Last Week In Markets: Oct 31-Nov 04, 2016

Fisher Investments recaps the biggest economic and political news from last week, including updates on US elections and monetary policy and economic releases for the UK, eurozone, China and Japan.

Despite generally positive corporate earnings and economic data, global equities ended lower (-1.8%) ahead of US presidential and congressional elections.

The long and noisy campaigning ends Tuesday. Regardless of election results, the longer-term market impact is likely positive as political uncertainty fades. Importantly, the victor likely faces meaningful gridlock ahead, limiting his or her ability to deliver on campaign trail promises—an underappreciated future positive for stocks. History shows that even the most persuasive presidents have trouble accomplishing more than a handful of their platforms’ policies. As we’ve outlined before, we maintain neutrality and focus on proposals affecting companies, capital markets and the broader global economy.

US economic data were positive. The Fed left interest rates unchanged, but signaled a possible rate hike in December on improved economic conditions. October auto sales beat estimates, expanding at an annualized clip of 17.9 million vehicle purchases. September seasonally adjusted durable goods orders grew 1.4% y/y. The labor market showed additional signs of health with the unemployment rate ticking lower to 4.9% and wages growing 2.8% y/y, their fastest pace since 2009.

UK data were generally positive. October purchasing managers’ indexes showed continued growth in service and manufacturing sectors, and September money supply growth accelerated to 6.2% y/y. The Bank of England also left interest rates unchanged, encouraged by the better-than-expected condition of the economy following Brexit.

Eurozone economic data were sparse. Third quarter GDP expanded 1.6% y/y—marking the fourteenth consecutive quarter of growth. Meanwhile, October’s core consumer prices and September’s unemployment readings were both stable, meeting forecasts.

Chinese manufacturing data surprised to the upside and reached a 27-month high, lifted by rebounding new orders. In Japan, the Bank of Japan made no changes to its interest rate policy or its quantitative easing program. Japan’s October consumer confidence index dipped lower, while its manufacturing purchasing managers’ index grew less than expected.

The Week Ahead: Much of the world will be focused on Tuesday’s US presidential and congressional elections. We will have updated commentary at www.marketminder.com as news develops. Economic releases will be light. US consumer credit and mortgage data are expected. The UK reports its latest retail sales, trade and industrial production numbers. Japan posts October trade balance and money supply data.

Disclosure: 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.

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