The Markets

Investor bullishness ticked higher last week on all four investor sentiment gauges tracked by Barron’s. Investor optimism may have been fanned by positive financial and economic news. For example, last week:

  • The jobs report was better than expected. Last week, the Bureau of Labor Statistics (BLS) reported that 531,000 new jobs were added in October, lowering the unemployment rate to 4.6%. In addition, the employment numbers for August and September were better than previously reported. The BLS Employment Diffusion Index measures the breadth of employment gains across the economy. It rose from 63.6 in September to 71.8 in October for private industry, and from 57.3 to 70 in manufacturing. The increase suggests that job gains were spread across diverse industries rather than concentrated in specific ones.
  • Central banks took a measured approach to policy changes. Investors who were concerned that central banks might pull back stimulus too soon were reassured last week. The U.S. Federal Reserve announced that it will begin tapering its bond buying program, and that the Federal Open Market Committee is not talking about raising rates yet, reported MarketWatch. In addition, the Bank of England surprised investors by not raising rates last week, reported Elliot Smith of CNBC.
  • Corporate earnings remained strong. Companies’ profits increased during the third quarter. So far, 81% of the companies in the Standard & Poor’s 500 Index have reported a positive earnings surprise, reported John Butters of FactSet. (A positive earnings surprise occurs when earnings are better than analysts expected.) So far, the blended earnings growth rate for the S&P 500 was 39.1 percent in the third quarter.

Major U.S. stock indices finished the week at record highs, again, according to Randall W. Forsyth of Barron’s. U.S. Treasuries rallied, too.


Data as of 11/5/21 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 Index 2.0% 25.1% 33.8% 19.7% 17.1% 14.1%
Dow Jones Global ex-U.S. Index 1.1 7.9 20.6 9.7 7.9 4.8
10-year Treasury Note (yield only) 1.5 N/A 0.8 3.2 1.8 2.0
Gold (per ounce) 1.9 -4.5 -7.1 13.5 7.0 0.1
Bloomberg Commodity Index -0.6 31.6 40.4 6.9 4.2 -3.7

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, MarketWatch, djindexes.com, Federal Reserve Bank of St. Louis, London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

The “Infrastructure Week” Curse Is Broken!

Curses often offer explanations for disappointments. The Billy Goat curse on the Chicago Cubs reportedly kept the team from winning a World Series for more than a century. Every actor is wary of the curse of Macbeth, which holds that the play is cursed and brings bad luck to those who perform it.

During the past few years, the term “Infrastructure Week” appeared to be cursed. Every time the White House planned an Infrastructure Week, it was overshadowed by more urgent events, according to Emily Cochrane and Eileen Sullivan of The New York Times. It was concerning because America’s infrastructure isn’t as sound as it once was. The American Society of Civil Engineers (ASCE) has been issuing a Report Card on America’s Infrastructure since 1998, and the best grade earned was a C in 1998.

Last week, the apparent curse was broken when the House of Representatives passed the Infrastructure Investment and Jobs Act (IIJA) with bipartisan support. The bill includes:

  • $110 billion to build and repair roads and bridges across the country, fund research and relieve congestion, reported Katie Lobosco and Tami Luhby of CNN.
  • $65 billion for power and water system improvements, including building new power lines, expanding renewable energy and upgrading water infrastructure.
  • $66 billion for passenger and freight rail systems.
  • $65 billion for broadband internet, particularly expanding broadband availability in rural areas and low-income communities.
  • $46 billion for flooding, coastal and climate resiliency that helps cities and states prepare for droughts, wildfires, floods and other climate issues, reported the ASCE.
  • $42 billion to update ports, waterways and airports.
  • $15 billion for electric vehicle charging stations and zero-emission school buses.

The IIJA will be funded by repurposing unspent coronavirus relief money and imposing tax-reporting requirements on cryptocurrencies. The infrastructure bill is expected to increase the deficit – the difference between the amount the United States spends and how much it takes in each year – by $250 to $350 billion over 10 years, depending on who is doing the math.

Weekly Focus – Think About It

“…for there is nothing either good or bad, but thinking makes it so…”

—William Shakespeare, playwright

Wishing you and your families well,
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management

Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.

  • Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
  • Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
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  • The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
  • Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
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Sources:

https://www.barrons.com/market-data/market-lab/beta (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/11-08-21_Barrons_Investor%20Sentiment%20Readings_1.pdf)

https://www.bls.gov/news.release/empsit.nr0.htm

https://www.bls.gov/news.release/empsit.b.htm

https://www.bls.gov/opub/mlr/1990/04/art3full.pdf

https://www.marketwatch.com/story/fomc-statement-in-november-after-fed-votes-to-taper-11635962889

https://www.cnbc.com/2021/11/04/bank-of-england-holds-off-hiking-rates-despite-surging-inflation.html

https://www.investopedia.com/terms/e/earningssurprise.asp

https://www.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_110521.pdf (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/11-08-21_Factset_Earnings%20Insight_8.pdf)

https://www.barrons.com/articles/stock-market-covid-jobs-federal-reserve-51636160304?refsec=the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/11-08-21_Barrons_Good%20Jobs%20Report%20Points%20to%20Continued%20Good%20Times%20for%20Stocks_9.pdf)

https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/TextView.aspx?data=yieldYear&year=2021

https://www.history.com/news/curses-king-tut-tippecanoe-origins

https://www.nytimes.com/2020/04/01/us/politics/coronavirus-infrastructure-week-timeline.html (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/11-08-21_New%20York%20Times_The%20Many%20Times%20Its%20Been%20Infrastructure%20Week%20in%20Washington_12.pdf)

https://infrastructurereportcard.org/making-the-grade/report-card-history/

https://www.cnn.com/2021/07/28/politics/infrastructure-bill-explained/index.html

https://www.washingtonpost.com/business/2021/08/10/senate-infrastructure-bill-what-is-in-it/ (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/11-08-21_Washington%20Post_Whats%20In%20the%201.2%20Trillion%20Infrastructure%20Package_15.pdf)

https://infrastructurereportcard.org/congress-passes-historic-infrastructure-bill/

http://shakespeare.mit.edu/hamlet/hamlet.2.2.html

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