Global markets posted sharp gains in October, clawing back most of September’s hefty losses. The revival was headed by equities, with US stocks leading the charge higher with a strong 7.9% total return via the Russell 3000 Index last month. Despite the broad-based gains at the kick-off to the fourth quarter, losses still dominate the year-to-date comparisons, along with a few instances of mild gains.
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● US consumer spending growth slows to 8-mo low in Sep | USA Today
● US personal income in Sep rises at slowest pace since March | USN&WR
● Consumer sentiment in US ticks higher in Oct | CNBC
● US Employment Cost Index growth accelerates in Q3 | US Labor Dept
● Chicago PMI rises to positive reading in Oct | ISM Chicago
● PMI: A lesser pace of decline for China’s mfg sector in Oct | Markit
● China’s official PMI for mfg shows slight contraction in Oct | MarketWatch

● The Money Makers: How Roosevelt and Keynes Ended the Depression, Defeated Fascism, and Secured a Prosperous Peace
By Eric Rauchway
Review via The Economist
Old-fashioned historians recoil at the idea of learning from the past to inform the present. But in “The Money Makers”, Eric Rauchway, a historian at the University of California, Davis, tries to do just that. His book looks at the economic policy of Franklin Delano Roosevelt, a four-time American president from 1933 to 1945, and how he was influenced by John Maynard Keynes, a British economist. Mr Rauchway argues that policymakers today could learn “valuable lessons” from Roosevelt, who shook up the economic orthodoxy to rescue America from the Great Depression of the 1930s and to keep the Allies going during the second world war.
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Deceleration weighed on personal income and spending growth for the US last month, according to this morning’s update from the Bureau of Economic Analysis. Consumer spending rose just 0.1% in September vs. the previous month—the smallest rise in eight months. Disposable personal income growth was weak too, rising only 0.1% in September—the weakest gain since April. Consider, too, that private-sector wage growth—the foundation for consumer spending and the US economy in general—just posted its first monthly decline in more than a year. Adding to the gloomy numbers is the sight of the year-over-year comparisons ticking lower as well.
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The recent turbulence in global markets is a signal that the potential for macro risk is on the rise. One way to quantify the threat for the US economy is by monitoring four financial stress indexes that are published by regional Fed banks. Although all of these benchmarks show that risk has increased lately, current levels remain well below their respective danger zones. That’s no guarantee of smooth sailing, but the fact that financial stress remains in the “normal” if slightly elevated range suggests that this variety of risk isn’t a major threat for the US economy at the moment. Trouble could arise for other reasons, of course, but the odds are low that a financial-related catalyst will create a problem for the US in the near term.
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● US Q3 GDP growth slows to 1.5% | Reuters
● US economy stronger than GDP suggests | The Economist
● US jobless claims but still close to 40-year low | MarketWatch
● Bloomberg US Consumer Comfort index falls to 5-week low | Bloomberg
● US Pending Home Sales Index falls for 2nd month in Sep | The Hill
● Eurozone economic sentiment improves in October | Reuters
● German retail spend flat in Sep but rise 3.4% YoY | Reuters
● Bank of Japan holds off on more monetary stimulus | Guardian

The US economy cooled in the third quarter, and by a hefty degree, according to this morning’s initial estimate of GDP for the July-through-September period. In line with market expectations, output rose at a soft 1.5% annual rate, well below Q2’s strong 3.9% rise. A key factor in the deceleration: a sluggish rise in inventories, which slashed 1.44 percentage points off of the headline GDP growth rate, marking the biggest inventory-related cut since Q4: 2012.
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Maybe. Depending on the selection of indexes, fund products, and time periods, you can find almost anything you want. Data mining issues aside, the notion of what’s often called the “sweet spot” in the capitalization spectrum persists, albeit in fits and starts. A popular explanation is that the middle slice of the capitalization spectrum merges the best attributes of small caps and large caps while minimizing the drawbacks. The implication: you should carve out a dedicated mid-cap allocation. Perhaps, but like every other risk premium the mid-cap variety waxes and wanes.
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● Fed leaves rate unchange, dhints at December hike | Reuters
● US trade gap drops to 7-month low in September | Bloomberg
● Inventories expected to weigh on today’s GDP report | Reuters
● US trucking growth has been weak this fall, according to execs | MNI
● German jobless rate ticks lower in September | Reuters
● Japan’s industrial output delivers upside surprise for Sep | Bloomberg

Expectations are in need of a haircut for tomorrow’s preliminary release of the government’s third-quarter US GDP report, according to yesterday’s update of the Atlanta Fed’s unofficial estimate. In contrast with Econoday.com’s consensus forecast for a 1.7% rise in Q3 output, yesterday’s update of the unofficial GDPNow model forecast sees Q3 growth at a tepid 0.8%, down a tick from the bank’s Oct. 20 nowcast of 0.9% and far below Q2’s strong 3.9% rise.
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