It's The Economy Stupid: Market Close

Well, the market’s down, but not as down as it was.

I hope everyone has a good weekend.

Geaux Tigers!

 

U.S. stocks fell, extending a weekly drop, amid concern a political impasse over the federal budget will hurt the economy. Treasuries rose and the yen strengthened while metals rallied.  The Dow Jones Industrial Average dropped over 70 points to 15258. The Standard & Poor’s 500 Index fell over 5 points to 1,691 in New York while the rate on 10-year Treasury notes lost 2.5 basis points to 2.62 percent. The yen appreciated against all 16 major peers as Japan’s finance minister damped speculation the government will cut the corporate tax rate. The pound advanced against most major currencies as Bank of England Governor Mark Carney told a U.K. newspaper he does not support increasing asset purchases.  Italian bonds and European shares slid following a debt auction.

     The U.S. Senate voted to finance the government through Nov. 15 after removing language to choke off funding for the health care law, putting pressure on the House to avoid a federal shutdown set to start Oct. 1.   Federal Reserve Bank of New York President William C. Dudley said budget battles in Washington are among risks to the economic outlook.

 

Description	Ticker	Last	Change	% Chg Today	% Chg 1Year
STOCK MARKETS
Dow Jones Industrial Average	INDU Index	15258.240	-70.0600	-0.4571	13.1670
S&P 500 Index	SPX Index	1692.320	-6.3500	-0.3738	16.7284
NASDAQ 100 Index	NDX Index	3230.305	-3.7310	-0.1154	14.4498
NASDAQ Composite Index	CCMP Index	3781.594	-5.8330	-0.1540	20.5616
Russell 3000 Index	RAY Index	1016.800	-3.9800	-0.3899	19.2185
Russell 1000 Index (Large Cap)	RIY Index	944.780	-3.7000	-0.3901	18.5478
Russell 2000 Index (Small Cap)	RTY Index	1074.190	-4.2200	-0.3913	27.4119
Wilshire 5000 Total Market	W5000 Index	18072.740	-69.9200	-0.3854	19.6270
TREASURIES	% Yield
3 Month Treasury	0.0203		#N/A N/A	#N/A N/A
6 Month Treasury	0.0355		0.0050	20.0000
2 Year Treasury	0.3324	99.836	0.0156	0.0157
5 Year Treasury	1.3993	99.875	0.1641	0.1645
10 Year Treasury	2.6227	98.922	0.2188	0.2216
30 Year Treasury	3.6829	98.922	0.1875	0.1899
ENERGY
Crude Oil, Brent Index	Brent Crude	108.350	-0.8600	-0.7875	3.2178
Crude Oil, Louisiana Lt. Sweet	LA Lt Sweet	105.260	-0.1700	-0.1612	-5.8100
Natural Gas, Henry Hub Index	Nat Gas	3.595	0.0280	0.7850	-8.6439
PRECIOUS METALS
Spot Gold $/oz	GOLD	1336.610	12.5200	0.9456	-24.7118
Spot Silver $/oz	SILVER	21.754	0.0240	0.1104	-37.1344
CURRENCIES
Euro	EUR Curncy	0.740	-0.0018	-0.2428	-4.5190
Japanese Yen	JPY Curncy	98.210	-0.7800	-0.7880	-21.0339
British Pound	GBP Curncy	0.620	-0.0039	-0.6256	0.5844
Swiss Franc	CHF Curncy	0.906	-0.0043	-0.4724	3.4662
Canadian Dollar	CAD Curncy	1.030	-0.0010	-0.0970	-4.8238
Chinese Renminbi	CNY Curncy	6.120	-0.0008	-0.0131	2.9984
FOREIGN INDICIES
FTSE 100 INDEX	UK	6512.660	-52.9300	-0.8062	12.6871
CAC 40 INDEX	FRANCE	4186.770	0.0500	0.0012	21.7325
DAX INDEX	GERMANY	8661.510	-2.5900	-0.0299	18.8133
NIKKEI 225 INDEX	JAPAN	14760.070	-39.0500	-0.2639	66.4014
HANG SENG INDEX	HONG KONG	23207.040	82.0100	0.3546	11.3561
SHANGHAI COMP INDEX	CHINA	2160.027	4.2180	0.1957	3.5404
	Last	Chg Today	% Chg Today	3 Mo Tot Ret	6 Mo Tot Ret	YTD Tot Ret
S&P 500 INDEX	1692.320	-6.350	-0.3738	5.2683	9.239	20.334
S&P 500 CONSUMER DISCRETION	482.490	0.241	0.0499	8.6507	16.069	29.697
S&P 500 CONSUMER STAPLES	414.600	-2.560	-0.6137	1.2758	2.914	17.327
S&P 500 ENERGY	609.940	-1.890	-0.3089	5.7657	5.269	16.336
S&P 500 FINANCIALS	270.360	-1.070	-0.3942	2.9990	11.487	23.926
S&P 500 HEALTH CARE	587.570	0.270	0.0460	6.1630	12.277	28.762
S&P 500 INDUSTRIALS	403.210	-2.540	-0.6260	8.8997	13.374	24.672
S&P 500 INFO TECHNOLOGY	522.180	-3.110	-0.5921	6.7679	9.284	14.013
S&P 500 MATERIALS	266.060	-3.220	-1.1958	10.2236	9.417	14.068
S&P 500 TELECOM SERVICES	150.190	-1.470	-0.9693	-4.6702	-2.665	6.164
S&P 500 UTILITIES	190.070	-1.300	-0.6793	0.7202	-1.170	10.320

 

 

 

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

225-342-0013

jbroussard@treasury.state.la.us

 

Bridgewater On Deleveraging

FOR THOSE OF YOU WHO FEEL THE NEED TO READ MORE ECONOMIC WONK MATERIAL, I'VE ATTACHED THE WHOLE DEAL. FOR MOST PEOPLE IT IS A GOOD CURE FOR INSOMNIA.

The US Deleveraging is Progressing, with Some Shifts in the Mix

As we have discussed, a key ingredient in the healing of the US economy has been policymakers' success at engineering an environment in which the overly leveraged US economy simultaneously lowers its debt burdens while experiencing moderate growth. This is what we refer to as a "beautiful deleveraging." After six years of this, aggregate debt levels have declined and the mix of credit balances has shifted, leaving lower debt-to-GDP across the whole economy, with the deleveraging occurring among those private sector borrowers who were most over-leveraged (households, financials), and the impact of their deleveraging cushioned by the leveraging up of the central government, which had room to do so. With the substantial healing that has taken place, growth is now gradually being supported to a greater extent by credit creation, and the rate of decline in debt-to-GDP has slowed. Household balance sheets are still improving, but at a slower rate because there are fewer defaults and more new borrowing. In the financial sector, debts relative to GDP are also falling more slowly as banks are accommodating the increase in the demand for credit by leveraging up. The pace of deleveraging in the shadow banking sector has also slowed, a reflection of the cleansing that has gone on in their balance sheets and the improved conditions of their borrowers. Business debt growth is notably fast, leading to rising business debt levels relative to GDP. As the private sector has healed, the government has been able to reduce its support, allowing sharply lower federal deficits while the economy has sustained an acceptable rate of economic growth. Of course, these improvements in private sector credit creation continue to be augmented by substantial money printing by the Federal Reserve, but the improvements in the private sector mean that the economy is gradually approaching the point where it can operate sustainably without this support. Going forward, the rise in rates which has already occurred will be a moderately restrictive influence, and, as we described earlier this week, if interest rates rise as discounted, sustaining the current deleveraging path at these higher levels of interest rates will require a much faster rate of improvement in private sector credit creation than is now occurring.

John Broussard
State of Louisiana
Department of the Treasury