ND & S Weekly Commentary 10.30.18 HAPPY HALLOWEEN!

October 30, 2018

The numerous issues affecting the financial markets continues to grow. Last week all three major U.S. equity indexes were on track to end the month of October with their worst month in eight years, for the week the S&P 500, the DJIA and the NASDAQ were off 3.93%, 2.97% and 3.78% respectively. The worst performing sectors in the S&P were energy, industrials and financials. Worries about corporate revenues peaking and slowdowns in China and Europe spilling over into the U.S. sent markets lower. International markets also declined with the EAFE and emerging markets down 3.87% and 3.27%. Investors sought shelter in fixed income as U.S. Treasuries rallied and the rate on the 10 year fell from 3.20% to 3.08%. Overall earnings season has been decent but investors’ reactions have been critical.  Though a few names reporting , like Intel, exceeded expectations, all eyes were on revenue growth and guidance and many stocks frightened the market like Caterpillar,  Texas Instruments and 3M with less than expected third quarter results. 

On the positive side, 3rd quarter GDP in the U.S. was reported last week to have grown at 3.5% slightly above expectations of 3.2%. Despite this deceleration from 4.2% in GDP growth is still robust. Housing was a weak spot, but consumer and government spending increased at a strong pace. October has typically been a scary month with a seasonal tailwind heading into year-end. We expect market volatility to continue and feel more comfortable with more reasonable valuations, attractive dividend yields, and solid US economic growth.

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Investors should maintain their asset allocations consider opportunities to rebalance moving tactically towards defensive positioning.

 

“Double, double toil and trouble: Fire burn and caldron bubble.”   From Shakespeare’s Macbeth.