Weekly Market Commentary December 17, 2018

Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.

After a few near misses, the S&P 500 finally entered a correction, meaning it closed more than 10% below its previous all-time closing high. The S&P 500 had flirted with these levels three previous times, even trading into correction territory. But it had always rallied enough at the close to stay above the 10% mark.

Investors should avoid getting too excited about officially reaching correction levels. While markets did hit a new low, the difference was marginal, and the core issues remain the same. Global economic data raised concerns about growth continuing to slow, and uncertainty about trade agreements pushed markets lower.

The S&P dropped 1.2% last week. Global stocks participated in the decline as the MSCI ACWI slid 1.1%. Concerns over economic growth have helped bonds recently, and the Bloomberg BarCap Aggregate Bond Index rose 0.1%.

Economic and Policy Update

Three sets of meetings, and the announcements that follow, will likely drive markets through year-end. Continued volatility may occur due to progress, or bad news.

The first is the Federal Reserve’s December 19 meeting on interest rates. Odds of a hike, based on CME Group data, are around 75%*. Of greater interest could be the press conference and meeting minutes communicate about future hikes. We believe the Fed will raise rates but communicate that rate hikes will likely slow next year.

The second set of meetings centers on the U.S.-China trade negotiations. Because of frequent signs of progress, followed by failures, investors have become more cynical regarding announcements from either party. Even though there are signs the talks are progressing, markets are waiting to see firm signals of progress or a deal. The accompanying chart shows the pressure on China is mounting. Industrial output grew at the slowest pace it’s seen in four years as trade pressure reduced manufacturing. These negotiations have continued to fare poorly, but both sides have an incentive to reach a truce that includes the framework for a final trade deal.

The third set of meetings encompasses the negotiations around Brexit. British Prime Minister Theresa May survived a no confidence vote last week but faces a delicate set of negotiations to get both the British Parliament and European Union to approve the same deal. The final outcome for Brexit is anybody’s guess. The near-term economic interests for all parties are for a deal, but the EU doesn’t want to make it easy to leave, and British politicians will be loath to sacrifice their careers signing on to a bad deal.

For each of these issues, the market will likely react more favorably to a pretty good long-term solution compared to a short-term truce. Economies are slowing because companies can’t make strategic decisions. Long-term predictability will likely benefit economic growth even if the solutions aren’t ideal.

                                                                                                                Source: FactSet

Key Points for the Week

  • The S&P 500, including dividends, has now declined more than 10% from its previous high.
  • Weak economic data out of China and other regions put pressure on the market.
  • The Federal Reserve, U.S.-China trade negotiations, and Brexit discussions will likely move markets this week.

Fun Story

Circle K Glitch Offers Gas for 2 Cents a Gallon

Circle K gas stations discovered a large influx of people pulling in for gas at multiple locations last week. Turns out a computer glitch set gas prices at 2 cents a gallon. The price break allowed some customers to fill up for just 30 cents. An early Christmas gift indeed.

facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.
Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.


Market Commentary: Robust Labor Market Growth Continues with Fed Poised for Another Rate Hike

Positive jobs data supported the market last week. The U.S. establishment survey indicated 372,000 new jobs were created in June. The rally was broad-based as every sector added jobs last month except for the governmental sector. Health care, professional and business services, and leisure …

Market Commentary: Moderating Inflation, Ebbing Political Uncertainty Among Reasons for Hope in the Face of a Tough Market

The Personal Consumption Expenditure (PCE) Price Index increased 0.6% in May, after rising only 0.2% in April. PCE inflation is an alternative inflation measure to the Consumer Price Index (CPI), which is released earlier. The two measures both show inflation to be very high, but the CPI in …

Market Commentary: S&P 500 Rallies 6.5%, Lifting Market Above Bear Level

The S&P 500 spent only a short time below the 20%-decline threshold, before jumping back above it last week. U.S. large-cap stocks rallied 6.5% based on optimism that inflationary pressures are starting to respond to higher interest rates.

Market Commentary: Fed Raises Rates by 0.75%, Market Moves Into Bear Territory

The S&P 500 dropped 5.7% last week and is now 22.3% off its peak. This decline pushed the index of large-cap U.S. stocks into a bear market, which is defined as a 20% or greater drop from its peak. Volatility remained elevated, and the S&P 500 has now moved by 1% or more 60 times …
1 2 3 4 69 70 71

Get in Touch

In just 15 minutes we can get to know your situation, then connect you with an advisor committed to helping you pursue true wealth.

Schedule a Consultation