US Economy: Tepid growth beats expectations.
US GDP for 3rd quarter 2019 grew at an 1.9% annualized rate, just below the 2nd quarter result (2.0%) but higher than analyst estimates. While US consumer spending (+2.9% for 3rd qtr.) remains relatively strong and the job market healthy, business investment continues to slip (-1.5% in 3rd qtr.) alongside persistent trade uncertainty.
US Stocks: Lower profits beat estimates.
The 40% of S&P 500 companies reporting so far for 3rd quarter 2019 showed a drop in earnings of nearly 4% vs. the year-earlier period. However, these results beat analyst estimates and corporate revenue has been growing. Small caps have more recently begun to outperform since their earnings are generally less affected by the strong US dollar.
Foreign Stocks: Trade news boost EM.
Foreign equities outperformed US stocks with strong results in the emerging markets (EM). Emerging market stocks have been stuck in a bit of limbo as the trade war ebbs and flows but a partial agreement between the US and China, as well as central bank stimulus, have helped them break out.
Fixed Income: How low will the Fed go?
The Fed cut its target interest rate for the 3rd time in 2019, to the 1.5% – 1.75% range, as US economic data has weakened. Still, Fed Chair Jerome Powell strongly hinted that this latest cut is likely to be the last for the foreseeable future, acknowledging that prior cuts have begun to have a positive impact.
Real Assets: Gold, commodities rally.
Commodities led the real assets category in October. While weak global growth and rising inventories were a headwind for oil, gold and other precious metals performed well as perceived safe havens and a bet on accommodative monetary policy.
Alternatives: Hedge funds in the black.
Generally, hedge funds were up in October. Rallying equity markets were supportive of equity hedge and event-driven strategies, while volatile interest rate markets whipsawed systematic macro strategies.
Equities Total Return
|U.S. Large Cap||2.2%||23.2%||14.3%|
|U.S. Small Cap||2.6%||17.2%||4.9%|
Fixed Income Total Return
|U.S. Agg. Bond||0.3%||8.8%||11.5%|
|U.S. High Yield||0.2%||11.8%||8.3%|
|Munis Broad Mkt||0.1%||7.2%||9.6%|
Non-Traditional Assets Total Return
|Overall HF Market||0.2%||6.2%||3.5%|
|Gold Spot $/OZ||$1513||$1284||$1215|
|U.S. Dollar Index||92.0||92.3||90.8|