Markets End Higher After a Volatile Week of Trading

Markets End Higher After a Volatile Week of Trading

Major U.S. and international equity indexes finished in positive territory on Friday, capping off a volatile week of trading. Global equities, measured by the MSCI All Country World Index (ACWI), rose 1.21%, while U.S. equities, represented by the S&P 500, advanced 1.71%. Market volatility was driven by a series of notable headlines. Early in the week, representatives from the U.S. and China appeared to walk back some of the prior week’s escalation in trade tensions. Additionally, dovish remarks from Federal Reserve officials and several high-profile deal announcements in the artificial intelligence (AI) space helped support equity markets.

Shutdown

The U.S. government shutdown entered its third week, following repeated failed votes in the Senate to approve funding through November 21. For perspective, during the 35-day shutdown in 2018 (the longest in U.S. history), the Congressional Budget Office estimated quarterly GDP growth was reduced by 0.4%. A key difference this time is that the economy entered the shutdown from a position of strength, with growth on pace to exceed 3.0% annualized in Q3. The Atlanta Fed’s GDPNow tracker currently projects GDP growth of 3.9% for the quarter, well above the long-term trend range of 1.5% to 2.0%.

Rate Cuts

Federal Reserve Chair Jerome Powell indicated that the central bank remains on track to cut short-term interest rates again this year, citing increased downside risks to employment. His comments, along with those of Fed officials Christopher Waller and Stephen Miran, reinforced expectations for further policy easing despite inflation remaining above target. The Fed’s Beige Book, released Wednesday, showed that overall economic activity was little changed across districts, with steady employment and rising wages offset by softer consumer spending, higher prices, and reports of layoffs and attrition.

Earnings Season

Earnings season began in earnest on Tuesday, with several major banks reporting third-quarter results. JPMorgan Chase, Citigroup, and Wells Fargo all posted better-than-expected earnings, contributing to improved investor sentiment. As of Friday morning, about 12% of S&P 500 companies had reported results, with 86% beating consensus estimates (FactSet).

Inflation Updates

Although many economic reports remain delayed due to the government shutdown that began October 1, the Bureau of Labor Statistics announced it will release its monthly inflation update this Friday, October 24, to meet statutory deadlines for benefit payments tied to inflation. The most recent Consumer Price Index (CPI) report showed annual inflation rose to 2.9% in August, up from 2.7% in July.

As Always

I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.