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In my view data released to date has indicated the US and global economy held up fairly well in Q3, contrary to the widely held fears of a sharp deceleration. Data is now suggesting third quarter global growth has slipped to 2.5% from 3.1% registered in the second; slow but not the implosion many have predicted.
Will growth accelerate in the fourth quarter? Generally speaking, very preliminary data suggest yes.
Friday October’s employment data is released. Many broad based conclusions will perhaps be made from these statistics.
The current advance in equities from August’s lows is based on the assumption of continued central bank intervention, a trade/narrative that is very long in duration.
About seven weeks ago the narrative began to change where good is good and bad is bad. But as written this emerging narrative was again overcome by the long embedded belief that increased central bank intervention is beneficial to equity prices [but not necessarily to the real economy].
At some juncture this massive stimuli will impact the real economy but the question is when.
As inferred above, for the exception of exports and manufacturing, US growth is relatively strong. There is/was a proverbial currency race to the bottom, especially as compared to the dollar. I think the vast majority of the upside move on the dollar is over.
Regarding manufacturing, many of the manufacturing jobs lost are in the oil sector. In my view it is unlikely oil will decline by the similar amount as the last 16 months thus suggesting oil’s drag on the economy will not be repeated.
Reiterating the question above, will growth re accelerate in the fourth quarter? I think yes for the simple fact many of the headwinds are abating or will not be repeated. Moreover the comparisons will be easier.
Last night the foreign markets were mixed. London was down 0.38%, Paris up 0.35% and Frankfurt down 0.83%. China was down 1.70%, Japan down 2.10%, and Hang Sang down 1.19%.
The Dow should open little changed on mixed signals from our trading partners. Europe’s data was stronger than expected while Chinese statistics offered mixed signals. The 10-year is off 6/32 to yield 2.18%.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.