As has become a trend in the last several days, another economic indicator covering the month of October came up short of expectations.  The most recent example is the ISM Non-Manufacturing report.  While economists were expecting a headline reading of 56.0 versus last month’s reading of 57.1, the actual reading came in at 54.8.  Yes, the report was weaker than expected, but it comes after last month’s print which showed the largest m/m increase in the history of the survey.  On a combined basis and accounting for each sector’s share of the overall economy, the October ISM came in at a level of 54.5 compared to last month’s reading of 56.4.  Again, that decline also came on the heels of the largest one-month increase on record in September.  Looking at the charts of both indices, current levels are right in the middle of their range of the last few years.

As far as the internals of the report are concerned, things were, for the most part, weak.  While every category is in expansion mode (above 50), the only ones that showed a month/month increase were Inventories, Prices, and Import Orders.  Compared to a year ago, breadth was similarly weak with just Prices and Export Orders showing a year/year increase.  With the October employment report coming up tomorrow, it was especially noteworthy that the category that showed the largest m/m and y/y decline was Employment.

With just five days to go until the election and the S&P 500 in the midst of a seven-day losing streak, sentiment on the part of individual investors only declined modestly this week.  That being said, with sentiment already at such depressed levels, it would be hard to get much more negative.  According to the weekly survey from AAII, bullish sentiment dropped from 24.75% down to 23.64%.  This is the lowest weekly reading since late June leading up to the Brexit vote, and represents the 53rd straight week below 40%.  Bearish sentiment, meanwhile, saw an extremely modest increase, rising to 34.32% from 34.07%.  We would like to say that once the election passes that investor sentiment will start to improve, but no matter who wins, that attitude may be a little on the optimistic side.

Jobless claims came in higher than expected this week hitting a level of 265K compared to expectations for 256K.  That’s the highest weekly reading since the first week of August.  Additionally, after nine straight weeks where jobless claims came in lower than expected, this week’s higher than expected reading represents the third straight miss.  Even after this week’s increase, jobless claims are still at extraordinarily low levels and have yet to even make a higher high, but when claims eventually do start rising, it will have to start from somewhere.  Whether or not it is from these levels remains to be seen.

With this week’s increase, the four-week moving average increased to 257.75K from 253K.  This is 8.25K above the post-recession low of 249.5K hit earlier this month.

On a non-seasonally adjusted (NSA) basis, claims increased by just under 9K to 245.3K.  Despite the increase, this level is more than 100K below the historical average for this current week of the year going back to 2000.  In fact, you still have to go back to 1973 to find a year where claims for the current week of the year were lower than they are now.

With the US underperforming other markets around the world over the last few weeks, we’ve seen its percentage of world equity market cap begin to dip and break down.  In mid-2016, the US made up nearly 38% of world market cap, but as shown below, as of yesterday this reading had dipped to 36.1%.  That’s the lowest level seen since mid-July, and it’s further indication that election hedging is causing a lot of the recent weakness for stocks.

Below is an updated look at our country trading range screen featuring the 30 largest country ETFs traded on US exchanges.  For each ETF, the dot represents where it’s currently trading, while the tail end represents where it was trading one week ago.  Moves into the green zone are considered oversold, while moves into the red zone are considered overbought.

Global investors certainly don’t have to worry about overbought markets right now, as just one country (Chile) is trading in overbought territory.  Plenty of countries are oversold, however.  As shown below, 15 of 30 countries are at oversold levels, with Sweden, Vietnam, and the US the most extended to the downside.

The US is usually an area of the world that holds up better than most when global markets decline in tandem, but this time the US is leading the way.  This is a pretty good indication that election worries here in the US have been a primary driver of the declines in recent days.