Quick Hits

1. Report releases: Consumer sentiment fell for the second consecutive month as shoppers appear to believe inflation will remain persistent.
2. Financial market data: Investors continued to seek shelter in mega-cap tech names.
3. Looking ahead: This week’s data will provide data on inflation, retail sales, and housing.
 

Report Releases—November 6–10, 2023

Trade Balance: September (Tuesday)

The trade deficit widened modestly in September due to a sharp rise in imports. Despite the increase, the monthly trade deficit remained well below record levels from early 2022.

• Expected/prior trade balance: –$59.8 billion/–$58.7 billion
• Actual trade balance: –$61.5 billion

 

Consumer Credit: September (Wednesday)

Consumer credit increased $9.06 billion in September, reversing some of the losses from the –$15.63 billion report in August and beating average expectations of $7.47 billion. This figure will be closely monitored over the next several months as we enter the holiday season.

 

MBA Mortgage Applications: Week Ending November 3 (Wednesday)

Mortgage applications rose 2.5 percent, better than the previous figure of –2.1 percent, as the recent decline in 10-year Treasury yields from the 5 percent level supported increased mortgage demand.

 

Preliminary University of Michigan Consumer Sentiment Index: November (Friday)

Consumer sentiment fell more than expected in November due in part to rising short- and long-term inflation expectations. Lower-income and younger consumers had the largest declines in sentiment.

• Expected/prior month consumer sentiment index: 63.7/63.8
• Actual consumer sentiment index: 60.4

The Takeaway

• In a relatively quiet week, consumer credit and mortgage applications fared slightly better than expected.
• Despite the bounce back in consumer credit, consumer expectations remain suppressed amid elevated inflation expectations.
   

Financial Market Data

Equity

Index	Week-to-Date	Month-to-Date	Year-to-Date	12-Month
S&P 500	1.35%	5.34%	16.60%	12.43%
Nasdaq Composite	2.40%	7.41%	32.76%	22.91%
DJIA	0.72%	3.80%	5.29%	3.78%
MSCI EAFE	–0.90%	3.34%	6.17%	7.77%
MSCI Emerging Markets	0.02%	3.65%	1.44%	4.07%
Russell 2000	–3.11%	2.65%	–1.92%	–7.98%

Source: Bloomberg, as of November 10, 2023

 

U.S. large cap growth continued its rally, whereas small-caps and international markets were more subdued. Despite a weak 30-year auction and rising inflation expectations, mega-cap tech names held up well on the potential for their large cash piles and low interest-bearing debt to continue to act as margins of safety. Energy was the worst performing sector as West Texas Intermediate crude slowed on demand softening. Other struggling sectors were real estate, materials, and health care.

 

Fixed Income

Index	Month-to-Date	Year-to-Date	12-Month
U.S. Broad Market	2.00%	–0.82%	0.44%
U.S. Treasury	1.56%	–1.20%	–0.43%
U.S. Mortgages	2.48%	–1.91%	–0.88%
Municipal Bond	2.66%	0.38%	3.58%

Source: Bloomberg, as of November 10, 2023

 

Several factors were at play in fixed income markets. Yields clawed back some of their recent declines, with the 2-year Treasury yield climbing above 5 percent and the 30-year closing the week at 4.73 percent after hitting a low of 4.63 percent on Wednesday. Hawkish talk from the Federal Reserve (Fed), consumer inflation expectations, and a lack of demand in the 30-year Treasury auction were seen as key drivers.                                    

The Takeaway

• Investors tend to flock to mega-cap names for safety amid a potentially higher-for-longer rate environment.
• Treasuries continued to be volatile; inflation expectations have bounced off the June low.

 

Looking Ahead

This week will be full of important economic data releases focusing on inflation, retail sales, and housing.

• The economic data releases begin Tuesday with the Consumer Price Index for October. Consumer inflation is set to increase modestly in October, with year-over-year price growth expected to drop from 3.7 percent to 3.3 percent.
• On Wednesday, retail sales for October are expected. They are expected to fall modestly, in part due to a notable drop in gasoline prices. Core sales, which strip out the impact of volatile auto and gas sales, are set to increase modestly.
• Thursday and Friday’s data will focus on housing. On Thursday, the NAHB Housing Market Index for November will be released. Home builder confidence is expected to remain unchanged, which would leave the index in contractionary territory. On Friday, building permits and housing starts are expected. These two measures of new home construction are expected to drop modestly.

 

Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000^® Index measures the performance of the 2,000 smallest companies in the Russell 3000^® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.

Pacific Crest Wealth Planning is located at 11209 Brockway Rd, Suite C-203, Truckee CA  96161 and can be reached at 530-563-5250.  John C. Manocchio, CFP®, CRPC® (CA Insurance Lic. #0H73423) is a Registered Representative and an Investment Adviser Representative with/and offers securities and advisory services through Commonwealth Financial Network®, member FINRA/SIPC, a Registered Investment Adviser.  Fixed insurance products and services offered through CES Insurance Agency

Authored by the Investment Research team at Commonwealth Financial Network.

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