WEEKLY MARKET SUMMARY
Global Equities: US investors continued the rotation out of technology stocks during the week, with heavy selling late in the week that drove the Nasdaq Composite -0.5% lower. The S&P 500 ended the week relatively flat at 0.1%, while the Dow Jones Industrial Average gained 0.4% as investors favored value stocks. US small cap stocks also struggled as investors repriced the odds of a Fed rate cut in December, ending the week -1.7% lower. Developed market stocks gained 1.0% during the week, while emerging market stocks ended positive at 0.8%.
Fixed Income: The 10-Year Treasury yield rose late in the week, reaching 4.15% on Friday as comments from numerous Fed members led to decreased confidence in a December rate cut. Despite the government reopening, economic data remains delayed, and some survey-based measures are unable to be calculated retroactively, which will lead to gaps in the data. The Fed does expect to get one additional inflation reading prior to the December meeting, but estimates of a rate cut have fallen dramatically and are now hovering around a 50% likelihood.
Commodities: Gold prices surged to near $4,250/oz late in the week as investors took profits from tech and parked in the safe-haven asset. Prices fell sharply on Friday, however, and ended the week around $4,095/oz. West Texas Intermediate Crude prices ended the week relatively unchanged at just under $60/barrel despite the escalation of US military presence around Venezuela.
WEEKLY ECONOMIC SUMMARY
Government Reopened: Following the capitulation of a handful of Democrats, a bill to reopen the government made its way to President Trump’s desk on Wednesday, ending the 43-day shutdown. The Congressional Budget Office estimates the impact of the shutdown at $11 billion of lost economic activity and predicts fourth quarter GDP will be reduced by approximately 1.5%. Official government data has yet to resume, but the September jobs report has been scheduled for release on Thursday, November 20th.
FHFA Evaluating Portable Mortgages: A week after the proposal of a 50-year mortgage by President Trump was broadly criticized by economists and financial experts, Federal Housing Finance Agency (FHFA) Director Bill Pulte tried a different approach by floating the idea of “portable” mortgages. Portable mortgages would allow homeowners to transfer their current mortgage rate to a new one, addressing the “lock-in effect” in the housing market that has kept many potential sellers on the sidelines. While the idea is intriguing and could alleviate the lack of supply that has pushed the average age of a homebuyer up to over 40, there are logistical and legal obstacles. An act of Congress may be required, and the impact on the mortgage-backed securities market is uncertain. Nevertheless, the idea was much more warmly received than the idea of a half-century long mortgage and could provide some housing market relief.
Earnings Season Update: It was a relatively quiet week for earnings with the market anxiously awaiting Nvidia (NVDA) on November 19th, but there were some significant names posting Q3 results. Disney (DIS) reported a strong quarter from its parks and streaming segments, but weakness in legacy TV and movie businesses led investors to sell shares. Cisco (CSCO) rode the artificial intelligence wave to an earnings beat, gaining over 7% after reporting. A slowdown in Chinese chip demand triggered a cautionary outlook from semiconductor supplier Applied Materials (AMAT), souring results from an otherwise strong quarter. While tariffs continue to dominate the news headlines, they have become a less prevalent topic on earnings calls this quarter, with FactSet reporting a 33% decline in mentions of tariffs since the second quarter.
CHART OF THE WEEK
The Chart of the Week is a year-to-date look at the Nasdaq Composite, the tech-heavy benchmark that has come to dominate large cap indices. The Nasdaq has enjoyed a remarkably smooth upward trend ever since recovering from the April “Liberation Day” tariff announcement, maintaining positive price momentum above the 50-day trendline (blue line). This week’s volatility marks the first major test of the 50-day for the Nasdaq, which rallied on Friday to finish just barely above the trendline. If the Nasdaq breaches its 50-day average, there is intermediate support at 22,250, where selling pressure was exhausted and reversed, and again at 21,500 where the index consolidated during August-September.
Commentary from VestGen Investment Management.