US Markets
Riding a wave of trade optimism and solid economic data, stocks notched solid gains in December, capping off an exceptional year for the equity markets.
The Dow Jones Industrial Average rose 1.74 percent, while the Standard & Poor’s 500 Index advanced 2.86 percent. The NASDAQ Composite led, climbing 3.54 percent.1
The month got off to a rocky start as trade sentiment turned negative. First, President Trump said that he was considering steel tariffs on Argentina and Brazil. Then, on the following day, he floated the idea that a trade deal with China might not happen until after the 2020 elections.
Solid Economic, Trade News
But a solid jobs report encouraged investors, sending stocks higher and wiping out much of the losses suffered in opening days of trading.
When news reports indicated that a phase-one trade deal with China may be near, stocks set another historical high. The apparent trade truce came as a relief to investors, erasing fears that another round of tariffs would kick in on December 15th.
News-Driven Rally
The stock market continued to march higher, following confirmation by officials from both the U.S. and China that a phase-one trade deal had been reached. Investors were also encouraged by positive news that showed strong consumer spending and a recovering housing market.
The final days of trading saw some selling, but not enough to diminish the shine on a powerful month and an exceptional year for investors.
Sector Scorecard
All but two industry sectors ended higher in December. Strong gains were posted in Communication Services (+1.85 percent), Consumer Discretionary (+2.28 percent), Consumer Staples (+1.48 percent), Energy (+1.38 percent), Financials (+1.76 percent), Health Care (+2.18 percent), Materials (+1.55 percent), Technology (+3.65 percent), and Utilities (+2.09 percent). Industrials (-0.63 percent) and Real Estate (-0.65 percent) were marginally lower.2
What Investors May Be Talking About in January
In the coming weeks, many companies will be releasing updates on business activity during the fourth quarter.
Corporate earnings were generally tepid in 2019, so expect attention to focus on whether companies believe they have turned the corner.
A pickup in earnings growth may lift investor sentiment as the new year gets underway. But a more modest forecast outlook may keep some on the sidelines, awaiting a clearer outlook from companies.
World Markets
Favorable developments in the U.S.-China trade dispute provided a boost to overseas markets. The MSCI-EAFE Index gained 3.12 percent during the final month of the year.3
European stocks were higher with gains in all major markets. The United Kingdom led, picking up 2.52 percent. France rose 1.23 percent, and Germany added 0.10 percent.4
Hong Kong posted a powerful month, picking up 7 percent. Meanwhile, Australian stocks slipped, with the ASX 200 down -2.36 percent. The volatile Argentinian market jumped 20.79 percent.5
Indicators
Gross Domestic Product
The final read of economic growth in the third quarter was unchanged, at a 2.1 percent annualized rate.6
Employment
Hiring surged in November, as employers added 266,000 jobs, which was well above the consensus estimate of 187,000. The unemployment rate fell to 3.5 percent, while wages rose a healthy 3.1 percent.7
Retail Sales
Retail sales disappointed, rising just 0.2 percent in November. The number was well below the consensus forecast of a 0.5-percent increase.8
Industrial Production
Industrial production rose 1.1 percent, a rebound largely due to the end of a labor strike at General Motors.9
Housing
Housing starts jumped 3.2 percent in November, with single-family housing starts reaching their highest level in ten months.10 Existing home sales were 2.7 percent higher than the previous month, with tight inventory driving a 5.4-percent jump to $271,300, in the year-over-year median sales price.11 New home sales rose 1.3 percent in November. The three months ending in November were the best three-month period for new home purchases since 2007.12
Consumer Price Index
The cost of consumer goods rose 0.3 percent in November. Year-over-year, inflation is up by 2.1 percent.13
Durable Goods Orders
Orders for long-lasting goods suffered a disappointing decline of 2.0 percent, falling short of the consensus estimate of a 1.2-percent increase.14
The Fed
The Fed reaffirmed its policy stance of maintaining short-term interest rates at their current level. In its statement, which accompanied the end of December’s Federal Open Market Committee meeting, officials suggested that the Fed had a “lower bar for cutting rates and a higher one for raising them.”15
- The Wall Street Journal, December 31, 2019
- Factset Research, December 31, 2019
- MSCI.com, December 31, 2019
- MSCI.com, December 31, 2019
- MSCI.com, December 31, 2019
- CNBC.com, December 20, 2019
- CNBC.com, December 6, 2019
- The Wall Street Journal, December 13, 2019
- CNBC.com, December 17, 2019
- CNBC.com, December 17, 2019
- The Wall Street Journal, December 19, 2019
- Bloomberg.com, December 23, 2019
- The Wall Street Journal, December 11, 2019
- The Wall Street Journal, December 23, 2019
- The Wall Street Journal, December 11, 2019
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