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WHAT HAVE YOU DONE FOR ME LATELY?:  Despite the fact that U.S. corporations have delivered quite a bit lately, markets continued to be volatile, and the S&P 500 recorded a weekly loss.  With 91% of the S&P 500 companies having reported third quarter earnings, profits are up 28% from a year ago.  78% have beaten analyst forecasts.  Revenue growth is up 8% from a year ago.  So why aren’t stock prices surging?  Fear.  Currently, the fear is that business growth, despite the recent surge, is slowing.  U.S. industrial output (see below) came in below expectations and household indebtedness is growing.  Tech stocks, which had been trading at very high prices, have come down significantly from their highs.  Energy stocks are being challenged by dropping oil prices (see below).  Lately, U.S. corporations have delivered, but there is a lot of fear that this trend has peaked.  We will see if the fears are realized.

INDUSTRIAL PRODUCTION:  Industrial production is a measurement of the industrial sector of the economy which includes manufacturing, mining and utilities.  Industrial production increased to 108.5 in October.  This is 25% above the recession low, and 4% above the pre-recession peak.

INDUSTRIAL CAPACITY:  Industrial capacity measures how much of our potential industrial output is being utilized.  In October, this rate increased to 78.4%.  This is 1.4% below the average from 1972-2017.

WHAT’S GOING ON WITH OIL AND GAS PRICES?:  On October 3 oil prices closed at the highest price in four years at $76.24 a barrel.  Prices had been driven up by worries about supply.  Iranian sanctions had been imposed and Venezuela and Libya continued to be problematic.  Last week, prices were back down to the mid-fifties per barrel, about where the price was a year ago.  Why?

  • President Trump issued more waivers (a total of 8 countries) than expected to the Iranian oil sanctions.
  • Russia and Saudi Arabia quietly agreed to increase exports to make up for any Iranian shortfall.
  • Anxieties about global economic growth are creating concerns about demand.
  • The stronger U.S. dollar (oil is priced in dollars).
  • U.S. oil production continues to grow.  (The U.S. is now the world’s top oil producer having recently surpassed Russia.)

Falling prices may aid consumer confidence and increase cash available for other spending.  It may also reduce inflation expectations.  It will reduce profits in the energy sector which can detract from their stock prices.



60-YEAR-OLDS ARE TAKING ON MORE FINANCIAL BURDEN:  A 2014 Pew Research Center study found that 52% of U.S. residents in their 60s (17.4 million people) are financially supporting either a parent or an adult child.  That is up from 45% in 2005.  1.2 million support both a parent and a child, more than double the number from a decade earlier.



A LOT OF RESOURCES:  The recent Camp and Woolsey fires in California have involved 9,400 firefighters, 1,200 fire engines, 120 bulldozers and 46 helicopters.



 INDUSTRIAL PRODUCTION: https://www.calculatedriskblog.com/2018/11/industrial-production-increased-01-in.html
INDUSTRIAL CAPACITY: https://www.calculatedriskblog.com/2018/11/industrial-production-increased-01-in.html; https://www.federalreserve.gov/releases/g17/Current/default.htm
WHAT’S GOING ON WITH OIL AND GAS PRICES?: https://www.horsesmouth.com/falling-oil-prices-cloud-the-outlook-for-investors
WHAT HAVE YOU DONE FOR ME LATELY?: https://www.horsesmouth.com/falling-oil-prices-cloud-the-outlook-for-investors; https://www.wsj.com/articles/u-s-stocks-set-for-lower-open-1542371202
60-YEAR-OLDS ARE TAKING ON MORE FINANCIAL BURDEN: https://www.wsj.com/articles/i-was-hoping-to-be-retired-the-cost-of-supporting-parents-and-adult-children-1542381023
A LOT OF RESOURCES:  Stoneridge Asset Management California Wildfires Update #3 (11/15/2018).