The New Year came with more of a whimper than a roar as December 31 market performance shaved performance off of the year. The S&P 500 finished the year up 11.41%[1].  The road there was not very smooth, but the year still finished in double digits.

Last week much of the data released led to the market shedding the gains made the prior week. Overall the data pointed to a continued softening in the global economy. Manufacturing data out of China and Europe softened, with much of the data indicating contraction, below the 50 mark. Inflation data out of Europe weakened as well, as follows[2]:

• Spanish CPI Y/Y: -1.1%
• HSBC China Manufacturing PMI: 49.6
• Italian Manufacturing PMI: 48.4
• French Manufacturing PMI: 47.5
• Europe Manufacturing PMI: 50.6

While Europe and China have shown signs of weakening the U.S. has been resilient. Not this time! Last week U.S. manufacturing data softened, initial unemployment claims went up, and U.S. home prices have gone up at slowing pace, as follows[3]:

• ISM Manufacturing PMI: 55.5
• Initial jobless claims: 298,000
• S&P/CS Home Price Index – 20: 4.5% Y/Y

All that said, the U.S. still remains the bright spot on the global economy. While it appears our economy is moderating, it is very far from stalling. This softening pressure, as long as it is watched and managed, will prolong the over-heating of the current expansion. Home prices were up, mortgage rates were down, initial unemployment claims remained under 300,000, and manufacturing remained in expansionary territory. Here are a few bright spots on the week[4]:

• CB Consumer Confidence: 92.6, up from 91
• Pending Home Sales: up 0.8% M/M

In all, the slowing of the global economy should lead to economic easing for emerging markets and the developed economies in Europe and Japan. Japan has already approved a $29.2 Billion stimulus package[5]. Oil prices are likely to experience more volatility before measures are taken by the global markets to stem the glut of oil supply currently on the market.

On the domestic front, the debt ceiling will become more hotly discussed as we near its next deadline in March.  Also, and likely more impactful, would be the Federal Reserve Board’s expectation to raise short term rates in the late spring. 2015 should be wrought with challenges, which will also provide opportunities.

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Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.

[1] www.morningstar.com – ^SPX quote

[2] www.investing.com – economic calendar

[3] www.investing.com – economic calendar

[4] www.investing.com – economic calendar

[5] www.mfs.com – week in review