In yesterday’s post, we concluded that interest rates were influenced—but not set—by the Fed. We also observed that rates were influenced—but not set—by the supply and demand of capital. We noted in both cases, however, that there was considerable variance over what those two models indicated, which suggests there is something else going on.

We closed yesterday’s post with the observation that economic theory doesn’t really have a good grip on where interest rates come from. Today, I want to explore where we think rates come from and what that might mean.

Yesterday, we started out this series with the observation that interest rates are likely transitioning to a new normal, which is different from the old normal. In other words, all of the projections that assume rates will be getting back to normal are wrong—because the definition of normal has changed.

Brexit. The impeachment. Hong Kong. The trade war. That’s a lot to discuss and to worry about. As always, though, there is a difference between what makes the headlines and what really matters. Not that those issues don’t matter—of course, they do. But in a couple of weeks or months, we will be talking and worrying about something completely different. Headlines come and go, but the deeper issues show their effects over years.

Brad here. Every so often, it is a great idea to go back to the basics and make sure you are doing the fundamentals right. Brian Glazer, a senior investment consultant on our Investment Consulting Services team, spends his days working with advisors to help them do just that. He put together this piece that summarizes some lessons from a legend in the investment profession. It’s a good read and a great reminder of what we should be doing. Thanks, Brian, so over to you. Have a great weekend everyone!

I have been preparing a couple of big-picture pieces over the past couple of days, including the monthly economic risk factor and market risk updates, and it has been a bit eye opening. Conditions have deteriorated more than I had realized. Although I still don’t think we are in the trouble zone, we are certainly getting closer, as was shown in this month's Economic Risk Factor Update. I wanted to get a bit more into the detail around those risks today.

The big economic news today is the jobs report, which was a much more mixed bag than usual. Expect to see headlines saying it was a terrible report, a good report, and pretty much everywhere in between. In fact, on the whole, this report shows that while growth is slowing, the economy continues to expand and is likely to keep doing so. Let’s take a look.

September was a fairly good month for investors. Stock markets were up pretty much across the board, for both U.S. and international markets. For the quarter, a strong September took U.S. markets back into the black. International markets, which got hit harder, stayed in the red. But what do these results mean for October? Let’s take a closer look.

After this week’s trip to California, I am in Denver next week for Commonwealth’s National Conference. As always, I am looking forward to seeing old friends and making new ones, as well as learning a lot from the different presentations. On top of that, I know I will have a great time at the many social events. Should be a wonderful week!

This will be a short post, as I am still traveling. It turns out planes, trains, and automobiles are not very conducive to thinking things through.