In the Community Our team supports programming through the Volunteer Center of the Lehigh Valley. Last week, our CEO was Honorary Chair for the Spirit of Volunteerism celebration, recognizing companies, organizations and individuals for their community impact.
Now, we
are collecting shoe boxes and gifts for children across the region to receive
Holiday Hope Chests. Described as “happiness in a shoe box,” these small gifts
are often the only present many children receive. This year, nonprofits are
requesting more than 10,000 boxes. That means there are 10,000 children who are
in need.
Our team’s
humble contribution usually amounts to somewhere between 20 and 30 boxes. But
every box makes a difference. If you are so inclined, please look for the
collection box in our front lobby where you can drop off items to help us do
more. Visit volunteerlv.org to see the list of nonprofits requesting shoeboxes
and the suggested gift list.
by Connor Darrell CFA, Assistant Vice President – Head of Investments Equity markets climbed higher last week, bolstered by healthier than expected corporate earnings and a strong October jobs report which also contained upward revisions to prior data. In addition to the stronger than expected job growth, Friday’s employment summary also revealed a healthy increase in hourly earnings of 3%, which is handily higher than the current rate of inflation and an excellent development for the U.S. consumer.
The Federal Reserve implemented a widely
anticipated quarter point rate cut on Wednesday and bond yields trickled lower
as a result, which led to positive returns for bond investors. In his comments
following the Fed announcement, Chairman Jerome Powell signaled to markets that
the economic fundamentals would need to deteriorate significantly before the
Fed would move to cut rates further, and we may now be entering the first
period of steady policy rates for quite some time.
First Look at Q3 GDP Yields Positive Signs According to advance estimates of Q3 US GDP figures released last week, real GDP grew at a rate of 1.9% during the quarter, which was faster than the consensus forecast of 1.6%. Given the Q3 data looks a bit lower than what was observed last quarter, the data provided further confirmation that the U.S. economy is slowing down but is not stalling in a way that many have begun to fear. Consumption growth was once again the primary driver of growth in GDP, with business investment and net exports offsetting some of the contributions from consumption for the second straight quarter, which illuminates some of the impacts of the U.S./China trade dispute. As the U.S. and China continue to inch closer to a “Phase One” trade deal, sentiment surrounding business decisions may have the opportunity to recover, but the length of the economic expansion will be largely driven by the consumer, which continues to benefit from wage growth and a historically healthy labor market.
THE NUMBERS Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends. Interest Rates: Federal Reserve, Freddie Mac
U.S. ECONOMIC HEAT MAP
The health of the U.S. economy is a key driver of long-term returns in the stock market. Below, we grade 5 key economic conditions that we believe are of particular importance to investors.
CONSUMER SPENDING
A
Our consumer spending grade remains an A despite a recent decline in retail sales numbers. US consumer confidence remains high, but we will be watching this metric closely over the next couple of weeks and throughout earnings season. The consumer has been the bedrock of the US economy through much of the current expansion.
FED POLICIES
A-
The Federal Reserve cut its interest rate target by an additional 25 bps following last week. This was the third cut this year, but Chairman Jerome Powell signaled to markets that we this may be the last adjustment to the Fed’s policy target until there is a meaningful shift in the economic data (either positive or negative).
BUSINESS PROFITABILITY
B-
As was largely expected by markets, corporate earnings growth has been weak thus far in Q3 as a result of the global slowdown and trade policy uncertainty. Throughout earnings season, we will be paying closer attention to management commentary and updates to forward guidance, which are likely to have a bigger impact on stock prices.
EMPLOYMENT
A
The US economy added a healthy 128,000 new jobs in October. Furthermore, there were upward revisions to data from the September and August reports in addition to evidence of strong wage growth. Considering the slew of negative sentiment leading up to its release, this was one of the more uplifting release in recent memory.
INFLATION
A
Inflation is often a sign of “tightening” in the economy, and can be a signal that growth is peaking. Recent inflationary data has increased slightly, but inflation remains benign at this time, which bodes well for the extension of the economic cycle.
OTHER CONCERNS
INTERNATIONAL RISKS
7
Despite the US & China being close to a “Phase One” agreement, we are keeping our “international risks” metric at an elevated level of 7 for now. Other key areas of focus for markets include the ongoing Brexit negotiations, rising economic nationalism around the globe, and escalating tensions in the Middle East.
The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.
Research shows that daylight savings time may have an effect on financial markets. “A number of studies show that daylight saving time harms people’s decision-making processes due to the disturbance it has on their circadian rhythm or body clock.” Read more at Worth.com
