Via Nova Update: Worries keep markets on edge.

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  • The S&P 500 finished lower following two weeks of gains.

  • The U.S. economy remains healthy, but overseas growth slowed.

  • Hints of progress on trade, but details lacking.

  • The Week Ahead: Happy Thanksgiving to all!Housing data and Black Friday spending will be the focus.

The S&P 500 finished lower following two weeks of gains.

The S&P 500 fell just over 1½% in the latest week, giving back a portion of the 5% gain during the previous two weeks.  Further evidence of slower foreign economic growth outweighed steady domestic economic statistics, budding hopes of progress on trade negotiations with China and hints from Federal Reserve officials that they may slow the projected pace of future rate increases.  While stocks were weaker in ten of the eleven sectors, large declines in Apple and Amazon had an outsized impact on the S&P 500 performance.  Small cap and international equities fell less than the S&P 500, and emerging market stocks showed a small gain. 

In other markets, the weaker international data and hints of fewer Federal Reserve interest rate hikes in the coming months helped lower bond yields and lift the Bloomberg/Barclays Aggregate Bond Index by nearly ½%.  Real estate, gold and Treasury Inflation-Protected Securities (TIPS) also improved, but oil prices fell again on concerns of excess global supply.  The value of the dollar fell for the week but remains on an upward trend so far this year.  A stronger dollar generally lowers the cost of imports for consumers but makes exports more expensive and less competitive.

The U.S. economy remains healthy, but overseas growth slowed.

Small business optimism remained high in the latest report, and retail sales rose more than expected in October signaling continued economic strength.  Major retailers reported they are positive on the outlook for holiday spending, which suggests that fourth quarter economic growth will remain firm.  Positive economic data tends to put upward pressure on inflation, but the latest consumer price index (CPI) data showed that inflation remains under control near the Federal Reserve’s 2% target.  Many analysts have been expecting and projecting accelerating inflation, but a resurgence has yet to materialize, and the recent drop in oil prices will likely keep inflation low over the near term.

While the U.S. economy continues to expand, data overseas was weaker.  The weakness has been reflected in global stock market returns.  The S&P 500 remains in positive territory year to date (+4%), but international equities are down over -8% and emerging market stocks are down nearly -13%.  Third quarter GDP growth fell in both Germany and Japan, and economic momentum in China continued to slow.  To be fair, special circumstances exerted downward pressure on the data out of Europe and Japan (auto production correction in Germany, typhoons and earthquakes in Japan), but the general slowing pattern was evident.  Fresh uncertainty surrounding Brexit and excessive government deficit projections out of Italy only added to the concerns. 

Hints of progress on trade, but details lacking.

Trade tensions have been a major source of uncertainty for the stock markets all year, but the latest rumors and reports on trade negotiations with China were positive.  Presidents Trump and Xi are expected to meet on November 30 at the G-20 Summit in Argentina, and trade negotiations are on the agenda.  Apparently, the Chinese sent a letter to the White House addressing, or at least mentioning some of the longstanding U.S. trade complaints, though no specifics were disclosed.  Via Nova believes that we will we see progress in resolving trade disputes over the coming year (a positive for the financial markets), but the progress will be gradual and perhaps slower than investors would like.

The Week Ahead: Happy Thanksgiving to all!  Housing data and Black Friday spending will be the focus.

Via Nova wishes safe travels and a happy Thanksgiving to all!  The holiday-shortened week has historically been positive for the equity markets (up 19 of the past 24 years), and often marks the beginning of an end of year stock market rally, but there are no guarantees.

The economic calendar will be light.Fresh data on home sales and construction will likely be a focus given the weakening trend this year.Reports on new orders for capital goods are also due along with an update on consumer sentiment.Anecdotal reports on Black Friday shopping crowds will also be carefully monitored for confirmation of optimistic spending forecasts.