November 4 2015
Keep your eyes on the data.
There was much to be said for U.S. stock markets’ performance during October. Both the Dow Jones Industrial Average and the Standard & Poor’s 500 Index delivered their best monthly performance in four years, according to Barron’s.
Any celebration of strong market performance was cut short when the Commerce Department’s estimate of third quarter U.S. gross domestic product (GDP) growth was released last week. GDP was in positive territory, up 1.5 percent for the period, but growth fell short of second quarter’s 3.9 percent, according to the BBC.
The primary reason for the decline was falling inventories. During third quarter both individuals and companies were worried about a possible slowdown in global growth. The Economist reported one reason companies may have reduced inventories is because they feared demand for goods would not be strong if the world economy weakens. That didn’t prove out as sales of American goods and services grew by 3 percent during the third quarter. When inventories are excluded, U.S. GDP growth was 2.9 percent, which many experts would say is pretty healthy growth.
Consumer spending comprises a much bigger part of U.S. GDP (68 percent) than does private investment by businesses and financial institutions (17 percent). Consumer spending numbers also were released last Friday and showed a 0.1 percent increase, which was smaller than many had expected. Experts cited by BloombergBusiness suggest that number could move higher if wages improve. The Economist concurred:
“…if the American consumer defies firms’ gloomy forecasts and continues to spend, investment will eventually return. There is good reason to believe that will happen. In cash terms, disposable personal income grew at an annualized pace of 4.8 percent, helped by cheap fuel. Consumers are more confident about their personal finances than at any time since 2007, according to the University of Michigan’s latest survey.”
Stay tuned. Information about U.S. jobs will be released next week. In theory, each piece of data should help investors gain a better understanding of what’s happening economically.
- Data as of 10/30/151-WeekY-T-D1-Year3-Year5-Year10-Year
- Standard & Poor’s 500 (Domestic Stocks)0.0020.010.0430.1380.1190.056
- Dow Jones Global ex-U.S.-0.7-3.2-220.127.116.11.8
- 10-year Treasury Note (Yield Only)2.2NA18.104.22.168.6
- Gold (per ounce)-1.6-4.8-5-12.7-3.49.3
- Bloomberg Commodity Index0-16.2-25.9-15-10-6.2
- DJ Equity All REIT Total Return Index-0.71.76.211.411.87.7
*Indices are unmanaged and investors cannot invest directly in an index.
*Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
*S&P 500, Gold, Dow Jones Global ex-Us, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend).
*The DJ Equity All REIT Total Return Index does include reinvested dividends.
*All investments involve risk – coins and bullion are no exception. The value of bullion and coins is affected by many economic circumstances, including the current market price of bullion, the perceived scarcity of the coins and other factors. Therefore, because both bullion and coins can go down as well as up in value, investing in them may not be suitable for everyone. Since all investments, including bullion and coins, can decline in value, you should understand them well, and have adequate cash reserves and disposable income before considering a bullion or coin investment.