11/1/19 – Stocks Higher in Busy Week

Markets posted their best week since early September in a week with a lot of news and several conflicting economic reports. Earlier in the week, the Fed lowered interest rates another 0.25%. The equity market has wanted lower rates and the Fed delivered. I don’t personally see interest rates being an impediment to business investment in the current environment, so lowering the rate to me hurts savers and won’t spark additional investment. It also reduces the Fed’s ability to use interest rates as a stimulus in the next recession, whenever that occurs. For the week, the Dow increased 1.4% while the S&P 500 gained 1.5%.

The October jobs report came out this morning and reported a better-than-expected 128k net new jobs created last month. This is good news after two very lackluster reports in August and September. However 128k is just an okay number and does support the recent concern that the economy is slowing from the ~3% growth we saw in 2017-18. It is important to note that jobs in the auto sector declined 42k in October because of the GM strike and those workers are now back to work. Even still, we’re on pace for the lowest level of new job creation since 2010. Part of the slowdown in job creation is simply because the unemployment rate is so low and the number of available workers to take new jobs is very small. Part of it though does seem to be general slowing in the economy. Read More

This week gave another warning of the risks of buying young, volatile companies. Beyond Meat, the recently-new public company that makes vegan ‘meat’ products, dropped ~20% on earnings and is now down 65% from its all-time reached three months ago. The company went public in late April and closed the first day of trading at $67/share. Over the next few months, it shot up $240 before crashing back to $82/share as of today. For investors who bought on the opening day, they’ve done okay, but many investors bought the hype over $200/share and are sitting on large losses. Like we saw with Tilray and other marijuana stocks last year, these things are nearly impossible to correctly time and generally lead retail investors to lose money from buying it after the hype then riding it down.

Oil decreased 0.9% this week to close at $56.14/barrel. The yield on the 10-yr Treasury moved lower, closing at 1.72%, from 1.80% last week. The average rate on a 30-yr fixed rate mortgage moved higher to 3.78% from 3.75% last week.

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