Department’s Consumer Price Index increased by 0.1% in October after a 0.5% jump in September. The flat month was largely due to gas prices stabilizing after a hurricane-related boost. After increasing by 13.3% in September, gas prices fell by 2.4% in October. Despite the decline, CPI still grew with health care and rent prices accounting for most of the growth.
We continue to monitor key innovations for potential disruption to existing business models. On Thursday, Tesla revealed a new fully electric semi-trailer truck that can travel 500 miles on one charge, while hauling 80,000 pounds of goods. The semi features the second generation of Tesla’s semiautonomous technology, Enhanced Autopilot, which will allow the truck to partially drive itself on highways.
Fun story of the week
Fraud is never a joking matter, but in this case we will make an exception. A 9-year-old girl recently booked a family trip to Disneyland Paris by logging into her father’s PayPal account. The girl, Susan Wilson, guessed her father’s password and booked the family into the Paris resort along with VIP passes to see the Eiffel Tower. Her dad finally noticed a couple days later when checking his account balances. He said Susan didn’t understand the enormity of her actions and that she was sorry. PayPal called it a case of “friendly fraud” and gave the family a full refund.
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of CWM, LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
S&P 500 INDEX
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
MSCI ACWI INDEX
The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 23 emerging markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.
Bloomberg U.S. Aggregate Bond Index
The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.