Market Update: Mon, Dec 10, 2018 | LPL Financial Research


Daily Insights

Retesting October-November lows. The S&P 500 Index fell 4.6% last week, its worst week since March, leaving the index in line with the lows of the latest correction. Losses were driven primarily by three issues: the risk that U.S.-China trade talks fall apart (see below), concerns about a Fed policy mistake, and sharply lower oil prices (see below), all of which contributed to increasing concerns about slowing global growth or recession. In today’s Weekly Market Commentary, we summarize our views on these issues and discuss prospects for a stock market rebound based on technical analysis.

We continue to see the U.S-China trade dispute as the biggest headwind for stocks. Against that backdrop, it is understandable that stocks threw a tantrum last week after U.S. trade officials walked back part of the apparently overly-optimistic recount of the Trump-Xi meeting at the G-20 summit. While no resolution has been reached, we continue to view the emergence of a path toward progress favorably and expect an agreement in the coming months, despite mixed messages from both sides and the arrest of a Chinese telecom executive. In this week’s Weekly Economic Commentary, due out later today, we provide some insight regarding the outcome of the G-20 meeting and what we expect over the next ~90 days as the two sides re-instate negotiations.

Leading indicators still pointing positive. Risk of a full-blown trade war with China and some potentially concerning market signals have increased fears of recession. One such signal is the inversion of the short end of the yield curve, including the spread between 2- and -5 year Treasuries. But the yield curves that have historically been more predictive of future recessions (2-year and 10-year, and 3-month and 10-year Treasuries) have not inverted. And even when they potentially do, stocks can continue to go higher for a year or two based on history. When we look at signals from the bond market alongside our other favorite leading indicators, we still see low odds of recession in the coming year.

Oil has a supply problem. Sharply lower WTI crude oil prices are also being cited by some as a sign of looming recession. But oil’s weakness has been driven mostly by supply issues, including Iran sanctions, record levels of U.S. production, and elevated domestic inventories. We think OPEC’s decision to cut 1.2 million barrels of production last week is a positive step and will help stabilize prices.

Brexit vote put on ice. In a last minute decision, British Prime Minister Theresa May decided to postpone tomorrow’s Brexit vote. Over the weekend, May insisted the vote would take place despite expectations that it would fall short by a large margin. We’re not convinced the vote will ever happen, but headline volatility is likely to persist as the UK approaches the March 29, 2019 deadline for leaving the European Union.


Click Here for our detailed Weekly Economic Calendar




  • CPI Report (MoM, Nov)
  • Eurozone Industrial Production (Oct)
  • Eurozone Employment Report (Q3)


  • Initial Jobless Claims (Dec. 8); LP: 234K
  • European Central Bank Rate Decision
  • Nikkei Japan Manufacturing PMI (Preliminary, Dec)
  • Japan Industrial Production (Oct)
  • China Retail Sales (Nov)
  • China Industrial Production (Nov)


  • Retail Sales (MoM, Nov)
  • Industrial Production (MoM, Nov)
  • Markit US Services PMI (Preliminary, Dec)
  • Markit US Manufacturing PMI (Preliminary, Dec)
  • Markit Eurozone Manufacturing PMI (Preliminary, Dec)



The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

All company names noted herein are for educational purposes only and not an indication of trading intent or a solitication of their products or services. LPL Financial doesn’t provide research on individual equities.

All performance referenced is historical and is no guarantee of future results.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured.  These products are not Bank/Credit Union obligations and are not endorsed, recommended or guaranteed by any Bank/Credit Union or any government agency.  The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.

Index data obtained via FactSet


For Public Use – Tracking #1-800866 (Exp. 12/19)