The Week in Charts
Market Recap
Last week we saw the U.S. stock market achieve notable gains, with both the S&P 500 and Dow Jones Industrial Average (DJIA) closing at record highs. These large-cap indices each added 1.4% for the week, while the tech-heavy NASDAQ slightly outperformed with a 1.5% increase.
However, smaller-cap stocks, represented by the Russell 2000, lagged behind their larger counterparts due to ongoing pressure from high borrowing costs, despite posting a respectable 1.3% gain for the week.
This positive market performance came in the face of mixed economic data.
Source: JP Morgan
Inflation and Consumer Prices
The Consumer Price Index (CPI) showed higher-than-anticipated inflation, with a 0.2% month-over-month increase versus the expected 0.1%. This data raised concerns about persistent inflationary pressures.
Adding to the economic uncertainty, unemployment claims rose to their highest level in over a year, suggesting potential weakness in the labor market that could impact consumer spending and broader economic growth.
However, these concerns were somewhat alleviated by Friday’s Producer Price Index (PPI) report, which showed no change for final demand last month, falling below the expected 0.1% increase. This data helped to temper inflation worries and contributed to the week’s overall positive market sentiment.
Small Business Sentiment
The National Federation of Independent Business (NFIB) Small Business Optimism Index showed a slight improvement, rising 0.3 points in September to 91.5.
However, this marks the 33rd consecutive month below the 50-year average of 98. Notably, the Uncertainty Index surged 11 points to 103, reaching its highest recorded level.
Small business owners reported decreased capital outlays and inventory gains, with 51% of owners reporting capital expenditures in the last six months (down five points from August) and a net negative 13% reporting inventory gains (the lowest since June 2020).
NFIB Chief Economist Bill Dunkelberg commented on the findings, stating, “Small business owners are experiencing unprecedented levels of uncertainty. This uncertainty is making owners hesitant to invest in capital spending and inventory, especially as inflation and financing costs continue to pressure their bottom lines.
While the upcoming holiday sales season offers some hope, many Main Street owners are questioning whether future business conditions will improve.”
What’s Going On In Your Portfolio?
As I mentioned in this week’s video update, investors are starting to look past the election and towards a year-end rally.
Client accounts are currently allocated towards growth. However, volatility stops are still in place in case of a spike in volatility before the US Presidential election.
Bond portfolios remain fully invested in High-Yield bonds, indicating that the market’s longer-term trend is still intact.
Upcoming Economic Data to Keep an Eye On
Source: Trading Economics
