Market Update: Fri, Nov 30, 2018 | LPL Financial Research

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Daily Insights

  • Fed minutes support flexibility. Minutes from the Federal Reserve’s (Fed’s) November meeting supported Fed Chair Jerome Powell’s and Fed Vice President Richard Clarida’s dovish comments earlier in the week. In the minutes, policymakers discussed several headwinds that have concerned investors recently: trade, deterioration in business-related economic data, and tightening financial conditions. Fed members also acknowledged that they must better convey their flexibility to economic circumstances, especially given the current headwinds. We remain encouraged by the Fed’s pragmatic approach to evaluating risks, and we believe that a careful, gradual approach to increasing rates will limit the chances of a policy mistake.

  • U.S., China look to ease tensions ahead of G20. A report from the Wall Street Journal said officials from both sides are working on a deal that would suspend additional tariffs through spring in exchange for meaningful discussions around producing significant changes to China’s economic policy. The report comes as Presidents Donald Trump and Xi Jinping are set to meet on the sidelines at the G20 summit in Buenos Aires being held today and tomorrow. Details of the potential deal were lacking, however, as it remains unclear what specific demands the U.S. will have or to what extent China will oblige. Despite the lack of clarity, this suggests both sides recognize the need to continue negotiations and work towards a mutually beneficial solution.

  • Oil dips below $50/barrel. WTI crude oil fell below the psychologically important level yesterday for the first time in over a year but rebounded on news that Russia is warming to the idea of production cuts after watching prices fall >30% over the last two months. However, meaningful cuts may be difficult to achieve for political reasons since Saudi Arabia would likely be expected to shoulder an outsized portion of the burden, and it may be difficult to tighten the spigot in the face of demands from President Trump for cheaper oil. OPEC officials are scheduled to convene Vienna next week, a meeting in which production negotiations normally take place; however, many officials expect clarity out of the G20 summit where President Trump, Russian President Vladimir Putin, and Saudi crown prince Mohammed bin Salman-among others-are meeting. While it’s possible oil could have near-term upside, U.S. supply response and continued pressure on OPEC out of Washington likely limits that potential.

  • Here comes December. Today is the last trading day of November, which means December is right around the corner. That could be good news for equity bulls, as since 1950, the S&P 500 Index in the month of December has the highest average return (+1.6%) out of all 12 months. Also, it has never been the worst month of the year – it is the only month that can claim that rare distinction (dating back to 1950). Today on the LPL Research blog we will take a closer look at this potentially bullish phenomena.

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