Market Update – Early October Cross-Currents

Early October has seen volatility pick back up in the financial markets.  Ironically, it is some recent strong economic reports that are the primary cause.

The September 2018 jobs reports showed unemployment falling to 3.7%, a level not seen since December 1969.  The Institute of Supply Management non-manufacturing index hit a 20 year high.  Inflation remains low by historical standards.  This news that the US economy is firing on almost all cylinders, coupled with the Federal Reserve latest 0.25% increase in short-term interest rates, led to a swift uptick in longer-term interest rates as reflected by the US 10 year Treasury, which jumped from 3.06% on 10/2/18 to 3.23% as of 2:30pm on 10/8/18.

The speed of that move over the last 3 days has created a knock-on effect in equities.  The S&P 500 had just seen a new all-time high reached on 10/3/18 but is now on pace to decline for a 3rd straight day – something it hasn’t done since March 2018.  However, from the all-time high to the intra-day low (11:46am today) the S&P has only declined 2.6%.

While fast and sharp moves like the last 3 days can be concerning, I do not believe the underlying trends of positive economic growth and increasing corporate profits have changed.

We want you to know we are monitoring the situation closely and will take appropriate actions as necessary.  Please call us if you have any questions or concerns.

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