The
remarkable market recovery that began on October 15 gained even more steam in
the past week with catalysts provided by central bank policy and a
better-than-expected print for third quarter U.S. GDP.
Expectations that the Federal Reserve would take a somewhat more dovish stance in its latest policy statement in response to recent weakness in Europe were largely dashed when the statement was released on Wednesday. With the statement the Fed officially ended its latest quantitative easing program that began in September 2012 and ultimately added more than $1.6 trillion to its balance sheet. In addition to mid-term election results, the upcoming week will be headlined by the release of October’s major economic data
For the week, the S&P 500 rose +2.72%, the Dow Jones Industrial Average rocketed +3.48%, and the MSCI EAFE (developed international) gained +2.24%.
Here are the 3 stories this week that rose above the noise:
A Breakdown of How the Market Performs after Midterm Elections
Expectations that the Federal Reserve would take a somewhat more dovish stance in its latest policy statement in response to recent weakness in Europe were largely dashed when the statement was released on Wednesday. With the statement the Fed officially ended its latest quantitative easing program that began in September 2012 and ultimately added more than $1.6 trillion to its balance sheet. In addition to mid-term election results, the upcoming week will be headlined by the release of October’s major economic data
For the week, the S&P 500 rose +2.72%, the Dow Jones Industrial Average rocketed +3.48%, and the MSCI EAFE (developed international) gained +2.24%.
Here are the 3 stories this week that rose above the noise:
A Breakdown of How the Market Performs after Midterm Elections
Tuesday’s midterm
elections will be closely monitored to see whether Republicans take control of
the Senate from the Democrats, creating a unified Republican Congress.
Historically, markets have performed well following midterm elections.
Seasonality plays a part — since the end of World War II the November-April
period has proven to be the strongest period for stocks, with an average 7.1
percent gain for the S&P 500.
However, Bank of Montreal notes that “midterm election years tend to see that performance get an extra boost, with stocks returning 16.3 percent over the same stretch.” Furthermore, S&P Capital IQ’s Sam Stovall points out that the combination of a Democratic president and a unified Republican Congress has been accompanied by the best average performance for the S&P 500 since 1945 and the second best since 1901.
Oil Hits Four-year Low Near $82 after Saudi Arabia Cuts U.S. Prices
However, Bank of Montreal notes that “midterm election years tend to see that performance get an extra boost, with stocks returning 16.3 percent over the same stretch.” Furthermore, S&P Capital IQ’s Sam Stovall points out that the combination of a Democratic president and a unified Republican Congress has been accompanied by the best average performance for the S&P 500 since 1945 and the second best since 1901.
Oil Hits Four-year Low Near $82 after Saudi Arabia Cuts U.S. Prices
Oil prices have been
under steady pressure for several months and experienced another sharp drop
this morning on news that Saudi Arabia is cutting its prices for the oil it
sells to the United States. This Reuters article details the price reduction
and provides some theories on potential ramifications of the move.
The price cut adds to evidence that OPEC will not curb output at its November 27 meeting despite falling prices and a very well-supplied market. This latest price drop has taken Brent crude to a four-year low, which should continue to pressure retail gasoline prices and provide a boost to consumer sentiment in the coming weeks.
Factories Spur U.S. Growth as World Markets Cool: Economy
The price cut adds to evidence that OPEC will not curb output at its November 27 meeting despite falling prices and a very well-supplied market. This latest price drop has taken Brent crude to a four-year low, which should continue to pressure retail gasoline prices and provide a boost to consumer sentiment in the coming weeks.
Factories Spur U.S. Growth as World Markets Cool: Economy
U.S. manufacturing
activity surged in October, as the Institute for Supply Management’s (ISM) factory
index increased to 59 from 56.6 in September (above 50 signals expansion). Last
month’s manufacturing activity matched its highest level since March 2011,
indicating that the future looks bright for U.S. manufacturing despite slowing
global growth.
The ISM New Orders index rose last month to its second-highest level since August 2009, providing added optimism that manufacturing will continue to be a strength for the U.S. economy in the coming months. Additionally, consumer demand will most likely get a boost from a strengthening job market and falling gasoline prices. The projected increase in consumer demand may provide a tailwind for U.S. manufacturing.
Articles chosen and summarized by the First Allied Asset Management, Inc. investment management team.
The ISM New Orders index rose last month to its second-highest level since August 2009, providing added optimism that manufacturing will continue to be a strength for the U.S. economy in the coming months. Additionally, consumer demand will most likely get a boost from a strengthening job market and falling gasoline prices. The projected increase in consumer demand may provide a tailwind for U.S. manufacturing.
Articles chosen and summarized by the First Allied Asset Management, Inc. investment management team.
