Market Update: Mon, Dec 31, 2018 | LPL Financial Research

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Daily Insights

U.S., China talks progress as Chinese economic slowdown continues. In a tweet over the weekend, President Trump suggested that a “deal is moving along very well” after a call with Chinese President Xi Jinping. Though the president indicated “big progress is being made,” skeptics abound that a comprehensive agreement is imminent. However, China is feeling increased pressure to make a deal as momentum in the economy continues to falter. In the latest sign, official Purchasing Managers Index (PMI) data for December showed manufacturing activity unexpectedly contracted for the first time since July 2016, while a sub-index for new orders fell for the first time in more than a year. While we remain optimistic that an agreement will be reached in 2019, possibly ahead of the March 1 deadline imposed by President Trump, our expectations that a wide-ranging deal can be secured ahead of initial face-to-face negotiations, set to begin January 7, is unlikely.

Government shutdown drags on as squabble continues over border wall. Funding for a wall on the U.S.-Mexico border remains the key sticking point in a budget battle in Washington that has served to erect a wall between Congressional republicans and democrats. Per the norm, markets have largely ignored the squabbling, given the negligible economic impact. However, to the extent it could serve as a preamble to a meaningful debt ceiling debate next summer, when interest payments on U.S. Treasuries could be at stake, the situation bears monitoring.

Weekly commentaries focus on market volatility. The S&P 500 Index came about as close as possible to the technical definition of a bear market last week without officially registering one. In today’s Weekly Market Commentary, we offer some historical perspective on bear markets and our latest thoughts on fundamentals, the Federal Reserve, the government shutdown, and the potential durability of the market’s recent low. On the economic front, increased uncertainty around policy risks has contributed to sharp market declines, but growth expectations continue to hold steady in the U.S. and have declined only modestly globally. In this week’s Weekly Economic Commentary, we compare the market’s fears and the economic realities. Overall, we encourage investors to remain focused on the fundamentals supporting growth in the economy and corporate profits, and stick with long-term strategies despite historic volatility.

Weekly Market Drivers Blog. Please read our recent blog, “Santa Makes Brief Appearance on Wall Street” for perspectives on last week’s wild ride in financial markets.

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Click Here for our detailed Weekly Economic Calendar

Monday

  • N/A

Tuesday

  • China Markit/Caixin PMI Manufacturing SA

Wednesday

  • S. Markit PMI Manufacturing SA (Final)
  • Germany Markit PMI Manufacturing SA (Final)
  • Eurozone Markit PMI Manufacturing SA (Final)
  • France Markit PMI Manufacturing SA (Final)
  • Italy Markit PMI Manufacturing SA

Thursday

  • S. ADP Employment Survey SA
  • S. BEA Domestic Auto Sales SAAR
  • S. Initial Claims SA
  • S. ISM Manufacturing SA
  • China Caixin Services PMI

Friday

  • Nonfarm Payrolls SA
  • Germany Markit PMI Services SA (Final)
  • Eurozone CPI EU Harmonized Y/Y (Preliminary)
  • Eurozone Markit PMI Services SA (Final)
  • Eurozone PPI NSA Y/Y
  • France CPI NSA M/M (Preliminary)
  • France Markit PMI Services SA (Final)
  • Italy Markit PMI Services SA

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Index data obtained via FactSet

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