Weekly Economic & Market Update 10/26/2015

Week in review

Global markets moved higher this past week on two primary factors. First, this past Thursday, the European Central Bank (ECB) decided to leave their interest rates in the zero to negative territory. Further, ECB President Mario Draghi raised the possibility that European economic accommodation will be expanded further. Expansion of economic accommodation from one of the major world economic systems was received well by investors and moved global stocks off their sideways movement early last week.

Global investors then awoke Friday morning to news that Chinese economic authorities were lowering their banking reserve ratio requirement, 1-year lending interest rate and 1-year deposit interest rate. This was the sixth rate cut for China since November and came as a surprise to the market. While many economists point to China as a slowing economy, there are just as many economists that point to the 6.9% annual growth rate of the economy as slowing yet positive. The real issue at hand is that the Chinese economy is centrally managed and the numbers from China look to be suspect. Consider that year to date exports are down, imports are down and according to The People’s Daily Chinese industrial electricity usage is down. So, the question is how can an export nation such as China have the above items falling yet the economy growing at 6.9%? The answer is that China is likely growing at a much slower pace. The evidence is in China’s actions in cutting interest rates so aggressively and limitations on its equity market trading.

As always, we continue to monitor global markets and economies to gather insight as to the direction of markets.

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

$SPX 10 26

Chart 2 – Aggregate Bonds

$AKG 10 26

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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.