November 2017 Market Update – The month of October showed strong market performance and economic data. For the month of October, the S&P 500 Index returned 2.33% and the FTSE All World Ex-US Index was up 1.91%. Year to date ending October 31st, the S&P 500 Index climbed 16.91% and the FTSE All World Ex-US Index increased 23.24%.
Real gross domestic product (GDP) increased at an annual rate of 3.0% in the third quarter, according to the advance estimate released by the Bureau of Economic Analysis. In October, the unemployment rate decreased to 4.1%, as 261,000 jobs were created. The small dip in the ISM Manufacturing Index in October from a 13-year high is benign, and we feel that manufacturing output will rebound in the fourth quarter. Strong corporate earnings, especially in the tech sector, have continued to push stocks higher.
The consumer confidence index rose to 125.9 in October, from 120.6 in September. This shows that consumer spending is likely to increase in the 4th quarter. However, the household savings rate has declined, signaling that household wealth, boosted by high capital gains, is at a record high and households can get away with saving less from their income.
At its last meeting, the Fed suggested that it is still on course to raise rates in December. Trump also announced his pick for a new Fed chair, Jerome Powell, to replace Janet Yellen. Powell has been a member of the Fed’s board of governors since 2012, yet some critics say he lacks the economic experience that other Fed chairs have had. Last week, Republicans outlined a proposed tax plan, which includes lower tax rates for households, lower tax rates for businesses, a new tax rate for pass-through businesses, increasing the standard deduction and child tax credit and eliminating state and local tax deductions. However, the tax reductions also came with reduction or elimination of many deductions and as a result, some residents, particularly in high state tax states like California and New York, would see tax increases under the proposal. The proposal is in early stages and we don’t know what will ultimately become law.
In the Eurozone, GDP growth continued (2.5% GDP growth over the last year) and the jobless rate is below 9%, for the first time since 2009. The MSCI Euro Index is up 24%, which has benefited from a declining dollar. We continue to feel that developed countries outside the U.S. have attractive relative valuations and fundamentals that warrant a higher than normal weight in a portfolio.
We continue to believe that a long-term perspective and a diversified portfolio will benefit investors. If you are a client and would like further detail on these topics or anything else, please don’t hesitate to call or email us. If you are not a client, but would like more information on Callan Capital’s wealth management services, please contact us at (858) 551-3800 or visit www.callancapital.com.
Past performance does not guarantee future results, which may vary. This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. For more information regarding Callan Capital, please refer to our most recent Form ADV Part 2A which may be found at www.adviserinfo.sec.gov.
S&P 500®: Standard & Poor’s (S&P) 500® Index. The S&P 500® Index is an unmanaged, capitalization – weighted index designed to measure the performance of the broad US economy through changes in the aggregate market value of 500 stocks representing all major industries.
The FTSE All-World ex US Index comprises Large and Midcap stocks providing coverage of Developed and Emerging Markets excluding the US. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization.
The MSCI Europe Index captures large and mid cap representation across 15 Developed Markets (DM) countries in Europe. With 445 constituents, the index covers approximately 85% of the free float-adjusted market capitalization across the European Developed Markets equity universe.