Last week saw a number of important economic updates, with a focus on October’s inflation reports and a first look at consumer confidence in November. Prices continued to rise in October, which negatively affected consumer confidence to start November. This will be another busy week for updates, with October’s retail sales and industrial production reports and a few updates on the housing sector scheduled for release.

My apologies . . .

Today I have to punt. I had planned to write about inflation and how to think about the most recent print. What should we be looking at? Where is the inflation coming from? What is likely to happen over the next year or so? It was going to be a great post—really!

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

My colleague Sam Millette, manager, fixed income 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!

In October, the markets bounced back strongly, following a difficult September. Here in the U.S., all three major indices were up significantly. The Nasdaq and the S&P 500 gained more than 7 percent, and the Dow went up almost 6 percent. Developed markets showed a smaller gain, almost 2.5 percent, and emerging markets eked out a small rise of 1 percent. Although stocks did well, bonds had another bad month, dropping slightly as interest rates rose.

Last week’s important economic data releases were focused on business confidence, the Fed’s November meeting, and the October employment report. While most of the news was positive, the jobs report was the highlight, as the pace of hiring improved notably during the month of October. This week will be slightly quieter, with October’s inflation reports and a first look at consumer sentiment in November serving as highlights.

It was so good to see the spooky season back in full swing last week. Many of the Halloween events unfortunately canceled in 2020 were back this year. Ghosts, witches, princesses, and others in costume were making the neighborhood rounds, yards were decorated with Halloween props, and many other fall festivities were back.

After yesterday’s piece on how many economic indicators are starting to move back to normal, it was nice to have the Fed ratify my point. The Fed has been buying $80 billion per month of Treasury securities and $40 billion per month of mortgage-backed securities. Yesterday, the Fed announced that, effective immediately, it would be cutting $10 billion per month from its Treasury purchases and $5 billion from the mortgage purchases for at least the next two months. Plus, it has the expectation that the drawdown will continue into next year—and possibly accelerate. This is a necessary first step in taking monetary policy back to normal.

As we deal with the daily rush of news and data—the elections, the Fed meeting, earnings, and so forth—it is easy to lose sight of the bigger picture. Yes, there is a lot going on. Some of it is good, some of it is bad, and most of it is somewhere in the middle. But if we step back a bit, we can see that, on the whole, we are returning as a country to something like normal, at least on an economic basis.

After a difficult September, the markets saw a bounce in October. Both the Nasdaq and the S&P gained more than 7 percent, and the Dow was up almost 6 percent. These results were driven by the stabilization of key economic data. Job growth declined in September, but a higher October result is expected as labor demand remains strong. Plus, consumer confidence has stabilized.