The Dow Jones Industrial Average reached another milestone in November, topping 28,000. It settled at 28,051.41 on November 29; on the same day, the Nasdaq Composite closed at 8,665.47, and the S&P 500, at 3,140.98. All in all, November was the best month for U.S. stocks since June, with indices shattering historical highs.
The short-term economic outlook has shifted to some degree; anxieties about a recession arriving in 2020 have lessened. There is still optimism that the U.S. and China may reach a phase-one trade agreement, and the Federal Reserve appears comfortable with its current monetary policy stance and seems to be watching the business cycle closely.
NOVEMBER IN BRIEF
The S&P 500 rose 3.4% in November and attained a series of record closes in the process. Earnings results helped stocks, as did intermittent signals that the first stage of a U.S.-China trade agreement might be near at hand. Job creation improved, and consumer spending lived up to market expectations; consumer confidence and business activity, not so much. Housing indicators communicated good news, and the rally in stocks made the commodity sector look less attractive.
DOMESTIC ECONOMIC HEALTH
Were the U.S. and China close to signing off on the first phase of a new trade deal? According to officials from both countries, the answer was yes. When would this phase-one deal be finalized? No definite answer emerged. On November 8, President Donald Trump said that such an agreement was near, and six days later, White House economic advisor Larry Kudlow said that negotiators were “getting close” to an accord. On November 26, China’s commerce ministry announced that trade representatives had “reached a consensus” on remaining issues, and President Trump said that negotiators were in the “final throes of a very important deal.” Still, November ended without any announcement that a phase-one pact had been reached.
The Department of Labor’s latest employment report found that the economy generated 128,000 net new jobs in October. This was a surprise to the upside. Analysts surveyed by Bloomberg expected 85,000 new hires. Since more people looked for work in October than in September, the headline unemployment rate ticked up 0.1% to 3.6%. The U-6 rate, which encompasses both the unemployed and underemployed, also rose 0.1% to 7.0%.
Consumer spending rose 0.3% in October, representing the largest monthly gain since July. This happened even without a gain in consumer income. One prominent index of consumer confidence declined in November: the Conference Board’s consumer confidence gauge fell 0.6 points to 125.5. The University of Michigan’s Consumer Sentiment Index, however, rose to a final November mark of 96.8 from a 95.5 preliminary reading.
In the business sector, the Institute for Supply Management’s purchasing manager indices of manufacturing and non-manufacturing activity both rose. The ISM Manufacturing PMI came in half a point higher for October at 48.3; the Non-Manufacturing PMI was at 54.7, nearly two points higher. For economists worried about a downturn in the business cycle, these numbers were encouraging.
Retail sales were up 0.3% in October, and looking ahead, the National Retail Federation is forecasting a year-over-year gain of between 3.8% and 4.2% for holiday-season retail purchases. If its prediction comes true, the 2019 holiday shopping season could rank as one of the better ones seen this decade.
An October jump of 0.4% for the Consumer Price Index was noticed by economists, but it still left annualized inflation at a manageable 1.8%. The core CPI, which strips out volatile food and energy costs, was rising 2.3% year-over-year through October.
Minutes from the Federal Reserve’s October policy meeting were released on November 20, and they indicated that central bank officials were prepared to… stand pat, at least for a while. In October, most Fed officials believed the current monetary policy approach would prove adequate to guide the economy in the near term. If some event or trend prompted a “material reassessment” of the Fed’s economic outlook, then policy might shift.