Weekly Wrap-Up

Last Week In Markets: Oct 30 - Nov 3, 2017

Fisher Investments recaps the biggest market, political and economic news from last week, including US, Asian and European economic data releases.

US economic data were mixed. The October ISM manufacturing Purchasing Managers’ Index (PMI) fell to 58.7, slightly missing expectations—but remains well above 50, indicating expansion. The October ISM non-manufacturing PMI rose to 60.1, beating forecasts. September seasonally-adjusted durable goods orders rose 2.0% m/m, missing expectations. In October nonfarm payrolls rose 260,000, missing forecasts, while the unemployment rate fell to 4.1%—its lowest point since 2000. As expected, the Fed left interest rates unchanged but signaled a possible rate hike in December. On Thursday, President Trump nominated Fed governor Jerome Powell as the next chairman of the Fed. If confirmed by the Senate, Powell will replace Janet Yellen when her term ends in February 2018. However, we’d caution against speculating what this might mean for future Fed policy. Powell’s future actions are unknowable and, importantly, the Fed head doesn’t dictate monetary policy—it is set by the 12-member Federal Open Market Committee. For more, please see our 11/03/2017 MarketMinder commentary, “Mr. Ordinary and the Wizards of Constitution Avenue.” House Republicans released their long-awaited tax reform proposal—the Tax Cuts and Jobs Act. Remember, this is just an initial proposal and isn’t guaranteed to pass either the House or Senate. Either chamber can materially change the legislation, as happened throughout the health care reform votes. While we’ll continue to closely monitor any developments, in our view, investors shouldn’t fixate on tax reform. Many presume tax cuts are bullish and hikes bearish, however historical data support neither assumption.

European economic releases were mostly positive. In the eurozone, preliminary Q3 2017 GDP expanded 2.5% y/y, ahead of forecasts. The October Markit manufacturing PMI slightly decreased to 58.5, missing expectations. The September unemployment rate fell more than expected to 8.9%. In the UK, the October Markit/CIPS manufacturing and services PMIs increased to 56.3 and 55.6, respectively, beating estimates. As expected, the Bank of England raised interest rates for the first time in more than a decade—from 0.25% to 0.5%.

In China, October non-manufacturing and services PMIs decreased to 54.3 and 53.5, respectively. In Japan, the October Markit manufacturing PMI rose to 52.8, ahead of forecasts. September retail sales grew 0.8% m/m. The September unemployment rate remained at 2.8%. The Bank of Japan kept monetary policy unchanged and signaled the central bank’s ETF buying could slow or stop in the foreseeable future.

The Week Ahead:

The UK releases September construction data and September industrial and manufacturing production. The eurozone reports October services PMI and September retail sales. China reports October trade and inflation data. Japan releases October lending 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.