Weekly Wrap-Up

Last Week In Markets: Oct 22 - Oct 26, 2018

Fisher Investments recaps the biggest market, political and economic news from last week, including US GDP, eurozone PMI releases and Japan’s Leading Economic Index.

Global equities fell amid an uptick in volatility. Though emotionally difficult, short-term market volatility is a normal and healthy part of bull markets. In our view, the best course of action for investors is to remain disciplined and avoid making knee-jerk decisions that often result in investment errors. Current fears—trade wars, slowing earnings growth, interest rates, etc.—are old, re-hashed, or misguided and lack material surprise power for stocks. In our view, the bull market should continue as still robust fundamentals, gridlocked governments and far-from-euphoric investor sentiment push future stock prices higher. For more, please see our 10/25/2018 MarketMinder column, “Some Perspective on This Rocky October.” In the US, economic data were mostly positive. The first estimate of Q3 2018 GDP indicated growth of 3.5% q/q annualized, surpassing expectations. The October Markit manufacturing Flash Purchasing Managers’ Index (PMI) rose to 55.9, ahead of expectations and well above 50—indicating continued expansion. The October Markit services Flash PMI rose to 54.7, beating forecasts. September preliminary durable goods orders rose 0.8% m/m, beating expectations of a 1% drop. September wholesale inventories grew 0.3% m/m, albeit less than expected. September new home sales fell 5.5% m/m. While this is the lowest rate since December 2016, we caution investors from reading too much into any single data point. New home sales are often volatile and have dipped myriad times throughout this economic expansion.

In the eurozone, September Markit manufacturing and services Flash PMIs fell to 52.1 and 53.3, respectively—both still indicating expansion. September money supply (M3) rose 3.5% m/m and September loan growth grew 3.1% y/y—suggesting eurozone financial conditions remain quite strong. European Central Bank (ECB) chief Mario Draghi confirmed his intent to end quantitative easing after December—an underappreciated positive in our view. For more, please see our 10/25/2018 MarketMinder column, “Eurozone Update: Investors Still Seem Too Dour Relative to Data.”

The US releases September trade data and October ISM manufacturing PMIs. The UK announces September money supply figures and the eurozone releases its first estimate of Q3 GDP. China reports October official services PMI and Japan releases September trade figures.

The Week Ahead:

The US and eurozone release preliminary September manufacturing and services Purchasing Managers’ Indexes (PMIs). The US releases the first estimate of Q3 2018 GDP and September wholesale inventories. The eurozone announces September money supply (M3) and loan growth. Japanese reports include the Nikkei Manufacturing PMI and September retail sales.

Source for all data cited is FactSet. This update constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. No assurances are made we will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Global equities are represented by the MSCI World Index. The MSCI World Index measures the performance of selected stocks in 23 developed countries and is presented net of dividend withholding taxes and uses a Luxembourg tax basis. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.