The key economic events for the coming week are the release of the first estimate of the third quarter Gross Domestic Product (GDP) on Friday and the Federal Open Market Committee (FOMC) meeting Tuesday and Wednesday. The GDP number is extremely important, and as I said last week, the number (and all data reported between now and November 6th) will be heavily scrutinized because it is the last GDP report prior to the election. Consensus is expecting an increase to 1.9% compared to 1.3% in the second quarter. The FOMC meeting is not expected to produce any headlines. The Federal Reserve’s last meeting set the FOMC’s policies for the next few quarters, so investors are expecting little more than a confirmation of the previous monetary policy announcements. September new home sales will be released on Wednesday morning. This is an important report because housing remains such a critical component to the US economy and may give some insight to the third quarter GDP number. Consensus is anticipating a slight increase in new home sales to an annualized rate of 385,000. Initial Jobless claims on Thursday morning is expected to report a slight decrease from last week’s rate of 388,000 to 372,000. Finally, September Durable Goods Orders will be released on Thursday. Consensus calls for an increase to 7% from August’s unexpected decline of 13.2%. All of the week’s reports may offer some insight into how the GDP number will look on Friday morning.
The NYSEBP gained 0.93 to close Friday at 66.26. As I noted earlier, the soldiers are still on the field and demand remains firmly in control. The NYSEBP would have to fall to 61.38 in order to reverse and put supply in control of stocks. The CBOE Volatility Index, referred to as the VIX, and is a measure of future volatility in
The Dorsey Wright & Associates analysis of the markets has remained unchanged for most of the summer and now into the fall. Data indicates that US stocks and Bonds are the two favored major asset categories followed by Foreign Currencies, International stocks, and Commodities. Middle capitalization stocks are favored, as is growth over value, and equal-weighted indexes over capitalization weighted indexes. Equal-weighted indexes are those where each stock in the index is weighted the same, while in capitalization-weighted indexes the larger stocks have the largest weighting consistent with their size relative to the other stocks. The relative strength sector weightings favor Consumer Discretionary, Health Care, and Financials. Financials pushed Real Estate to the fourth position this past week, but it would not cause me to sell or reduce Real Estate positions at this time. US Treasuries and International Bonds are favored in the Bond category, while US and Developed Markets are favored within the International stock category. Energy and Agriculture are the favored sectors within the Commodity category.