What We Are Watching This Week
- US Consumer Price Index
- US Producer Price Index
- US Retail Sales
Highlights From Last Week
- Fed Rate Announcement
- Factory Orders
- ISM Services
- Consumer Credit
Major stock benchmarks reached record highs as investors anticipated a Republican “red sweep” in the White House, Senate, and House would spur faster earnings growth, deregulation, and lower corporate taxes. The small-cap Russell 2000 Index led the gains, jumping 8.57% for the week but remained 2.41% below its November 2021 record. The S&P 500 also surged, with a 4.66% gain, marking its best week in nearly a year. The economic outlook of the Trump administration remains to be seen. Policies like immigration restrictions and tariffs could raise inflation, though the economic-financial impact depends on implementation. A stronger U.S. dollar might help offset inflation from tariffs, while expected tax cuts and deregulation could further support economic growth.
Toronto equities attempted to mirror the upward momentum of U.S. markets during a volatile election week but gave up some gains by Friday. The TSX closed lower 86.53 points at 24,759.40 on Friday, though it still gained 504 points, or 2.1%, for the week. The Canadian dollar edged down by 0.02 cents to 71.87 cents U.S. On the economic front, Statistics Canada reported modest job growth of 15,000, with the unemployment rate at 6.5%. Investors closely watch these figures for insights into the Bank of Canada’s upcoming interest rate decision. After a 50-basis-point rate cut last month, traders currently anticipate a 64% chance of another reduction in December.
The STOXX Europe 600 Index fell 0.84%, with European markets impacted by concerns over U.S. President-elect Donald Trump’s trade policies and their potential effect on growth and central bank decisions. Major indexes declined, with Italy’s FTSE MIB down 2.48%, France’s CAC 40 dropping 0.95%, Germany’s DAX decreasing 0.21%, and the U.K.’s FTSE 100 slipping 1.28%. In central bank news, the Bank of England (BoE) cut its key interest rate by 0.25% to 4.75% amid slowing inflation, with BoE Governor Andrew Bailey signaling further gradual rate reductions if economic conditions align with expectations. While Sweden’s Riksbank also cut rates, Norway’s Norges Bank opted to keep its rates unchanged.
In September, new orders for manufactured goods decreased by $2.8 billion, or 0.5%, bringing the total to $584.2 billion, as the U.S. Census Bureau reported. This decline marks the fourth decrease in the past five months, following a 0.8% drop in August. Shipments also fell for the second consecutive month, down by $2.2 billion, or 0.4%, to $586.9 billion after a 0.7% decrease in August. Unfilled orders, which have risen in 49 of the last 50 months, grew by $2.1 billion, or 0.2%, to reach $1,391.0 billion, following a similar 0.2% increase in August. The ratio of unfilled orders to shipments rose to 6.94 from 6.86 in August. Inventories, which had previously increased for two months, declined by $1.9 billion, or 0.2%, to $858.1 billion, following a 0.1% gain in August. The inventories-to-shipments ratio remained steady at 1.46.1
In October, the U.S. services sector continued its steady expansion, marking its fourth straight month of growth and reaching the highest Services PMI reading since July 2022, at 56 percent. This reflects a long-standing trend of sector growth, with expansion recorded in 50 of the last 53 months. Steve Miller, Chair of the ISM Services Business Survey Committee, highlighted that this rise from September’s 54.9 percent was primarily driven by a boost in employment and supplier delivery performance, both of which saw substantial increases over the previous month. Business activity and new orders continued to expand, though they eased slightly from September’s highs. Meanwhile, the Supplier Deliveries Index indicated slower delivery times, often a sign of heightened demand, marking a second consecutive month in this territory. The Prices Index, while still indicating rising costs, slightly moderated from September, reflecting a 1.3 percentage point drop. Other metrics showed mixed results. The Inventories Index remained in expansion for a third month, though slightly down from September, while the Inventory Sentiment Index, indicating inventory levels relative to demand, recorded its lowest reading in over a year. Backlogged orders continued to decline, reflecting a slight slowdown in new work volume. Despite these mixed signals, 14 industries reported growth in October, up from 12 in September, with political uncertainties, hurricanes, and port labor disruptions cited as challenges. Nonetheless, impacts from a recent longshoremen’s strike were milder than anticipated, thanks to its brief duration. Overall, the services sector displayed resilience, maintaining above-average performance across key indexes in 2024.2
On Thursday, the U.S. Labor Department reported that, for the week ending November 2, seasonally adjusted initial unemployment claims reached 221,000, marking an increase of 3,000 from the prior week’s revised figure. This previous week’s figure was revised up by 2,000, from 216,000 to 218,000. The four-week moving average dropped to 227,250, down by 9,750 from the prior week’s revised average. That prior average was revised up by 500, changing from 236,500 to 237,000. In the week ending October 19, the total number of continued claims for benefits across all programs was 1,642,554, reflecting a decrease of 9,028 from the previous week. By comparison, in the same week in 2023, there were 1,599,623 continued claims across all programs.3
Also, on Thursday, the Federal Reserve lowered its key interest rates by 25 basis points to a target range of 4.5–4.75 percent, aiming to support steady economic growth, maximum employment, and 2 percent inflation. The Fed noted that while economic growth remains stable, labor market conditions have softened slightly, and inflation is nearing the 2 percent target, though still slightly above it. The Fed will continue reducing its holdings in various securities and closely monitor economic data to guide future rate adjustments. The Committee remains prepared to adjust policy if new risks threaten its economic objectives, considering labor market trends, inflation pressures, and financial developments.4
The latest Federal Reserve G.19 report on consumer credit showed that overall consumer credit, including revolving credit (like credit cards) and non-revolving credit (such as fixed-rate loans like auto loans), grew at an annualized rate of 1.4% in September. This marks a slowdown from the 1.8% pace in August and is well below July’s 6.5% increase. Total borrowings across all lending categories reached $6 billion in September, significantly lower than the estimated $14.5 billion increase projected by several financial sources. In August, borrowings had been $7.6 billion. Revolving debt, largely tied to credit cards and lines of credit like HELOCs, allows borrowers access to a set credit limit with required minimum payments. According to the Fed’s June estimates, 92% of revolving credit is linked to credit cards, making it a reliable indicator of credit card debt levels for U.S. households. Non-revolving debt includes fixed loans like mortgages, auto loans, and student loans, repaid in regular installments. Looking at quarterly data, revolving credit grew by 2.8% in the third quarter, slightly higher than the 2.6% growth in the second quarter. However, both quarters reflect a slowdown compared to the first quarter’s 6.3% growth rate in revolving debt.5
Joanne Hsu, Director of Surveys of Consumers at the University of Michigan, reported that consumer sentiment rose for the fourth month in a row, increasing by 3.5% to its highest level in six months. While current conditions saw little change, the expectations index showed strong growth across all areas, reaching its highest level since July 2021. Expectations for personal finances rose by 6%, driven partly by improving income prospects, and short-term business conditions surged by 9% in November. Long-term business conditions also reached their most favorable level in nearly four years. Overall, sentiment is now nearly 50% higher than its June 2022 low, though it remains below pre-pandemic levels. Note that interviews for this report concluded on Monday, so reactions to the election results are not reflected. Year-ahead inflation expectations dropped slightly, from 2.7% last month to 2.6% this month, the lowest since December 2020 and within the pre-pandemic range of 2.3-3.0%. Long-term inflation expectations increased from 3.0% to 3.1%, remaining modestly above the pre-pandemic range.6
| WK | Year to Date | |
| Dow | 4.61% | 16.71% |
| S&P500 | 4.66% | 25.70% |
| Nasdaq | 5.15% | 28.48% |
| S&P400 Mid-cap | 6.27% | 18.54% |
| Russell | 8.50% | 18.38% |
| TSX | 2.1% | 18.10% |
| Oil | 1.30% | -1.70% |
- https://www.census.gov/manufacturing/m3/prel/pdf/s-i-o.pdf?utm_source=chipkappwriter_AftNews_DarrenTsai&utm_medium=oth_Intextlink&utm_campaign=%E7%B1%8C%E7%A2%BCK%E5%B0%8F%E7%B5%84_%E9%A1%8C%E6%9D%90_%E6%99%9A%E5%A0%B1
- https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/services/october/
- https://www.dol.gov/ui/data.pdf
- https://www.federalreserve.gov/newsevents/pressreleases/monetary20241107a.htm
- https://www.federalreserve.gov/releases/g19/current/
- http://www.sca.isr.umich.edu/
Important Information:
Warren Gerow is an independent investment wealth consultant to Sightline Wealth Management.
Sightline Wealth Management LP (“Sightline”) is an investment dealer and is a member of the Canadian Industry Regulation Organization (CIRO) and the Canadian Investor Protection Fund (CIPF).
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