FOUR IN A ROW: U.S. stocks notched their fourth consecutive week of gains last week. Have fears of an economic slowdown subsided? Apparently so, at least for now. Data continues to show a very healthy labor market and the Federal Reserve has lately been indicating flexibility with monetary policy. Both factors seem to have ignited a bit of a relief rally/bounce. Investors will continue to watch updates in trade talk activity with China and the drama of the U.S. government partial shutdown. Another market mover will be fourth quarter corporate earnings reports. So far more have been surprising to the upside, rather than the downside, buoying markets even further. Major stock indices in Europe, China and Japan, and others, have been climbing as well.
U.S. INDUSTRIAL PRODUCTION INCREASES: Industrial production in the U.S. increased 0.3% after a 0.4% rise in November. Total industrial production in December was 4.0% higher than December of 2017.
With credit to Scott Grannis at scottgrannis.blogspot.com, the graph below shows quite the contrast between what is happening in the U.S. compared to industrial production in the eurozone.
EUROPEAN CENTRAL BANK STILL CAN’T RAISE RATES: The U.S. Federal Reserve Bank has been systematically raising interest rates as the economic recovery continues. Meanwhile, in Europe, the European Central Bank (ECB) continues with its negative interest rate regime. If you deposit money with the ECB, you must pay 0.4% for the privilege. There has been widespread belief that the ECB would imminently announce its first interest rate increase since June of 2011. Disappointing data have made it clear, however, that the eurozone economy is weaker than expected, and the ECB has cut its growth forecasts. The likelihood of the ECB raising rates this year has shrunk to near zero at this point. After slipping from 2.4% growth in 2017 to 1.9% in 2018, the World Bank is now projecting further slowing to 1.6% this year. A trade deal between the U.S. and China and a smooth Brexit would help turn sentiment around.
OIL BUMP: In December, OPEC lowered its oil production by 590,000 barrels a day. In addition, there has been some indication that lower oil prices were beginning to cause U.S. production to trend down. These two factors plus optimism that China and the U.S. will reach a trade deal has caused oil prices to jump to an eight-week high on Friday.
NOT FUN BUT NECESSARY: Northwestern Mutual recently announced results of a survey it conducted of U.S. adults about financial planning. When asked how they feel about financial planning, the number one answer, coming in at 40%, was “not my favorite thing in the world but know it needs to get done like a medical checkup.” Another 40% had negative emotions. 18% said they were “excited and inspired, love to do it.” I know that we certainly strive to get our clients in that 18%.