Week in Review
Global equity markets were flat to negative this past week on similarly divergent global economic data releases. Early this past week, the Institute for Supply Management (ISM) released their monthly report on manufacturing and associated manufacturing index. The ISM manufacturing index is widely viewed as a gauge on the health of manufacturing in the US and came in at 48.6 for November after a reading of 50.1 in October. Readings under 50 on the ISM manufacturing Index are often associated with recessionary periods. Additionally, ISM also released its non-manufacturing index last week which came in at 55.9 for November after a report in October of 59.1. Some analysts give weight to the non-manufacturing index as the US is less a manufacturing economy and more a services economy. Either way both ISM readings were pointing lower.
Overseas, the European Central Bank (ECB) announced that it would be lowering its deposit rate from -.20% to -.30%. The deposit rate is the rate that Euro area banks earn for money left on deposit with the ECB. The ECB is desperate to get banks to lend money versus leaving it on deposit and have hence made the deposit rate negative to try to prod banks to lend. Additionally, the ECB announced plans to lengthen their monthly $66 billion asset purchase program by six months which takes it out to March of 2017. Global investors seemed to be disappointed with the news as expectations were for more easing than was announced. The ECB’s decision to boost the economic stimulus is a result of weaker inflation numbers than the ECB is seeking. In other words, they are attempting to fight deflation.
At the end of this past week the Bureau of Labor Statistics (BLS) released the non-farm payroll numbers for November showing 211,000 jobs added with analysts’ expectations of 200,000. The beat on the November jobs number sent the markets forward with the assumption that the Federal Reserve (FED) will raise interest rates. While many see a rise in rates as long overdue, others see a rise as getting the monkey off the FED and markets back.
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.