- Total long-term mutual funds saw severe net outflows for the two weeks ended October 2. Nearly $23 billion were withdrawn from mutual funds, with equities and bonds strongly diverging.
- Equities experienced more than $26 billion in net outflows, mostly due to large withdrawals from domestic and large-cap stocks. Meanwhile, bond mutual funds flows were positive with a total of more than $7 billion plowed into the asset class. Taxable and investment-grade bonds were by far investor favorites.
- The U.S. economy added around 136,000 jobs for the month of September, roughly 9,000 below expectations. The previous month’s figure was revised up to 168,000. The unemployment rate declined from 3.7% to 3.5%, while hourly earnings’ growth was flat at 0% versus analysts’ projection of 0.3%. This was the lowest growth rate since November 2017.
- Federal Reserve policymakers expressed concern that the market is pricing in more rate cuts than the central bank might be willing to make. Although policymakers were sharply divided on the future course of action, all of them were worried about one thing: global trade, and particularly the U.S.-China feud.
- Yet the U.S. and China agreed on a tentative agreement, which U.S. President Donald Trump called the “first phase” of a deal. China agreed to buy $50 billion of U.S. farm products and give more access to its financial markets. Meanwhile, the U.S. agreed to suspend new tariffs scheduled for October 15.
- U.S. inflation was unchanged in September, disappointing analysts who expected tepid growth of 0.1%. Year-over-year, the consumer price index (CPI) increased by 1.7%, which is a little below the Federal Reserve’s target of 2%. Energy prices fell consistently during the month, while food and healthcare costs climbed slightly. Core inflation, which excludes volatile energy prices, among others, rose 0.1%.
- U.S. unemployment claims for the week ended October 4 came in at 210,000, a three-week low. Analysts had expected 215,000 claims.
- U.S. consumer sentiment reached a three-month high of 96 in October, after hovering around 92 for two consecutive months.
- U.K. national output grew 0.3% in the three months ended in August versus the previous three-month period. As a result, Britain avoided a recession, which means two consecutive quarters of negative growth.
- Equities have posted small gains this week, while bonds fell.
- The U.S. Nasdaq 100 fund (NASDX) advanced 1.86% for the two weeks ended October 11, recovering losses experienced in prior weeks. The technology index is now up more than 11% year-to-date.
- * Vanguard’s international bonds fund* (VTIBX) declined 0.76%, the worst performer from the pack. However, year-to-date, the index has risen by nearly 8%.
- With the exception of India, all foreign markets were up.
- The Chinese fund (MICDX) gained nearly 2.9% these past two weeks, as investors cheered a potential thaw in trade relations with the U.S.
- India equities fund (WIINX) gave up some of the gains it registered in the prior two weeks, shedding 1.85%.
Major Asset Classes
- In asset classes, the performance picture was decidedly mixed.
- The broad equities fund (VFINX) rose a tepid 0.36%, enough to become the best performer from the pack.
- Commodities equities fund (DXCTX) was the worst performer, losing 5.9% of its value.
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The Bottom Line
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