Geopolitical tensions flare. U.S. stocks are lower this morning, extending Friday’s decline on news of a U.S. airstrike that killed a top Iranian military official. The attack was a major escalation in Mideast tensions, and it could have significant geopolitical implications. We cannot dismiss the risk that the situation expands into a broader conflict, but at this point, we think it’s unlikely to have a material impact on U.S. economic fundamentals or corporate profits. Still, stocks are ripe for volatility with the S&P 500 Index near record highs, so these headlines may be enough to spur a pullback. We’ll dig more into the potential market implications in today’s LPL Research blog.
U.S. manufacturing slides. Investors are also digesting a discouraging Institute for Supply Management (ISM) report on U.S. manufacturing health released Jan. 3. ISM’s manufacturing Purchasing Managers’ Index (PMI) fell to 47.2 in December, its lowest reading of the cycle and fifth straight month in contractionary territory (below 50). ISM’s forward-looking gauge of new orders also fell to a cycle low. We had hoped to see some stabilization in the manufacturing sector last month with the U.S.-China limited trade agreement in sight, but Friday’s report showed the decline may take a bit more time to reverse.
Lessons learned. In the decade of the 2010s, we learned two important lessons: to ignore short-term market noise and to be prepared for volatility. In this week’s Weekly Market Commentary: Lessons From the Past Decade, we review those lessons and look at what we may learn in the next decade.
Closing out 2019. U.S. stocks ended last week little changed, and the Nasdaq was the best performing domestic index for the week (and in 2019). Commodities rallied as geopolitical tensions flared Friday. See how the major indexes closed the week in our Weekly Market Performance: Closing the Books on 2019, compiled Friday, Jan. 3, 2020.
Special edition video. In our new Street View Special Extended Edition: Outlook 2020 video, Chief Market Strategist John Lynch details our Outlook 2020 investment insights and market guidance in a conversational, client-friendly format. He explains the data in the Outlook 2020 charts and what it means for investors. He also covers the impact of the impeachment process and the elections on the markets. Use this 25-minute video with clients, at your events, and on your websites.
The week ahead. This week’s economic calendar includes the December jobs report on Friday, which will receive a lot of attention. We’ll also get a preview of December’s job market in the Automatic Data Processing, Inc. (ADP) employment report Wednesday. On Tuesday, we’ll see December data for the ISM’s Non-Manufacturing Index, along with November durable goods data. Internationally, key data points will include Eurozone inflation data and retail sales on Monday and Tuesday. In China, producer and consumer inflation data are slated for release on Wednesday.
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