MCF Weekly Capital Market Review - November 11th, 2019

After a strong start, Q3 earnings season continues to be mostly positive with ~68% of companies beating earnings estimates.[1] All broad market equity indices were positive last week with emerging markets leading the way; bonds were mostly down. Despite worries of a bear market from the Q4 drawdown last year, the S&P 500 is up over 25% year to date and again reached new all-time highs last week. Both the Dow Jones Industrial Average and NASDAQ also set new all-time highs.

US Treasury yields have experienced an eventful 2019 so far. For a yield curve that has spent much of the year with shorter maturity yields higher than many of the intermediate maturity yields, recent Fed rate cuts appear to be having the intended affect. Shorter maturity yields have declined while longer maturity yields have jumped higher. The 10-year US Treasury yield jumped from 1.73% to 1.94% in the past week alone.[2] This tilting of the yield curve moves it more in line with what practitioners call a “normal” market. Most market participants are now betting on no further Fed action through 2020.[3]

What is not normal is the lack of geo-political events creating market uncertainty. Phase One of the US-China trade deal is supposed to be signed this month although few details have been released from either side. The trade deal between the US, Mexico, and Canada is still waiting for US ratification. Brexit is paused until the December 12 election brings a new wave of members to Parliament. Any of these outstanding items could lead to a positive or negative surprise.

September factory orders fell with weakness in durable goods orders. The JOLTS report indicates a slowdown in job openings and job quits, but a pickup in job hiring. The ISM non-manufacturing index showed unexpected strength for October. International trade shows contraction for both imports and exports,[4] which should come as no surprise given this year’s trade tensions and tariffs.

This week will feature a speech from Powell, and reports on CPI, PPI, retail sales, and industrial production.

We’d also like to take this Veterans day as an opportunity thank all veterans that have served to protect the USA.

INDEX RETURNS

^[1]^{https://www.streetinsider.com/ec_beat.php}

^{[2] https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/TextView.aspx?data=yield}

^{[3] https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html}

^{[4] https://us.econoday.com/byweek.asp?cust=us}

^{IMPORTANT DISCLOSURE INFORMATION}

^{Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by MCF), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from MCF. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. MCF is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the MCF’s current written disclosure statement discussing our advisory services and fees is available upon request. If you are an MCF client, please remember to contact MCF, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. Please click here to review our full disclosure.}

^{REFLECTED INDICES}

^{S&P Composite 1500® Index combines three leading indices, the S&P 500®, the S&P MidCap 400®, and the S&P SmallCap 600® to cover approximately 90% of the US market capitalization. It is designed for investors seeking to replicate the performance of the US equity market or benchmark against a representative universe of tradable stocks. Investors cannot invest in an index.}

^{MSCI ACWI ex USA Index captures large and mid cap representation across 22 of 23 Developed Markets (DM) countries (excluding the US) and 23 Emerging Markets (EM) countries. With 1,859 constituents, the index covers approximately 85% of the global equity opportunity set outside the US. Investors cannot invest in an index.}

^{Bloomberg Barclays Global Aggregate ex-USD Index is a measure of global investment grade debt from 24 local currency markets. This multi- currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers. Investors cannot invest in an index.}

^{Bloomberg Barclays High Yield Corporate Bond Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on Barclays EM country definition, are excluded. Investors cannot invest in an index.}

^{S&P GSCI is a composite index of commodity sector returns which represents a broadly diversified, unleveraged, long-only position in commodity futures. The S&P GSCI is intended to provide exposure to broad-based commodities. Investors cannot invest in an index.}

^{Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed- rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass- through), ABS and CMBS (agency and non-agency). Provided the necessary inclusion rules are met, US Aggregate eligible securities also contribute to the multi-currency Global Aggregate Index and the US universal Index, which includes high yield and emerging markets debt. The US Aggregate Index was created in 1986 with history backfilled to January 1, 1976. Investors cannot invest in an index.}

^{Bloomberg Barclays 1-10 Year US Government Inflation-Linked Bond Index tracks the 1-10-year inflation protected sector of the United States Treasury market. Investors cannot invest in an index.}

^{Bloomberg Barclays US Treasury 1-3 Year Index measures the performance of public obligations of the US Treasury with maturities of 1-3 years, including securities roll up to the US Aggregate, US Universal, and Global Aggregate Indices. Investors cannot invest in an index.}

^{Bloomberg Barclays US Treasury Bellwethers 3 Month Index is an unmanaged index representing the on-the-run (most recently auctioned) US Treasury bill with 3 months’ maturity. Investors cannot invest in an index.}