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Week In Review


U.S. GDP grew at a 3.0% annualized rate in the third quarter according to data released by the Commerce Department.  Driving the solid Q3 growth was rising inventories, increased foreign trade and stronger business fixed investment.  Negative components of the report included reduced consumer spending (from 3.3% to 2.4%), lower residential investment and a slight decline in government spending.

Our Take

Solid growth in Q3 comes on the heels of 3.1% growth in Q2, marking the first back-to-back quarters with growth over 3% since 2014.  One troublesome part of the report was weak consumer spending, though this may be due to this year’s devastating hurricane season.  If sales recover, the trend (is two quarters a trend?) of recent strong GDP results could continue.  Keep in mind, however, that year-over-year GDP growth is just 2.3% despite the recent strong quarters, and a reversion to tepid growth is not out of the realm of possibility.


Abe’s coalition retained their two-thirds majority in last weekend’s elections.  This will allow Abe to lead Japan with no effective opposition through 2021.

Our Take

Abe will likely view this overwhelming victory as a mandate to continue the policies of Abenomics, which, to date; have consisted mostly of massive monetary easing and fiscal stimulus.  A continuation of Abenomics will likely do nothing to improve Japan’s dire fiscal situation and is unlikely to include the structural reforms needed to drive the sustained higher growth that Japan needs.


The ECB announced that it will reduce by half the size of its bond purchases starting in January and will continue the purchases through next September.  The bank also stated that it may extend the bond purchase program if necessary and stated that maturities will be reinvested for “an extended period of time after the end of asset purchases”.

Our Take

The ECB is moving toward less monetary accommodation in response to revived Eurozone growth.  However, the ECB still has a very large amount of unconventional policy easing in place and will for some time.


Xi Jinping unveiled a new Chinese leadership lineup that does not include a clear successor to him following his second five year term.  This marks a break from the practice in place since Deng Xiaoping’s retirement whereby the leader appoints a clear successor after their first term.  The Chinese Communist Party’s charter was also revised to elevate Xi’s status to the same level as Deng and Mao.

Our Take

China desperately needs to slow down credit growth and remove structural barriers to foreign investment and economic efficiency.  It remains to be seen if Xi will use his newly consolidated position to implement these difficult reforms.


The Catalan parliament voted to declare independence from Spain.  In response, the Spanish Senate granted Rajoy’s government the authority to oust the Catalan regional leaders and establish direct federal authority in the region.  Spanish bonds widened relative to Bunds, and the stock market fell 1.4%.

Our Take

Spain is very unlikely to allow Catalan independence, and Catalonia is unlikely to find many nations or international institutions willing to recognize its independence.  However, the Catalan independence episode is another indicator of the widespread disaffection with establishment parties and institutions throughout Europe.


Connecticut lawmakers passed a two-year $41 billion budget on Thursday.  The budget closes a budget gap and includes higher taxes and fees.  The budget provides relief for Hartford, as the city’s leaders had indicated that the city could be forced to seek bankruptcy protection without state assistance.  Both the Connecticut House and Senate passed the budget by large enough margins that would make it veto-proof should Democratic Governor Daniel Malloy attempt a veto.

Our Take

This week’s legislative approval of the Connecticut budget ends the almost four-month impasse.  The strong bipartisan support sends a message to Governor Malloy that the current budget proposal should be enacted into law.  During the stalemate, uncertainty surrounded Hartford’s financial situation as city leaders hinted that bankruptcy could occur.  Once the Connecticut budget is in place, Hartford will be able to move forward and focus on its own fiscal plan.


All expressions of opinions are subject to change without notice in reaction to shifting market conditions.  All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.  Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice.