Last week was relatively quiet for economic news—the few major reports released related to international trade and service sector and consumer confidence. The trade deficit narrowed as expected, while service sector and consumer confidence both increased by more than anticipated. This week, a little more action is forthcoming, as we’re expecting updates on consumer and producer inflation, retail sales, and industrial production.

Last night, I spoke at a client event for one of our Commonwealth advisors. As usual, it was a great group—thoughtful, interested, full of great questions. And, of course, worried. Worried about politics, worried about the debt and deficit, and, most of all, worried about what all of this means for their kids.

My colleague Sam Millette, senior investment research analyst on Commonwealth’s Investment Management and Research team, has helped me put together this month’s Market Risk Update. Thanks for the assist, Sam!

Is the market trading on fundamentals or politics? I discussed this and more today on Yahoo Finance’s On the Move.

My colleague Sam Millette, senior investment research analyst on Commonwealth’s Investment Management and Research team, has helped me put together this month’s Economic Risk Factor Update. Thanks for the assist, Sam!

The economic data released in October largely came in better than expected, with increasing service sector and consumer confidence offsetting some of the declines we saw in September. Job creation also came in better than anticipated, and the yield curve normalized for the first time in months. Despite these positive results, the longer-term trends continue to deteriorate, suggesting there are still very real risks in the economy that should be monitored going forward.

September and October are historically the two weakest months of the year, and markets did enter October in a nervous state. September ended on a positive note, but there was a drop that continued into the start of October. That decline took away all of the gains from the prior month and threatened to take the markets even lower. This move would have made sense, as the economic news was weakening. But markets went on to rebound and have a very good month. That reversal is the story of last month and very possibly of this one.

Last week was jam-packed with economic updates, many of which beat expectations. Faster-than-expected GDP growth in the third quarter and a stronger-than-expected October employment report highlighted a week in which the Fed cut the federal funds rate by 25 bps. This week will be quieter, with notable releases on international trade, the service sector, and consumer confidence.

October was a great month, with U.S. markets doing well and international markets doing even better. This positive news was surprising, given the impeachment inquiry, weak job growth, and declining business confidence. Still, major sectors of the economy remain strong. Consumers continue to earn and spend more. Plus, the Fed has gotten behind the markets with rate cuts at its last two meetings. But is there volatility ahead? Watch my latest Market Thoughts video to learn more.

Yesterday, the Fed announced that it was cutting rates one more time, in response to continued economic weakness. That decision was the treat. Markets responded accordingly, with stock markets rising. The trick, however, was in the implication—of the statement and the press conference—that this would be the last cut unless the economy deteriorated further. The implied probability of a December rate cut dropped to 22 percent, the dollar index dropped, and the rate on the 10-year Treasury declined. The Fed giveth and the Fed taketh away.

There is a lot of economic data coming out this week: consumer confidence, third-quarter economic growth, personal income and spending, the ISM Manufacturing number, the jobs report on Friday, and, of course, the Fed’s decision on interest rates (which, if you haven't heard, resulted in another quarter-point cut this afternoon). We will get a much better understanding of where we are by the end of the week, and we will talk about what all that data means.