WEEKLY MARKET UPDATE

Stocks added to last week’s best five-day rally in a year as interest rates continued to stabilize and third quarter (Q3) earnings exceeded expectations.  As a result, the S&P 500 has risen nine of the last ten days and is up over 7% since October 27th.  Q3 earnings season is 92% complete and results have quietly come in much better than expected with S&P 500 year-over-year earnings growth on pace to rise over 4% and snap a three-quarter streak of negative earnings growth.  Next week, will be headlined by the October CPI report on Tuesday and interest rates will continue to be scrutinized.

Government Shutdowns and Financial Markets

The United States faces a potential government shutdown if Congress cannot agree to extend funding past next Friday (Nov. 17) and while we anticipate a lot of headlines on the issue, markets have generally looked past these events.  Since 1975, for example, there have been 21 government shutdowns.  Removing the February 2018 event as it lasted less than a day, per Strategas Research, the average S&P 500 return during the last 20 government shutdowns has been 0.04% (see chart below).  Certainly this average is skewed by the last shutdown, which was the longest on record at 35 days, seeing stocks rise 10%.  However, after shutdowns have ended, the S&P 500 has closed higher one year later 85% of the time (per Carson Investment).  To borrow a phrase from Otto von Bismark, "Laws are like sausages. It's better not to see them being made” and markets seem to agree.

Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder

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