US economic data were largely positive. Preliminary Q3 2017 GDP grew 3.0% annualized, beating expectations. September new home sales jumped 18.9% m/m to a 667,000 annualized rate, notching the highest level in a decade. September durable goods orders rose 2.2% m/m, led by a 31.5% surge in volatile aircraft orders. On Thursday, the House approved the Senate’s budget resolution. This now enables the Senate to pass tax reform legislation with a simple majority, so long as it adds no more than $1.5 trillion to the deficit over the next decade. However, key tax reform components are still being debated, including exemptions for state and local taxes and changes to 401(k) plan limits. In our view, investors shouldn’t fixate on potential tax reform—tax policy is so widely debated and implemented far enough in the future that it tends to sap market surprise power and allows markets to price in potential outcomes either way. (For more, see Ken’s 10/09/17 USA Today article, “What President Trump’s Plan Means for Stocks.”)
European economic news was light. As expected, the European Central Bank (ECB) announced it would keep interest rates unchanged and extend its asset purchase program to September 2018—tapering purchases from €60 to €30 billion per month beginning January 2018. However, the ECB left the door open to prolonging the program should conditions warrant. (For more, see our 10/27/17 MarketMinder.com article, “Word Games with ECB Head Mario Draghi.”) In the UK, the preliminary reading of Q3 2017 GDP indicated the economy rose 1.6% annualized, meeting expectations.
In Asia, China’s 19th Communist Party Congress came to an end, with the consensus being General Secretary Xi Jinping cemented his political power well beyond 2022 (when his second five year term ends). Otherwise, few major changes were announced and Xi noted the Party would continue to focus on maintaining political and economic stability. Elsewhere, Japan held snap elections, with Prime Minister Shinzo Abe’s Liberal Democratic Party (LDP) maintaining its supermajority.
The Fed meets—no major changes from current policy are expected. The UK releases October home prices and a monetary policy update from the Bank of England. The eurozone reports October inflation and the first estimate of Q3 2017 GDP. China reports October Purchasing Managers’ Indexes and Japan releases October industrial production, housing starts and construction data.
—The Investment Policy Committee
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.