US Economy and Credit Markets Ended November 6, 2020
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Treasury yields were broadly lower, and prices up, last week as the market digested election results indicating a divided government. A Republican senate is expected to reduce the odds of a large fiscal stimulus spend which kept Treasury prices up. Growth equities and government bonds performed well with markets expecting monetary policy will be forced to carry the stimulus load. A continuation of the duration trade resulted. Last Monday the ISM Manufacturing Index indicated a strengthening manufacturing sector as it recorded a reading of 59.3 which was well ahead of consensus expectations. Wednesday's Non-Manufacturing ISM disappointed, however, as it declined to 56.6, below expectations, but still above 50 – indicating expansion. On Thursday, Nonfarm Productivity was recorded increasing at a 4.9% annualized rate for the third quarter but lagging expectations. Interestingly, real (inflation-adjusted) compensation per hour in the nonfarm sector declined at a 9.1% annual rate in Q3 but was still up 5.3% versus a year ago. Also on Thursday, Jerome Powell discussed the risk that the pandemic still poses to the economy and indicated that it was most concerned about rising infection rates and resulting shutdowns as well as declining savings as the previous fiscal stimulus has come off. Friday's nonfarm payroll data indicated a rise well ahead of expectations. The unemployment rate was down a full percent versus the prior month. Major economic reports (related consensus forecasts, prior data) for the upcoming week include Wednesday: November 6 MBA Mortgage Applications (n/a, 3.8%); Thursday: October CPI (0.2%, unch.) and November 7 initial jobless claims (730K, 751K); Friday: October PPI Final Demand (0.2%, 0.4%) and November preliminary University of Michigan Consumer Sentiment Index (82.0, 81.80).
Posted on Monday, November 9, 2020 @ 9:02 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.