NDS Weekly Commentary 12.23.19 – December Equity Rally Continues

December 23, 2019

Equities reached new milestones last week as all three major US indices touched new all-time highs. The rally persisted due to abating concerns on trade and geopolitics. Work continues on the details of the preliminary phase one trade deal struck between the US and China a week ago. US Treasury Secretary, Steve Mnuchin, said he expects the pact to be signed in early January. This, along with the imminent passage of the USMCA (revised trade deal with US-Mexico-Canada), has removed anxieties that weighed on the market throughout 2019.

For the week, the DJIA increased 1.1%, the S&P 500 rose 1.7%, and the tech-heavy NASDAQ climbed 2.2%.  International stocks were also positive on the week with developed country stocks (MSCI EAFE) and emerging markets stocks (MSCI EM) adding 0.6% and 2.0%, respectively. As expected, fixed income assets struggled on the week with the 10yr U.S. Treasury closing 9bps higher at a yield of 1.92%.

As is well known by now, the US House of Representatives passed two articles of impeachment against the US President. This is the third time in history a sitting US President has been impeached by the US House of Representatives. Without additional information, the equity markets will remain unfazed as it seems unlikely the President will be removed in a Republican-led senate.

Economic data on the week was quite positive. The Markit Flash U.S. Composite PMI Output Index for December registered a reading of 52.2, up from 52.0 in November. The improved reading was helped by services sector growth and improving manufacturing conditions. Industrial production increased 1.1% in November, which beat expectations of a 0.8% increase.  On Friday, the Bureau of Economic Analysis (BEA) reported that real U.S. Gross Domestic Product (GDP) increased to 2.1% (in-line with expectations) in the 3rd quarter. The BEA also reported that personal income rose 0.5% in November, which outpaced estimates of a 0.3% increase.

As a reminder, the U.S. markets will close at 1:00pm EST Tuesday and the full day Wednesday in observation of Christmas Day. Most importantly, we wish to extend to all a peaceful and enjoyable holiday season!