Weekly Commentary 12.17.18 – Grinch-Like

December 17, 2018

It was a Grinch-like week. Equity markets finished in the red last week as investors fretted about ongoing trade tensions with China, slowing global growth concerns, Brexit bickering, the upcoming Fed meeting and legal problems for President Trump.

For the week, the DJIA lost 1.17% while the S&P 500 gave back 1.22%. The volatile Nasdaq declined 0.81%. Developed international markets were also weak as the MSCI EAFE index dropped 0.89% for the week. Emerging markets lost ground as well with the MSCI EM index ceding 0.95%. Small company stocks, represented by the Russell 2000, were beaten-down by 2.52% for the week. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week slightly higher (+0.06%) in a flight to safety. As a result, the 10 YR US Treasury closed at a yield of 2.89% (up 4 bps from the previous week’s closing yield of 2.85%). Gold prices closed at $1,237/oz – down 0.79% on the week. Oil prices continued their sell-off during the week as oil closed at $51.20 – down 2.68% for the week (good for consumers and businesses, but seemingly bad for the overall psyche of the market …).

The week ahead will bring a host of economic reports – housing starts and existing home sales, durable goods, consumer sentiment, final estimate of 3Q GDP and the all-important FOMC meeting. We expect most economic reports to be fairly positive, but investors will be focusing on any comments from the Fed regarding future interest rate hikes. It is widely expected that the Fed will raise interest rates by 25 bps this week. Of course, positive developments surrounding the lingering trade spat with China should provide a much needed boost to equities around the world (don’t hold your breath …).

Volatility is here. It certainly feels like this market downturn will never end, but we all know better. As always, we plan to look through the day-to-day news and focus on longer-term objectives. Investors should stay the course and stick close to their long-term asset allocation targets.

Most importantly, we wish to extend to all a peaceful and enjoyable holiday season.

“Every Who Down in Whoville Liked Christmas a lot…
But the Grinch,Who lived just north of Whoville, Did NOT!
The Grinch hated Christmas! The whole Christmas season!
Now, please don’t ask why. No one quite knows the reason.”

– Dr. Suess