December 19th – Weekly Update

  • Major U.S. equity indexes finished the week relatively flat following Wednesday’s largely predicted Federal Open Market Committee (FOMC) announcement of a 25 basis point (bp) increase to the Fed funds rate.
  • Gold prices dipped and oil was slightly up. The 10-yr U.S. Treasury note yield ended the week at approx. 2.60%.
  • The FOMC voted unanimously for a 25 bp increase to the Fed funds rate retaining in their statement that near-term risks to the economic outlook appear roughly balanced.
  • While the Fed projects three more hikes during 2017, Fed Chair Janet Yellen stressed that though the economy has made considerable progress toward its inflation and employment goals, the economic outlook remains highly uncertain.
  • Rising market and investor confidence has been a recurring theme since the U.S. presidential election. The National Federation of Independent Business (NFIB) Small Business Optimism release was consistent with this trend, with November’s reading coming in at a 98.4 level against October’s 94.9.
  • Economic sentiment also improved in the European Union with Zew Survey Expectations rising from 15.8 in November to 18.1 in December, beating the consensus of 16.5.
  • December’s fund manager survey by BofA Merrill Lynch suggests there are heightened expectations the reflation trade will continue into next year. 54% of respondents thought the rotation into cyclicals and inflationary sectors will continue into 2017, up from 44% in November. This comes as expectations for global growth jumped to 19- month highs.
  • U.S. housing starts dove 18.7% during November after registering their strongest level since 2007 in October.
  • The U.S. consumer price index (CPI) measured 1.7% year-over-year in its November reading, this is the highest rate of inflation since October 2014.
  • The U.K. and the European Union also demonstrated modest growth in November on a year-over-year basis. U.K. CPI rose 1.2% during the period while euro zone CPI crept up 0.6%.
  • U.K. unemployment declined to 4.8% in the three months leading to October, the lowest level in 11 years.
  • In China, retail sales grew 10.8 percent in November, year-over year. This is the strongest growth posted since December 2015. Industrial production also increased by 6.2 percent during the same period.

CPWM Weekly Market Monitor (2016.12.19)