Stock markets continued to hold monthly gains of 2.64% this week despite the seasonal tendency for losses in the month of September. One fly in the ointment is that a government shutdown could begin Wednesday after a rocky week in Congress that’s left budget negotiations completely stalled. We have seen this story many times before over the last 15 years and it always ends in a short-term band-aid but we have to consider this time may be different and if it happens that will stir uncertainty among investors.
Economic Data This Week
There was not a lot on the calendar this week but we did get an unexpected surprise positive revision to Q2 GDP from 3.3% to 3.8% due to strong consumer spending, business investment and inventory accumulation. This raised questions about Fed policy (cutting rates) and caused interest rates to rise.
On Friday we got the PCE, or Personal Consumption Expenditures price index which is an inflation measure published by the U.S. Bureau of Economic Analysis (BEA). The PCE tracks the average change in prices that consumers in the U.S. pay for goods and services and is the favored index the Fed uses to track inflation. Compared to last year, the PCE came in at +2.7% which was slightly higher than last month’s +2.6% and higher than the Fed’s 2% target.
The S&P 500
Not much to say this week as the S&P closed about where it opened on Monday – energy and utilities led the charge while technology rested. I still see an upside target just below 7000 (6650 now) before we see heavy resistance.
October could be setting up for some volatility if the government shuts down as the vitriol in Washington DC is elevated these days. Also, the deficits in the federal government are real and how spending is addressed will be scrutinized by Wall Street as the impact to interest rates and inflation is of paramount importance.
Thank you for being a reader!
President, Kisco Capital
