Weak Manufacturing Report Leads To Rough Week For Stock Market

by Financial Design Studio, Inc. / October 3, 2019

financial advisor robert stoll cfp cfa chief investment officer draft commentary Profile AboutStocks had a difficult week as investors digested a weaker-than-expected survey on the health of U.S. manufacturing. The weak manufacturing report added to fears that the U.S. and global economy could be headed for a recession.

Let’s take a closer look at what the report said.

On Tuesday, the Institute for Supply Management released their monthly survey of manufacturing, known as the Purchasing Managers Index (PMI).

The index reading came in at 47.8, below economist expectations. A reading below 50 usually points to a contraction in manufacturing activity, while a reading above 50 indicates a manufacturing expansion.

Financial Advisor Weak Manufacturing Deer Park Barrington

This was the first time since 2015 the PMI Index fell below the critical level of 50.0. According to the ISM, the main driver of the pessimism was the continued trade fight between the U.S. and China. 

Does This Automatically Mean A Recession Is On The Horizon?

Not necessarily. This is the 9th time the PMI has broken below 50 since 1990, yet there have only been three recessions during that period. Back in 2015-2016, a steep drop in oil prices led to the PMI dropping below 50 as oil & gas drillers in the U.S. suffered, yet the overall economy stayed out of recession.

How Do Jobless Claims Factor Into This?

One of the timely economic indicators we watch closely is weekly jobless claims, which remain at very healthy levels. In fact, weekly jobless claims haven’t been this low since the late 1960’s.

Financial Advisor Weak Manufacturing Deer Park Barrington

We continue to monitor the situation closely. Our recent post on recession odds suggested that we’re overdue for a downturn, as they typically happen every seven years. Regardless of whether a recession happens or not, we’re continuously monitoring moves in the market and taking advantage of out-sized moves to make sure client portfolio remain in-line with client financial goals.

Wondering how this affects your portfolio? Schedule a call with our financial advisors at Financial Design Studio to discuss your portfolio today.

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