October – November 2019

U.S. Economic and Market Highlights

The Economy

  • Over the last nine years, debt outstanding among non-financial corporations has grown at an average rate of 5.7% per year and is at the highest percentage level when compared to Gross Domestic Product (GDP) since 1936.
  • However, corporations’ financial health is still in good condition including their ability to pay their debt obligation. The Federal Reserve’s reduction of short-term interest rates to a historical low created an environment conducive to higher borrowing. Low interest rates since the financial crisis have kept interest expense down which makes it easier for companies to carry more debt at a low cost.
  • Leading Economic Indicators continued to slow in October. However, the data indicate a continuation in economic growth albeit at a slower pace. Positive U.S.-China trade war news, the third interest rate cut by the Fed this year, and U.S. equity markets reaching all-time highs will help strengthen economic data near-term.
  • The third-quarter 2019 GDP growth rate for the U.S. economy was 2.1%, exceeding the initial estimate of a 1.9%. GDP is comprised of four components: personal consumption (makes up nearly 70%), business investment, government spending, and net exports. The U.S. consumer continues to drive the economy forward.

Fixed Income

  • Yields on short-term U.S. Treasury bills significantly decreased in October, while yields on longer-term U.S. Treasury bonds increased, altering the yield curve closer to a normal, upward sloping shape.
  • Yields rose on long-term German and Japanese bonds, as trade tensions eased and global central banks increased economic stimulus.
  • U.S. equities were bolstered by better-than-expected third quarter earnings, U.S. and China agreeing to a partial trade deal, and the Fed’s third interest rate cut this year. All three major U.S. equity averages established all-time highs at the end of November.


  • After trailing U.S. equities for most of the year, Non-U.S. equities outperformed U.S. equities in October. Non-U.S. equities benefitted from the tentative U.S. and China phase one trade deal, an improvement in some eurozone economic data, Brexit’s three-month extension, and a weaker dollar.
  • S&P 500 price/earnings ratio is near 23x vs. 10-year average of 16.0x. Growth company valuations exceeded their value company counterparts over the last ten years. But value companies outperformed growth companies last quarter, while economic growth slowed and economic uncertainty increased.

[See the Market Tracker below for additional statistics and Global Market Indices.]

This communication was prepared for informational purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security/instrument or to participate in any trading strategy. Past performance is not indicative of future results.