Key manufacturing reports across the globe have influenced what we are reading this week, as the US pace is record-breaking, while Europe hits a snag.
For the week, the S&P 500 added +0.75%, the Dow Jones Industrial Average gained +0.57%, and the MSCI EAFE (developed international) increased +0.58%.
Here are the 3 stories this week that rose above the noise:
U.S. Manufacturing Grows at Fastest Pace in Three Years
The U.S. manufacturing sector continues to propel the economy, growing for the 15th consecutive month. The Institute for Supply Management’s (ISM) Manufacturing Index rose to 59, the highest reading since March 2011 (levels greater than 50 indicate growth).
Gains were broad-based -- the new orders index climbed to 66.7, the highest level since April 2004, the employment index grew for the 14th consecutive month, and the production gauge rose to the strongest since May 2010. The overall reading exceeded even the most optimistic forecast among the 78 economists surveyed in a Bloomberg survey.
Europe’s Manufacturing Malaise Was Not in Policymakers’ Playbook
A post from The Wall Street Journal Moneybeat blog summarizes the latest evidence of sharply weakening manufacturing activity in the Eurozone, with manufacturing purchasing managers’ indexes for August showing negative momentum throughout the region.
As pointed out in the article, one result of this disappointing data has been increasing expectations that the European Central Bank (ECB) will soon announce a large asset-purchase program, which helps explain why the yields on German and French bonds have recently plunged to all-time lows. As a result, markets are likely to be heavily influenced in the coming weeks by Eurozone data and the ECB’s policy response.
Here’s Why Morgan Stanley Says the S&P 500 May Near 3,000
The S&P 500’s rally isn’t over and the key equity index could jump 50 percent more by 2020 as the U.S. economy heads for a record winning streak, according to investment bank Morgan Stanley. A slower, though sustained, period of growth could help the equity benchmark peak near 3,000, according to a report issued by the investment bank. The U.S. economy, which began recovering in July 2009, may continue growing for five years or more, making the probability of a cycle peak low for some time.
Part of their outlook is due to expectations that central banks are likely to keep interest rates lower for longer as major economies around the world are at different states of growth. Amid lower levels of household debt and brighter confidence on the part of American consumers, the U.S. economy may be just halfway through a period of sustained growth with company profits following, Morgan Stanley said.
Articles chosen and summarized by the First Allied Asset Management, Inc. investment management team.
International investing involves additional risk, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Investing in companies involved in one specified sector may be more risky and volatile than an investment with greater diversification.
