Weekly Economic & Market Update 10/19/2015

Week in Review

Global markets moved higher this past week on continued confidence that the US will not raise interest rates in the near term. With consumer prices remaining under pressure and sagging manufacturing data from the US and abroad, it looks more likely that a rate hike is moving out on the US Federal Reserve’s timeline. Giving support to this notion were comments from the Federal Reserve Bank of New York’s President, William Dudley. His comments this past week pointed to a weaker economy, putting a rate rise in question.

To coincide with the many analysts who are beginning to talk about the onset of a global recession, this past week the world’s largest retailer, Walmart, experienced their largest drop in stock price in 27 years. The driver of the stock drop was an extremely disappointing earnings projection. Notes from the Walmart release are as follows:

• Strong US dollar to hurt full-year revenue by $15 billion
• Expects fiscal 2017 earnings to fall by 6-12%
• Company to implement a $20 billion stock buy-back program

Logic would follow that since the US economy is consumption-driven and Walmart is the largest retailer, then Walmart is a company worth watching in order to obtain a read on the US consumer and US economy.

Overseas, the story of a slowing global economy was reinforced by India which reported a year-over-year decline of 25% in exports. Again, if we follow a logical path and if US demand for goods is falling then a drop in exports would be seen in places that export to the US such as China and India. Further, such decline would be seen by companies that sell goods in the US.

At Lighthouse Wealth Management, we are not putting a flag in the ground and saying we are in a recession. Frankly, recessions are only confirmed with hindsight. Rather, we are taking notice of the economic and corporate data that are pointing to slower global economic activity. The recent past tells us that slowing economic activity is likely to be met with economic stimulus, which the markets have enjoyed. So, we may be back to the saying that ‘bad news is good news,’ to some extent.

Getting Technical with Market Charts

In this section we present charts of the S&P 500 Stock Index and the US Bond Market Index relative to their 50 day (blue line) and 200 day (red line) moving averages. In addition, we have added the blue shaded area which represents the recent trading channel. The 50 and 200 day moving averages are widely followed market trend indicators that provide a general picture of the health of the broad indexes.

Chart 1 – S&P 500

S&P 10.19.15

Chart 2 – Aggregate Bonds

AKG 10.19.15

Securities are offered through First Allied Securities, Inc. (FASI), a registered Broker Dealer, Member FINRA/SIPC. Advisory Services offered through Lighthouse Financial Advisors, Inc., a Registered Investment Advisor dba Lighthouse Wealth Management (LWM). Lighthouse Financial Advisors, Inc. is not a subsidiary or control affiliate of FASI.

Disclaimer – Information contained herein is taken from sources believed to be reliable, but cannot be guaranteed as to its accuracy. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. The Standard and Poors 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Contact your investment professional to discuss suitability for your particular circumstances. This article does not constitute an offer of sales of any securities. Securities trading is speculative and involves the potential loss of investment. Past results are not necessarily indicative of future results. Lighthouse Financial Advisors, Inc., dba Lighthouse Wealth Management, is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered, excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability.