Vehicle Sales

Vehicle sales increased in October from 17.8 million to 18.3 million units on a seasonally adjusted annual rate. This represents just under a 3% gain month over month and a 0.6% gain year over year. The pace of vehicle sales does not appear sustainable, however, as the industry will face headwinds from financing in the upcoming year. If the Federal Reserve raises interest rates as anticipated, this will filter down to auto loan rates and cause payments to rise. Financing will also become more constrained as the level of auto loan delinquencies will continue to rise, as it has in 2016. Another risk to sales is a decline in used-vehicle pricing, which erodes leasing sales and has accounted for an increasing share of sales overall.

 U.S. & World Equity Indexes; 10/31/16; YTD Return S&P 500; 2,126; 4.00% Dow Jones Industrials; 18,142; 4.10% NASDAQ Composite; 5,189; 3.60% Shanghai Composite (China); 3,100; −12.40% S&P BSE Sensex (India); 27,930; 6.90% Nikkei Stock Avg (Japan); 17,425; −8.50% CAC 40 (France); 4,509; −2.80% DAX (Germany); 10,665; −0.70% FTSE 100 (U.K.); 6,954; 11.40%
 Selected Interest Rates; 10/31/16; 9/30/16 15-Year Mortgage; 2.78%; 2.72% 30-Year Mortgage; 3.47%; 3.42% 5-Year Treasury Bond; 1.31%; 1.14% 10-Year Treasury Bond; 1.84%; 1.60% 30-Year Treasury Bond; 2.58%; 2.32%
 Key Economic Statistics; Most Recent; Prior Month National Producer Price Index; 0.00%; 0.30% Consumer Price Index; 0.40%; 0.30% Unemployment Rate; 4.90%; 5.00% ISM Manufacturing Index; 51.90; 51.50 ISM Services Index; 54.80; 57.10 Change in Non-Farm Payroll Emp.; 161,000; 156,000 New York State Consumer Price Index - NY, NJ, CT; 0.10%; 0.20% Unemployment Rate; 5.20%; 5.00% NYS Index of Coincident indicators; −0.90%; 4.40%

Risk of Recession

The probability that the U.S. will be in recession in six months fell one percentage point in September, to 12%. The current expansion is getting a bit long, as the nation shifts from a midto late-cycle expansion. Entering a late-cycle expansion, however, does not mean that a recession is imminent. Fundamentals remain strong; household balance sheets couldn’t be better, the financial system’s balance sheet is strong, and although businesses have leverage, the levels are manageable given low interest rates. In summation, the current expansion has room to run.

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 Equity Market Statistics; 10/31/16; 9/30/16 Dow Jones Industrials Dividend Yield; 2.67%; 2.63% Price-to-Earnings Ratio (12 Mth Trailing); 18.89; 19.29 Price-to-Book Value; 3.07; 3.10 S&P 500 Index Earnings Yield; 4.79%; 4.53% Dividend Yield; 2.14%; 2.14% Price/Earnings (12 Mth Trailing); 20.90; 22.09 Price/Earnings (2016 EPS Est); 19.45; 19.68

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