Weekly Market Commentary October 30, 2017

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Another week, another record. The S&P 500 edged up 0.2% to post another new record. The MSCI ACWI dropped 0.1% as a strengthening dollar pushed the value of international stocks lower for U.S. investors. The Bloomberg BarCap U.S. Aggregate Bond Index slipped -0.1%.

Investors continue to focus on the good news. A strong U.S. GDP report, a moderate ECB policy change, improving prospects for tax reform, and a vote of confidence in Japan all pushed markets higher. Investors are so far unfazed by the continued uptrend in interest rates and political unrest in Spain.

Key points for the week

  • Third quarter GDP growth was 3%, beating expectations.
  • The European Central Bank (ECB) plans to decrease its bond buying, but it has extended the program through September 2018.
  • Shinzo Abe won the snap election with widespread support to remain Japan’s prime minister.

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.

First reading on third-quarter GDP up 3.0%, vs 2.5% rise expected

To the surprise of many market watchers, GDP for the third quarter increased at a 3% annual rate, surpassing expectations of 2.5%. This low expectation was due to the estimated impact of Hurricanes Harvey and Irma that caused a slowdown in consumer spending and a decline in construction. The expected decline was offset by a reduced trade deficit and an increase in inventories.

Draghi Goes Lower for Longer in Overhauling Bond Buying Plan

ECB President Mario Draghi announced the bank will begin buying fewer bonds but for a longer period. Draghi also emphasized there will not be an abrupt end to bond purchases. The bank’s governing council favored keeping the program open-ended in case inflation lags or economic expansion stumbles. The reaction from investors weakened the euro, while lifting stock prices.

Japan Election Victory Gives Abe Mandate For Reform

Japanese Prime Minister Shinzo Abe secured a two-thirds majority in the snap election to remain as Japan’s prime minister. Analysts have attributed Abe’s victory to his strong opposition to North Korea. Abe’s plans include increasing the consumption tax from 8% to 10% in order to fund education and childcare. Investors’ reaction to the news sent Japanese stocks higher and the yen lower against the dollar.


Fun story of the week

Pumpkin-nappers try to carve out a crime spree in Maryland Heights

You may have heard of a police lineup to identify criminals — but what about pumpkins? On Oct. 18, police in St. Louis, Missouri received multiple phone calls reporting pumpkins stolen from front stoop displays. One witness described an SUV driven by the nappers, which was soon discovered — filled to the brim with 48 pumpkins and three teenage boys. Police arrested the boys, brought the pumpkins to the police station, and then staged a pumpkin lineup. A social media post with a photo of the pumpkin lineup brought numerous owners to claim their stolen decor. All but 13 pumpkins have since been identified and returned home.


 

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