- New LPL Market Signals Podcast. In the latest episode of the Market Signals Podcast, listen to Equity Strategist & Portfolio Manager Jeff Buchbinder and Chief Investment Strategist John Lynch discuss Fed Chair Jerome Powell’s speech at the annual meeting of the National Association for Business Economics, as well as some of the factors pointing to continued strength in the economy. Market Signals by LPL Financial is now available on iTunes, Google Play and Spotify. Please join our discussion on social via #LPLMarketSignals.
- 10-year Treasury yield breaches 3.25%. After returning from the Columbus Day holiday, bond traders bid up the yield on the benchmark 10-year note to 3.254% at one point this morning, a level not seen since 2011. We expect yields to continue higher from here but hold to our view that increases will be gradual, and the 10-year will likely end 2018 near current levels. Though higher interest rates tend to weigh on stocks, on the positive side, higher yields benefit savers, who have had significant difficulty finding places to park cash. Also, stocks haven’t historically been negatively impacted by higher rates until the 10-year reaches ~5%. While we could see a ~4% threshold given the low-rate environment we’ve sustained, the drivers of higher rates are important. Economic growth remains solid and inflation remains contained, suggesting the drag on stocks may be more likely at the 4%+ level vs. ~3%. On the LPL Research blog, due out later today, we’ll examine the latest increase in rates in more detail and explain why we think longer-term yields may have hit a ceiling.
- Small business optimism dipped but remains high.Though it ticked lower from August’s record high, at 107.9, the NFIB Small Business Index came in at its third-highest level in the survey’s 45-year history and is the longest streak of small business optimism in history, helped by the recent tax cuts and fiscal policy changes. Among the highlights, a record percentage of small business owners reported raising compensation, and data showed a pickup in investment spending and expectations for higher sales volumes.
Monitoring the Week Ahead
- CPI Report (Sep)
- Initial Jobless Claims (Oct. 6)
- China Trade Balance (Sep)
- China Imports/Exports Data (Sep)
- Import Price Index (MoM, Sep)
- Export Price Index (MoM, Sep)
- Eurozone Industrial Production (Aug)
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