Week In Review 11.1.2019

Equity markets ended the week higher thanks to a Fed rate cut, positive comments about trade, and more upbeat economic news, both domestically and abroad. The S&P 500 set three new record highs over the course of the week.On Wednesday, in a widely expected move, the Fed cuts interest rates by 0.25% to a range of 1.50-1.75%. Subtle changes to the wording of the accompanying statement, and remarks by Chair Powell, suggest the Fed will now pause for some period of time to assess the efficacy of its recent cuts before determining whether further action is required. Current market expectations are that the Fed will not raise rates again until April 2020. While rate cuts seem to clearly boost investor sentiment, we question their overall benefit to the broader economy. As we have stated before, we believe that uncertainty surrounding trade policy, not access to credit, is currently the greatest hindrance to growth.

A number of global economic data points released during the week surprised to the upside including Eurozone GDP, Chinese manufacturing, Japanese industrial production, and U.S. non-farm payrolls. The data helped assuage some of the ongoing concerns about slowing global economic growth.

Through Friday, 71% of S&P 500 companies had reported earnings, of which 76% and 61% had exceeded their earnings and revenue estimates, respectively. Currently, full-quarter earnings growth is expected to decline -2.7% Y/Y, a slight improvement from the -4.1% forecast as of September 30.