The Independent Market Observer

Monday Update: Strong Performance After the Storms

Posted by Sam Millette

This entry was posted on Oct 16, 2017 12:49:19 PM

and tagged In the News

Leave a comment

Monday updateToday's post is from Sam Millette, a fixed income analyst on our Investment Management and Research team.

Last week, we saw positive results from some of the major economic data releases, as the economy appears to be strengthening following the hurricanes. This strong performance is in line with recent data and indicates that we may be entering a period of accelerated growth.

Last week’s news

On Wednesday, the Fed released the minutes from its last meeting in September. Based on the notes, Fed members are concerned that weak inflation numbers are likely to persist. Markets still believed that the minutes were hawkish, as a majority of Fed officials plan for one more rate hike this year.

Speaking of inflation, the Fed was given more news on Friday with the release of consumer price data. The headline Consumer Price Index rose by 0.5 percent in September against expectations for a 0.6-percent increase. The annual figure also came in slightly lower than anticipated, with growth of 2.2 percent compared with expectations of 2.3 percent. The core figure, which excludes volatile gasoline and food prices, rose by a more modest 0.1 percent and 1.7 percent for the month and year, respectively. Although this result is slightly below the Fed’s stated 2-percent inflation target, again, the recent minutes show that the Fed may be ready to raise rates once more this year.

Also on Friday,  retail sales showed very solid growth of 1.6 percent for September. Much of this was due to an uptick in auto sales, as vehicles damaged in the hurricanes had to be replaced. The core figure, which excludes automobile and gas purchases, rose by a healthy 0.4 percent. Overall, these positive numbers indicate that consumers are continuing to spend despite the hurricanes.

Finally, on Friday, the University of Michigan Consumer Sentiment Index surprised by jumping from 95.1 to 101.1, against expectations for a slight decrease to 95. This increase brought the survey to a 13-year high, suggesting that consumers are clearly unconcerned with the impact of the hurricanes. This resilience is very positive given the important role of the consumer in the economy, and it bodes well for faster growth.

What to look forward to

This will be a relatively subdued week for economic news; however, we’ll see the release of a number of important housing data points.

On Tuesday, industrial production is expected to rise modestly following a 0.9-percent decline in August. We anticipate some lingering hurricane-related effects on this figure, as oil production was hit particularly hard by the first hurricane in August. If this measure disappoints, it would not be worrisome, as it’s likely to rebound significantly next month.

Also on Tuesday, the National Association of Home Builders survey will be released. This measure of home builder confidence is expected to decline slightly, largely due to labor and material shortages. This index remains near multi-year highs, however; any reading near current levels would indicate continued confidence.

On Wednesday, the release of September housing starts data will show if home builders are translating this confidence into new construction. While the expectation is for housing starts to remain flat, low levels of supply and rising prices may influence some growth in this figure.

Finally, on Friday, existing home sales data for September is also expected to remain flat. Supply continues to be a major concern for existing home sales, as August marked the seventh month in a row where the supply of existing homes dropped. Existing home supply now sits at lows that haven’t been seen since 1994. Demand remains strong, however, so this figure may also improve.

Have a great week!

Subscribe via Email

New call-to-action
Crash-Test Investing

Hot Topics

New Call-to-action



see all



The information on this website is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly in an index.

The MSCI EAFE (Europe, Australia, Far East) Index is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices.

One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.

The VIX (CBOE Volatility Index) measures the market’s expectation of 30-day volatility across a wide range of S&P 500 options.

The forward price-to-earnings (P/E) ratio divides the current share price of the index by its estimated future earnings.

Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided on these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption by Commonwealth of any kind. You should consult with a financial advisor regarding your specific situation.


Please review our Terms of Use

Commonwealth Financial Network®