For the week ending 11-9-18
Stocks rallied as investors seemed to breathe a sigh of relief that the midterm uncertainty was finally over. The prospect of legislative gridlock seemed to be a welcome one, and many on Wall Street made note of a historical pattern of gains following the midterms—stocks have rallied after every midterm election since 1946, regardless of the winner or subsequent redistribution of power in Washington.
The Dow Jones Industrial Average outperformed the tech-heavy NASDAQ as the slower-growing value stocks outpaced higher-valuation growth shares. Within the S&P 500 Index, health care stocks outperformed. Both healthcare providers and insurers rose during the week after the Democrats won a majority of seats in the House of Representatives, which was seen as a likely sign that subsidies under the Affordable Care Act would continue. Communication services stocks performed worst, held down by late declines in Netflix and video game stocks.
Energy stocks have been weak the past week due to falling oil prices as a result of a temporary oversupply of oil production that lifted U.S. petroleum inventories. President Trump surprised OPEC by instituting temporary waivers to some oil importers of Iranian oil production in accordance with the sanctions placed on Iran. At an OPEC gathering over the weekend, Saudi Arabia stated they would reduce oil production starting in December and reduce production even more into 2019. Thus, we believe that the decline in oil prices and energy stocks is likely to prove temporary.
Here in the U.S., the week’s economic data was mixed. The Institute for Supply Management’s measure of service sector activity declined less than expected in October and remained just below the record peak that was reached in September. Weekly jobless claims stayed near multi-decade lows and the University of Michigan’s gauge of consumer sentiment rose a bit. More concerning, though, was a jump in producer price inflation, with much of the inflationary pressure coming from wholesalers and retailers and blamed, mostly, on the tariff war with China.
The unexpected jump in producer inflation had investors thinking, once again, about interest rates. The Federal Reserve Open Market Committee met on Tuesday and Wednesday, and, although the meeting didn’t generate any news, the FOMC indicated that they are on track to raise the rate that Wall Street banks charge each other for overnight loans – called the Federal Funds Rate – another quarter percent when they meet again in December. Market interest rates, as reflected in the yield on the 10-year Treasury note, remained steady at 3.2%
For the week, the Dow Jones rose 718 points to 25,989 (2.8%); the NASDAQ was up 50 points to 7,407, (0.7%); and the S&P 500 added 58 points to 2,781 (2.1%)
Oil fell another 2.00 to $61/bbl. Gold lost $31 in value to $1,204/oz.
The yield on the 10 yr. Treasury was unchanged at 3.2%.
This weekly market commentary is written and produced in house by the investment team at Winch Financial. If you’d like more information about our investment strategies, or would like to attend a small group investment discussion, please call our office at 920-739-8577. We’re always glad to help.
Disclaimer: It is worth noting that the opinions in this commentary are Christian Peterson’s and may occasionally vary somewhat from the opinions of the Winch Financial investment team as a whole. Client recognizes that any opinions or analysis described in this commentary involve the Advisor’s judgment and good faith and do not constitute investment advice. All recommendations or observations are subject to various market, currency, economic, political and business risks. Client recognizes that no party to this alert has made any guarantee, either oral or written, that Client’s investment objectives will be achieved. Advisor shall not be liable for any action performed or omitted to be performed or for any errors of judgment or mistake, except in the case of Advisor’s gross negligence, willful misconduct, or violation of applicable law. Advisor shall not be responsible for any loss incurred by reason of any act or omission of Client, custodians, broker-dealers, or any other third party. Nothing in this commentary shall constitute a waiver or limitation of any rights that Client may have under applicable state or federal law, including without limitation the state and federal securities laws.