Monthly Market Insights | October 2017

U.S. Markets

Stock prices set historical highs during the month, overcoming steady geopolitical tensions and domestic political issues.

The Dow Jones Industrial Average gained 2.08 percent while the Standard & Poor’s 500 Index picked up 1.93 percent. The NASDAQ Composite, which has led for most of the year, rose 1.05 percent.¹

The month opened on a volatile note, as stock prices stumbled over worries about Hurricane Irma, a festering diplomatic situation with North Korea, and comments by the Minneapolis Fed’s president suggesting that rate increases were hurting the economy.

However, stocks rebounded slightly following a deal to raise the debt ceiling, removing the risk of a government shutdown in the immediate term.

New Highs

As the month progressed, markets began heading higher, setting multiple historical highs along the way. While stock prices eventually pulled back a bit, it was notable that the combination of a renewed effort to replace the Affordable Care Act, fresh threats from North Korea, and strong words by President Trump at the UN seemed to have little impact on investors.

Tax Reform

Stocks regained a firmer footing as the month drew to a close, and inching even higher on the release of the long-awaited tax reform proposal. On the final day of the month the S&P 500 Index and NASDAQ Composite set yet another record, cementing a positive month for stocks.

Despite North Korea’s launching of a missile over northern Japan and the tragedy of Hurricane Harvey, investors focussed on positive economic growth prospects, sending stocks higher and into positive territory to close out the month.

Sector Scorecard

The majority of industry sectors ended the month higher, led by a robust rally in Energy (+9.20 percent), and strong gains in Financials (+4.42 percent), Industrials (+4.94 percent), and Materials (+4.20 percent). Other sectors with gains included Consumer Discretionary (+1.20 percent), Health Care (+2.37 percent), and Technology (+1.54 percent). Losses were seen in Utilities (-3.89 percent), Real Estate (-1.26 percent) and Consumer Staples (-0.90 percent).²

What Investors May Be Talking About in October

One of the primary catalysts to the market’s post-Presidential election rally has been the optimism generated by the prospect of tax reform.

With the announcement of a tax-reform proposal in the final week of September, investors’ hopes for an overhaul have risen. Bloomberg News announced that the President is planning to travel to 13 cities over 7 weeks, hoping to build support for his tax reform vision.³

With a deeply partisan Congress, finding common ground may prove difficult, especially in light of the narrow window for passing the legislation before Congress’ Christmas break.

Given the importance investors have placed on tax reform, they may be keenly attuned to any signals of cooperation or division among Republicans and Democrats, and between The White House and Congress, in the debate that unfolds during October and November.

The political posturing that precedes any important legislative initiative may cause optimism to wax and wane through the next couple of months, and stock prices could respond accordingly. However, the final impact of the bill on the stock market remains to be seen.

World Markets

European stocks powered international markets higher, as the MSCI-EAFE Index moved 1.69 percent higher in September. ⁴

Economic data reflecting continued gains in growth and a declining euro drove most European markets higher, with Germany and France leading the charge. While the United Kingdom slipped a bit, Italy, the Netherlands and Switzerland all posted solid gains.⁵

Markets in the Pacific Rim were more mixed, with price advances in Japan and losses in Australia and Hong Kong.⁶

Indicators

Gross Domestic Product: Economic growth in the second quarter was revised higher to a 3.1 percent annualized rate, representing the highest growth rate in two years.⁷

Employment: The unemployment rate ticked up a tenth of a percent to 4.4 percent as job growth slowed in August, with employers adding just 156,000 new jobs.⁸

Retail Sales: U.S. retailers suffered a 0.2 percent decline in August sales, while the initial estimate of a 0.6 percent lift in July sales was halved to 0.3 percent.⁹

Industrial Production: Hurricane Harvey wreaked havoc on industrial production in August, shutting down a range of activities from refineries to shipping. The storm accounted for much of this area’s 0.9 percent decline -- the largest single-month drop since May, 2009.¹⁰

Housing: Housing starts declined 0.8 percent as a 6.5 percent drop in multi-unit starts outweighed a jump of 1.6 percent in single family housing starts.¹¹

Purchases of new homes slipped 3.4 percent, declining for the second straight month and touching levels not seen since December of 2016.¹²

Existing homes sales weakened 1.7 percent in August due to an inventory shortage, and a sharp sales drop-off in the Houston area in the wake of Hurricane Harvey.¹³

Consumer Price Index: Inflation picked up in August, rising 0.4 percent. The monthly jump represented the steepest increase since January. For the last 12 months, inflation has clocked in at 1.9 percent.¹⁴

Durable Goods Orders: Boosted by orders of civilian aircraft, durable goods orders rose 1.7 percent. Unlike industrial production, the Commerce Department said that it could not isolate the effect of Hurricane Harvey on durable goods orders.¹⁵

The Fed

The Fed elected to keep rates steady at its two-day meeting ending on September 20. It also announced that the unwinding of its $4.5 trillion portfolio is scheduled to commence in October, and indicated that markets should expect a rate hike in December.¹⁶

In a news conference following the meeting, Fed Chair Janet Yellen said that she expects the Fed’s balance sheet will decline “gradually and predictably.”

By the Numbers: Estate Awareness

 

National Estate Planning Awareness Week: October 16-22, 2017¹⁷

 

Largest estate in the U.S.: The Biltmore House in Asheville, NC (built in 1895)¹⁸

Original owner: George W. Vanderbilt¹⁹

 

Square feet in The Biltmore House: 135,280¹⁸

Number of UPS shipping trailers you could park inside The Biltmore House: 59²⁰

Estimated price tag on the house: $101 million¹⁸

 

Estate tax exemption amount in 2017: $5.49 million²¹

Exemption amount in 2001: $650,000²¹

 

Top estate tax rate in 2017: 40%²¹

Average effective estate tax rate: 17%²¹

 

Share of Americans who have an up-to-date estate strategy: about 4 in 10²²

Percent of individuals age 72 and older who have a will or living trust: 81%²³

 

Name of Bill and Melinda Gates’ commitment to donate at least half of their wealth to philanthropic causes: The Giving Pledge²⁴

Minimum net worth to join The Giving Pledge: $1 billion²⁴

Number of people who have joined: 168²⁴

 

Amount given to charity by Americans in 2016: $390 billion²⁵

Amount given in bequests: $30.36 billion²⁵

 

Second most generous country in the world: U.S.²⁶

Most generous country in the world: Myanmar (Charities Aid Foundation, 2016 World Giving Index)²⁶

 

Percent of those in Myanmar who gave money to charity in the past year: 91%²⁶

Percent of Americans who did: 63%²⁶

 

Fee granted by the New York Attorney General to infamous billionaire Leona Helmsley’s executors for the management of her estate: $628/hour²⁷

Fee they originally requested: $6,000/hour²⁷

 

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.

Investing involves risks, and investment decisions should be based on your own goals, time horizon and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

Any companies mentioned are for illustrative purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance.

The forecasts or forward-looking statements are based on assumptions, may not materialize and are subject to revision without notice.

The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.

International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

Please consult your financial advisor for additional information.

Copyright 2017 FMG Suite.

1. The Wall Street Journal, September 30, 2017
2. Interactive Data Managed Solutions, September 30, 2017
3. Bloomberg, September 12, 2017
4. MSCI.com, September 30, 2017
5. MSCI.com, September 30, 2017
6. MSCI.com, September 30, 2017
7. The Wall Street Journal, September 28, 2017
8. The Wall Street Journal, September 1, 2017
9. The Wall Street Journal, September 15, 2017
10. The Wall Street Journal, September 15, 2017
11. The Wall Street Journal, September 19, 2017
12. The Wall Street Journal, September 26, 2017
13. The Wall Street Journal, September 20, 2017
14. The Wall Street Journal, September 14, 2017
15. The Wall Street Journal, September 27, 2017
16. The Wall Street Journal, September 20, 2017
17. Naepc.org, 2017
18. USA Today, February 10, 2017
19. Biltmore.com, 2017
20. UPSFreight.com, 2017
21. Center on Budget and Policy Priorities, May 5, 2017
22. Naepc.org, 2016
23. Caring.com 2017
24. CNBC.com, May 31, 2017
25. Giving USA 2017
26. Charities Aid Foundation, 2016 World Giving Index
27. Fortune, January 25, 2016