Rhetoric that trade tensions between the United States and China may be easing helped quell investors’ concerns, prompting a stock market rally last week. The stock market seems to be ignoring the federal government shutdown or at least seeing it as temporary, and therefore not a big drag on the economy long term. The large caps of the S&P 500 and the Dow led the way, followed by the Nasdaq, the Russell 2000, and the Global Dow. This marks the fourth consecutive week of positive returns, the longest such streak since last August. For the month (and year), each of the major benchmark stock indexes are well ahead of their 2018 closing values. The small-cap Russell 2000 is nearly 10.0% above its 2018 closing value, while the Nasdaq is ahead by almost 8.0% since the end of December. Also, oil prices climbed again last week, while the price of gold (COMEX) fell for the first time in several weeks.
LAST WEEK’S ECONOMIC HEADLINES
- Prices producers receive for goods and services fell slightly in December after rising in November and October, respectively. Producer prices climbed 2.5% in 2018, the same increase as in 2017, so inflation is under control.
- Prices paid for imported goods decreased 1.0% in December after falling 1.9% in November. Prices received for exported goods fell 0.6% last month following a 0.8% drop in November. For 2018, import prices decreased 0.6% following a 3.2% increase in 2017. The decline in 2018 was the first calendar-year drop since import prices fell 8.3% in 2015. On the other hand, export prices increased 1.1% in 2018, and have not recorded a calendar year decrease since falling 6.6% in 2015.
- According to the Federal Reserve, industrial production increased in December after also rising in November. Overall, total industrial production was 4.0% higher in December than it was a year earlier.
EYE ON THE WEEK AHEAD
The housing sector is front and center in the coming week with reports on new and existing home sales in December. Also of interest is the December report on durable goods orders. November saw orders for core capital goods (excluding aircraft and goods produced for the Defense Department) fall 0.6% in November — not a good sign for manufacturers moving forward.
BWFA continues to maintain a stance of being fully invested in the respective BWFA investment model selected for each client. With the specter of interest rate increases subsiding and the trade war with China continuing to de-escalate, there seems to be some investing tailwinds for the foreseeable future.