Weekly Insights - Nov 6, 2023

Weekly Economic Recap

Fed Keeps Interest Rates Unchanged; Job Gains Slow

Consumer confidence as tracked by the Conference Board fell to a five-month low in October. Consumer views on current conditions fell to the lowest level since Nov. 2022, while year-ahead inflation expectations increased to the highest level since May 2023.

The S&P CoreLogic Case-Shiller Home Price Index increased more than expected in August (1.0% vs. 0.8% est.). Price gains in Miami, Las Vegas and Detroit overshadowed weakness in San Francisco, Dallas and Cleveland.

Manufacturing as measured by the ISM Manufacturing Index remained in contraction territory (level below 50) for the 12th straight month. New orders contracted at the fastest pace since June 2022. The employment component slipped into contraction territory, falling the most in 13 months.

As expected, the Federal Reserve held interest rates steady at 5.25% - 5.50% last week. The Federal Reserve Chairman indicated the committee will "continue to assess additional information and its implications for monetary policy.” However, “the process of getting inflation sustainably down to 2% has a long way to go," leaving the possibility of additional rate hikes on the table.

Job openings as measured by the JOLTS report rose more than estimated in September (9.55 million vs. 9.50 million est.), putting the ratio of openings to available workers at 1.5-to-1. The quits rate was unchanged for the third straight month at 2.3%.

 The U.S. economy added 150K jobs in October which was lower than the 180K estimate. The unemployment rate increased to 3.9%, the highest since January 2022 while the labor force participation rate decreased to 62.7%.  

Weekly Market Recap 

Global Equities Surge Amid Expectations Fed is Done Raising Rates

Equities: The MSCI AC World Index posted its best weekly performance since November 2022 after the Federal Reserve held interest rates steady and the pace of job gains eased in the U.S. All major U.S. markets posted their best weekly performances in roughly a year as investors grew hopeful the Fed’s rate hiking cycle is over, but growth outperformed value on a relative basis. The Russell 2000 was the best performing index, posting its best one week rally since February 2021.  

Fixed Income: The Bloomberg Barclays Aggregate Index posted its best weekly performance since November 2022 as Treasury yields fell sharply after the Fed kept interest rates unchanged. Floating rate instruments were the only sector of fixed income to post a loss for the week. Outperformance came from the riskier areas of credit, including EM debt (USD) and high yield corporates.

Commodities/FX: The Bloomberg Commodity Index fell for the second straight week led by losses in crude oil. Crude fell as investors seem to be shaking off supply concerns despite the ongoing tension in the Middle East. Gold prices fell and the U.S. Dollar weakened amid expectations the Fed is done raising rates.