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Weekly Market Update for December 13, 2019

by JM Hanley

The Dow was up on Friday, rising 3 points to close at 28,135. For the week, the Dow was up 0.4% (SP500 +0.7%) and year-to-date is now up 20.6% (SP500 +26.4%). The yield on the 10-year Treasury (an important interest-rate indicator) was down two basis points, closing at 1.82%. The price of crude oil was up 1% this week to $60 a barrel – up 30% YTD.

It was, as ever, difficult to discern progress on the trade deal amidst the fog of rumor. But Washington and Beijing have apparently reached a “phase one” deal along the lines laid out weeks ago.  The extensive tariffs Washington had scheduled to come into effect this Sunday has been suspended; beyond this, the tariff rate on an additional $120B in Chinese goods will be cut in half. In exchange, China has committed to purchase hundreds of billions’ worth of American products, including agricultural goods. Negotiators are expected to sign the deal in January. Talks on the second phase of agreement will begin immediately.

Across the Atlantic, the pro-Brexit Conservative Party won a substantial majority in British elections yesterday. The country now seems likely to exit the European Union in a more orderly fashion. Though domestic equities have little exposure to the UK economy, a chaotic departure was a potential source of volatility.

Economic data from the US was mixed.  Retail sales last month were lower than expected, and prior months were revised downward.  Other consumer indicators look healthy, so the late timing of Thanksgiving may have pushed some holiday shopping into this month. In accordance with this view, inflation in the US last month was very slightly higher than expected at 2.3%.  This is a healthy pace, albeit unsurprising in light of the Fed’s interest rate cuts throughout the year.  The Fed followed its own advice and left rates unchanged at its December meeting. Reports from the meeting seem to indicate that the Fed will hold rates flat through the end of 2020. Chairman Powell said he only would support higher rates if inflation accelerates for a sustained period of time, which he believes is unlikely.

Highlights on next weeks’ economic calendar include some manufacturing indicators and data from China, both on Monday.

*The information contained in this commentary is not investment advice for any person. It is presented only for informational purposes to assist in explaining factors that may have had an impact in the past or may have an impact in the future on client portfolios or composites. All expressions of opinion reflect the judgment of the firm on this date and are subject to change. Included information has been obtained from sources considered reliable, but we do not guarantee that the foregoing materials are accurate or complete. Clients or prospective clients should contact Ulland Investment Advisors for individualized information prior to deciding to participate in any portfolio or making any investment decision. Ulland Investment Advisors does not provide tax advice. All clients are strongly urged to consult with their tax advisors regarding any potential investment. Past performance does not guarantee future results; there is always a possibility of loss.