Week in Review
Global equity markets were mixed this past week with US indexes flat to slightly positive while foreign equity markets fell sharply. The continued undercurrent of a global economic slowdown coupled with western-world economic easing, is creating an investing environment of confusion.
This past week, the US Census Bureau reported September durable goods orders were 1.2% lower than the previous month. Here at Lighthouse, we look at the bigger picture with regards to durable goods orders. In particular, we look at what is identified as Core-Capital Expenditures (Core CAPEX).
Core CAPEX is nondefense capital goods excluding aircraft. Very simply, durable goods are items that do not wear out quickly and that can be used more than once. Practically speaking, items in this category are appliances, furnishings, computers, tools and the like. To smooth out the noise of month-to-month reports, we look at the year-over-year three-month averages in durable goods information. In particular we look at new orders. The chart below shows the comparison of Core CAPEX to the S&P 500:
As can be seen from the chart above, the slowdown in the both the S&P 500 and Core CAPEX is noticeable and well-correlated. As we see the data in the US and global economy slow, the investing markets are interpreting this as more economic stimulus is to come and they have moved higher on ‘bad news is good news.’
While we like to see gains in the markets, we would rather the gains have a better economic underpinning. Therefore, we maintain our cautiously optimistic stance. As always, we continue to monitor global markets and economies for insight into 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
Chart 2 – Aggregate Bonds
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.