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AUTHOR: Jason J. Roque, CFP®, APMA®
TITLE: Investment Adviser Rep – CCO TAGS: Trade, Jobs, Oil, Stimulus |
Markets whipsawed about last week as trade, economic data, and fiscal action swayed confidence. What does it mean going forward?
Trade Exacerbation
Last week started with President Trump reinstating tariffs on steel from Brazil and Argentina. Tuesday, President Trump announced that a trade deal with China may not be done till after the 2020 election. The market had priced in a Phase 1 deal. That being the case, this news was not received well. Later calming statements from both the US and China caused a rebound recapturing most of the early losses. China indicated that human rights legislation by the US is not hampering talks. Additionally, China is waiving retaliatory tariffs on pork and soy products.
Economic Data[1]
With the Calendar turning over to December, there was a bevy of data points last week. The lone dark spot came from ISM manufacturing, as it came in at 48.1 for November. 50 marks the line between contraction and expansion. This is the 4th consecutive month of contraction for the sector. Job Strength gave us a nice rally on Friday. Unemployment fell to 3.5% as the economy added 266K jobs. Including upward revisions to the last 2 months, 307K jobs were added. Wages grew at 3.1% over the last 12 months, however stronger growth is needed to spur inflation. Thanksgiving retail spending rose 16%[2] from last year as consumer sentiment is at the highest level seen since May. Consumer sentiment rose to 99.2 for the month of December. Traditionally a seasonally strong statistic, but welcomed, as it had started to taper in the late summer.
OPEC and Friends
There was optimism last week around oil prices. OPEC proposed to decrease output by an additional 400K barrels/day. Current cuts call for 1.2M barrels/day. This would lighten supply giving further support to prices[3].
Japan’s Backpedal
Japan announced a ¥13.2T fiscal stimulus package. It was needed to offset the impact of tax increases from October. There was a crushing fall in consumption after the tax increase. Likely this effort was welcomed by the Bank of Japan as they have carried the stimulus burden as of late.
Conclusion
There was a lot of good news late last week that helped markets whipsaw back from a rough start. This week may be very similar. Articles of Impeachment are likely coming soon. While not expected to have long-term effects, they will likely have a short-term impact. The US has a 12/15 deadline where they are supposed to impose additional tariffs on China. Deferral or elimination is hoped for as a result of a phase 1 deal. Also, UK citizens head to the polls on the 12th to determine the direction of their country. Markets maybe thinly traded and susceptible to negativity, while results are awaited.
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[1] www.investing.com – economic calendar
[2] www.troweprice.com – global markets weekly update
[3] www.mfs.com – week in review