Stocks continued their march higher in October, hitting all-time highs for most major market indexes.
The catalyst for this continued upswing right now is most likely the expectation of some tax reform getting passed through Congress. However, they will be hard pressed to get anything approved before the end of the year, so that could be cause for a pullback, which is well overdue anyway.
Earnings reports have been excellent for the tech and banking sectors but not so hot for retail companies. Q3 is always the weakest quarter for retail stocks so that is not a big surprise.
Historically speaking, we are going into the best six months to be invested in the stock market, November through April. Possible events that could prove history wrong are war with North Korea and/or the Donald getting indicted in the Russian investigation.
Bonds took a little bit of a dip this past month as signs of a healthy economy pushed bond interest rates higher.
The Federal Reserve concludes their scheduled meeting today, November 1st, and is expected to bump interest rates another 25 basis points. Rates still seem to be bottoming out from their 30 year decline. Here’s a nice 55 year chart of the interest rate of the US Treasury 10 year note to put it into perspective: http://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart.
On the savings side, rates that banks are paying us just aren’t going up as fast as we’d like.
Currently, the average money market/savings account is paying 0.13%.
The 1 year CD interest rate is averaging only 1.51% and the 5 year CD rate is at 2.14%.
The good news is that mortgage rates continue to stay extremely low, with the 30 year refi rate at 3.92%. Depending on the loan terms, if you have a current mortgage with a loan rate over 5%, you should at least check out refinancing it.
Oil prices rose about 5% in October.continuing its upward trend since bottoming in June. Price per barrell now sits at $54.20.
Even though we still have 1 month left in the hurricane season, prices are reflecting a return-to-normal after the damage and disruption caused by Hurricane Harvey.
Prices should hold steady for the rest of the year.
Nationally, gasoline prices are averaging about $2.47 per gallon. FYI, a year ago, we were paying $2.20. Chattanooga, TN has the cheapest gas in the country at $2.10.
Check out the prices at the pump in your area: Gas Buddy.
Outlook
Events on the horizon that could move the markets in November:
- Russian Investigation: Odds are slim that Mueller will indict President Trump, but it does appear that more of his aides and appointees will be in his crosshairs shortly. Any market pullback from this should be short lived and will provide a buying opportunity for long term investors.
- Escalating Tensions with North Korea: The stock market, so far, has shown little concern with the wing nut that rules NK. However, he does no how to push Trump’s buttons. So, at some point, these two bullies may call for a fight in the playground after school. Hopefully, the adults will show up for both sides and cooler heads will prevail.
Joe Baker, CFP
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
