Santa makes an appearance on Wall Street. Investors received a belated Christmas present yesterday as major U.S. indexes jumped roughly 5%. The Dow and S&P 500 Index posted their largest single-day point gains ever. Consumer discretionary stocks (+6.3%) helped power the markets higher thanks to reports showing retailers had their best holiday shopping season in years, while the energy sector (+6.2%) was also among the top performers on the heels of a 10% surge in WTI crude oil prices. Bond prices declined as investors moved into riskier assets, with yields on longer-dated Treasuries rising more than shorter-dated issues, leading to a steepening of the yield curve. Yesterday’s rally was a welcome event with equities on course for their worst December on record. And though we remain optimistic, we encourage patience as volatility (on both the upside and downside) is likely to persist.
U.S.-China trade talks slated for early January. For the first time since President Trump’s late-November meeting with Chinese counterpart Xi Jinping, U.S. and Chinese officials will hold in-person meetings as the two sides seek common ground on the their trade dispute ahead of the March deadline. The news follows an announcement out of Beijing this week that it will implement a third round of tariff cuts on January 1 targeting more than 700 goods. While a major breakthrough at the meeting is unlikely, it demonstrates both sides’ commitment to finding a resolution, which we expect to occur in 2019.
Trump-Powell meeting eyed for next month. Amid persistent criticism from the president, White House officials have reportedly posed the idea of a meeting between Federal Reserve (Fed) Chair Jerome Powell and President Trump early next year. Though Powell has not explicitly expressed interest, he would be hard-pressed to decline an invitation. Historically, similar meetings have taken place without a perceived loss of the Fed’s independence in guiding monetary policy, and a Trump-Powell meeting would likely be no different. The headlines follow several interviews over the weekend in which Administration officials indicated that Powell’s job is “100% safe,” and that the president does not have the authority to fire the Fed chair.
Bear market without a recession? Dating back to WWII, there have been 14 bear markets–7 of them during a recession, and 7 without a recession–In bear markets accompanied by a recession, the S&P 500 has taken an average of about 34 months to recover its prior peak. In bear markets without a recession, we find that stocks tend to recover a bit faster, taking an average of about 11 months to recover their prior peak. We discuss this topic further in today’s LPL Research blog, due at noon ET.
LPL Research on Fox Business News. LPL Senior Market Strategist Ryan Detrick was on Fox Business News yesterday discussing the recent volatility and what might be in store for markets and the economy in 2019.
- Initial Jobless Claims (Dec. 22)
- New Home Sales (MoM, Nov)
- Conference Board Consumer Confidence Index (Dec)
- Japan Jobless Rate (Nov)
- Japan Industrial Production (Preliminary, Nov)
- Japan Retail Sales (Nov)
- Wholesale Inventories (Preliminary, MoM, Nov)
- Retail Inventories (MoM, Nov)
- Pending Home Sales (MoM, Nov)
- Germany CPI Report (Preliminary, Dec)
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Index data obtained via FactSet
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