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Investment Review/Outlook

Market Highlights


  • December consumer confidence fell to 126, below estimates, as growth slows
  • Retail sales rose 0.3% in December but auto sales fell to 16.7 million units, below estimates
  • Non-farm payrolls in December were 145,000, below estimates of 160,000
  • Unemployment remains at 3.5%, with underemployment falling to 6.7%
  • U.S. industrial production fell in December, following an increase of 0.4% in November
  • Housing prices are up 3.3% on a year-over-year basis, with a rise in supply to 5.7 months
  • New home construction numbers were 1.36 million in December, versus 1.31 million in November
  • Existing home sales rose to an annual rate of 5.35 million in December
  • U.S. manufacturing expansion is slowing, with December ISM at 47.2, below estimates
  • Personal income was up 0.5% and consumer spending was up 0.4% in November
  • GDP for Q3 was up 2.1%, above estimates, and is estimated to be up 2.0% in 2019


  • December core inflation was 2.3% for CPI and 1.3% for PPI on a year-over-year basis
  • Crude oil remains steady at $52.8, with demand off due to a slowing world economy
  • Deflation has been the worry for some time, but long term inflation remains concerning

Monetary Policy

  • A mid-cycle pause has the Fed Funds rate at 1.75% and the Discount rate at 2.25%
  • The Fed is buying bonds again and adding liquidity to the repurchase market
  • World Central Banks continue to cut rates and add liquidity by purchasing bonds
  • The Fed will remain data dependent as tariffs and trade have slowed economy


  • President Trump signs USMCA trade deal and the China Phase One trade deal
  • Worldwide debt has grown to some $253 trillion, according to the Institute of International Finance
  • China's economic growth slows as the new year begins with coronavirus outbreak
  • President Trump takes out Iranian General Soleimani in a surgical strike in Iraq

Interest Rates

  • Ten-year Treasury yields rose from a low of 1.55% to a high of 1.94% and now at 1.62%
  • Libor, the inter-bank lending standard, is 1.79%, and is set to be phased out in 2020
  • Mortgage rates fell, as the 30-year fixed rate came down from 5% to 3.6%
  • Yields of $17 trillion of worldwide debt is negative, Japan 10yr -0.14%, Germany 10yr -0.33%


  • Reported corporate earnings are beating estimates 72% of the time and revenues are beating 63%
  • Fourth quarter results are up 0.2% from a year ago, as growth slows
  • Markets have reaccelerated with Central Banks becoming accommodative once again

Market Outlook

  • S&P 500 rose 31.5% through December on prospects for Fed rate cuts and China trade talks
  • Market volatility decreased during the quarter, with the Fed on hold
  • Health Care, Technology, and Financials were the best performing groups
  • The S&P 500 is trading at 18.2 times forward earnings, above its 25-year average

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