Stock prices rose significantly in October with the major indices averaging about 5.5% return for the month. All sectors of the stock market rose with energy and consumer discretionary leading. Bonds generally closed down slightly but TIPS (inflation protected treasuries), long term treasuries and international treasuries closed October positively.
In order to understand the deficit and government spending we must understand the difference between personal debt/income ratios and corporate debt/equity ratios and government debt/GDP ratios. The GDP measures the strength of a country’s economy. Our GDP is based on spending, household and government combined. Consumer spending supports the U.S. economy until it doesn’t. Then the government steps up and thus increases national debt. When the stimulus is effective (to consumers, not banks), it increases consumer spending and the economy is again running on consumers, the GDP rises and the debt/GDP ratio falls. A stronger GDP supports a higher debt level. For corporations and government, growth balances debt. Long overdue wage growth is currently not harming the stock market.
November begins the season of letting go. Trees easily release their leaves of summer, opening our view of the sky. It would be fatal to cling to them. Only bare branches survive the season of snows. A new canopy will grow in time. For now we take delight in what the summer brought, how we grew and learned to love better this cyclical life.