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Monthly Market Brief- October 2016

Each month, our Heritage Investment team publishes a market brief to provide an overview of the major factors influencing the US economy, including a summary of key sectors and the current positives & challenges.

Click Market Brief October 2016 for the October 2016 update.

Here are some key highlights:

POSITIVES
Americans continue to clean up household balance sheets by significantly lowering average mortgage payments to 11.7% of income, down from approximately 19.5% at the peak of the Great Recession and average over the last 40 years
oVehicle sales rose to an annualized 17.8 million units in September, up a surprising 4.7% from August
oWhile non-farm payroll growth was relatively soft compared to the last three months, 156,000 jobs were added in September
oBoth the ISM manufacturing and non-manufacturing indices rebounded in September, suggesting that the significant decline both experienced in August was an anomaly

CHALLENGES
oThe labor force participation rate remains at a low of 62.8% since the peak of the Great Recession, and while a good portion can be explained by those choosing to retire, the aging effect and cyclicality do not tell the whole story
oAs of September 30, 2016, the real yield on a 10-year treasury was -0.70%; thus, savers are not being compensated adequately for inflation and are in essence paying to save
oSoft consumer spending and capital goods shipments will likely weigh on third quarter GDP growth; thus, market expectations for a November interest rate hike have cooled