Stocks Stumble as Economic Data Remains Strong

October 29, 2018

Stocks Stumble as Economic Data Remains Strong Photo

Last week’s preliminary third quarter GDP exceeded expectations by posting a 3.5% gain due to solid consumption growth. The stronger-than-expected report continues the trend of positive U.S. economic indicators over the past few months. Despite the strong growth, stocks struggled last week, and the Dow Jones Industrial Average and the S&P 500 Indices now have negative returns for the year. The challenge for asset prices is a Federal Reserve that seems intent on normalizing interest rates. As a result of tightening monetary conditions, it is likely that asset prices will continue to remain under pressure. 

The U.S. will receive several new indicators of economic performance this week, culminating with the October employment report on Friday. Earlier in the week, I expect both consumer confidence and the Institute for Supply Management data to remain robust. Employment should also be strong after September’s Hurricane Florence impacted results. Job gains should bounce back to nearly 200,000 new jobs for the month. 

In this environment, good economic news is bad for asset prices.

Tags: GDP | Jobs report | Interest Rates | Federal Reserve

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