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A Macro View: Beta Shifts, P/E, and a New “New Normal”?
Chart of the Week
- Jobless claims in the US fell to 210,000 in October, declining by 10,000 for the week ended October 5. Applications for jobless benefits help gauge layoffs, currently standing close to a 50-year low. Claims were higher in Michigan and Ohio, states largely affected by weakness in manufacturing. This jobless claims report augmented the “Goldilocks” jobs report from the prior week, showing the economy added 136,000 jobs in the month of September. The manufacturing industry lost about 2,000 jobs in September. Unemployment stood at 3.50%.
- The Consumer Price Index (CPI) was flat for the month of September at 1.70%, following a 0.10% increase in August. According to the Bureau of Labor Statistics, increases for food and shelter were offset by decreases in energy costs as well as used vehicles. Many believe this indicator could pave the way for another interest rate cut by the Federal Reserve (the Fed) at the end of October. In monitoring futures trades on the Fed’s policy rate, the CME Group pegged the probability of an October rate cut at 84%.
- The Federal Open Market Committee (FOMC) minutes from the September meeting were released, and the trade war and impacts of tariffs were among the Fed’s chief concerns. Equities rode a roller coaster to close the week amid conflicting reports of progress on US/China trade talks in Washington.
- US equities rallied at the end of a week of speculation on trade talks between the US and China, up between 1%-2%. Non-US equities also rose, with most major indices up 1%-2%.
- The yield on the 10-Year U.S. Treasury Note jumped to more than 1.70% to close the week with hopes of progress in US/China trade talks. The 3-month/10-year Treasury curve was positive, a change from the inverted yield curve that historically has been a recession indicator.
- The US dollar finished weaker against a basket of currencies, reflecting both rising expectations of a Fed rate cut later this month and optimism over a limited trade deal with China to close the week.
- Gold fell about 2% on the week as of Friday’s trading.
- Oil prices soared upon the news of an alleged missile attack on an Iranian tanker. Brent crude and WTI futures rose between 1.50%-2.00%.
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