THIS WEEK'S UPDATE

Last Week On Wall Street

Believe it or not, after a rollercoaster ride of a week starting with a powerful two-day

stock rebound cemented a positive week for investors as a new trading month began.

The Dow Jones Industrial Average rose 1.99%, while the Standard & Poor’s 500 added

1.51%. The Nasdaq Composite index increased 0.73% for the week. The MSCI EAFE

index, which tracks developed overseas stock markets, gained 3.42%.
 

A Mixed Labor Picture

Employment-related reports offered conflicting signals on the state of the labor market.

In a sign of cooling, the number of open jobs in August fell 10%, while a subsequent

report from Automated Data Processing (ADP) showed continued labor market strength.

ADP reported private employers added a higher-than-anticipated 208,000 jobs in September,

and annual wages rose 7.8% from a year ago. Jobless claims rose to 219,000, up from the

previous week’s 190,000 and in line with 2019’s average. September’s employment report

showed that employers added 263,000 jobs–slightly lower than expectations. The combination

of new hiring and lower labor force participation led to a drop in the unemployment rate to 3.5%.
 

This Week: Key Economic Data

Wednesday: Producer Price Index (PPI). Federal Open Market Committee (FOMC) Meeting Minutes.

Thursday: Consumer Price Index (CPI). Jobless Claims. 

Friday: Retail Sales.
 

This Week: Notable Companies Reporting Earnings

Wednesday: Delta Air Lines, Inc. (DAL), PepsiCo, Inc. (PEP).

Thursday: Wells Fargo & Company (WFC), Walgreens Boots Alliance, Inc. (WBA), BlackRock, Inc.

(BLK).

Friday: JPMorgan Chase & Co. (JPM), UnitedHealth Group, Inc. (UNH), Citigroup, Inc. (C), Morgan

Stanley (MS), The PNC Financial Services Group, Inc. (PNC), U.S. Bancorp (USB).
 

Final Thoughts

Well, we are back in the mode of good news is bad news and bad news (other than inflation) is good

news for the market.  A slowing economy, falling home prices and higher unemployment would mean

the Fed is closer to reaching one of their goals.  The other goal of vanquishing inflation is still a work

in progress.  As I’ve discussed in many prior reports, the data that shows up in the consumer price index

(CPI) is slightly stale, meaning it takes a couple of months before declines happening in real time show up.  

The data isn’t bad, just not as fresh as we have grown accustomed to in the information age.  It’s kind of

like buying Twinkies at the day-old bread store.  They’re past the date, but still useful in expanding one’s

waistline.  
 

This week we will get updated CPI numbers which should show continued decline.  Commodity prices

continue to come down across the board.  Home prices have certainly curtailed their ascent and used car

prices are coming down.  Rent has been a little sticky as demand is strong and high tax and insurance rates

squeeze profitability for landlords.  Make no mistake though, Thursday this will be the news that moves

markets one way or another.
 

One area I want to mention is oil prices.  Don’t look now, but they are grinding their way higher again.  

Perhaps the rise is temporary, but it will have a negative impact on inflation and ultimately your wallet if

it continues.  The U.S. has been dumping oil from the Strategic Petroleum Reserve (SPR) at a very heavy

rate.  Undoubtedly this has helped to bring down oil prices in the short term.  However, as you can see below

Uncle Sam can’t continue this forever.  Maybe it’s ironic and then again maybe it isn’t that this will probably

end at or near the mid-term elections.  The thought that the powers that be might try to buy votes, while

nauseating, is imaginable and has indeed occurred.  So, there you have it.  Just as inflation numbers probably

begin to crack, government in its infinite wisdom will conceivably be fueling the fans of inflation once again

by having to buy oil to put back into the SPR.  


 
Finally, let’s face it this has been a difficult year to be an investor to say the very least.  Okay I will just say it,

this year has been an odorous abomination.  Everything other than energy companies are down.  And, until this

year, energy had been a terrible investment the past 5 years or so.  Most of us have portfolios of stocks and bonds

diversified across all sectors of the economy.  Unfortunately, that hasn’t helped a whole lot this year.  Over the

last 25 years I have learned every asset class has its day in the sun and its turn in the barrel regardless of what

it is.  Occasionally, those turns can happen at the same time making one feel like there’s nowhere to preserve

purchasing power or capital.  The chart below came from this past Saturday’s Wall Street Journal.  It shows how

many times returns on a diversified portfolio of 60% stocks and 40% bonds fell 20% in the first 3 quarters of each

year since 1926.  Well, it happened 3 times. What I gleaned from the chart though was this: the time period

following these downturns looked pretty decent.  

Final Thoughts cont... 

It may, and probably will, get a little worse before it gets better, but it will get better.  There have been

and will always be scary geopolitical events, boneheads in Washington, expansions, recessions, periods

of fear and greed.  The constant that always prevails is you.  The American way of life and striving for

more.  I go to the gym 6 days a week ( God took a day off, so will I) at 45 years old with all the aches

and pains that come along with it.  Something hurts, things torn, I go anyway.  The gym is closed for

some reason, I find another gym or another way.  My wife asks me why.  Why not go 3 or 4 times a

week?  Why not take a break?  While I haven’t arrived yet, there is something inside me that says I can

do just a little more and I can be just a little better.  We all have that inside of us. Whether it is work or

fitness or friends or family, we want.  I don’t mean in a greedy way.  I mean we have an aching desire

to do or create.  We travel, we celebrate milestones by consuming food and drink and sharing it with

friends.  We give and we enjoy the way it makes us feel.  It is in our DNA.  We all want to leave our

kids just a little better off than we were. So, just by living our lives we drive the economy forward.

You are a juggernaut and as you can see there is no temporary market decline or news du jour that’s

going to rewrite your DNA.  I’ve said this before, but it bears repeating.  The belief that our markets

fall apart and stay there is a bet against you, and I wouldn’t bet against you.
 

Stay tuned…