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Worst December Since the Days of Charlie Chaplin

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Friday, December 21, 2018

Market futures are up at last on this Friday before Christmas (NOTE: Ahead of Wall Street will be taking off both Christmas Eve and Christmas next Monday and Tuesday — Happy Holidays to all!) in an attempt to make back at least some of the bloodletting we’ve seen in equities values this week. Even with this slight bounce, we’re currently on pace to record our worst December in 87 years, back when Charlie Chaplin was charming movie audiences.

The final revision on Q3 Gross Domestic Product (GDP) ticked down from 3.5% on the first two reads to 3.4% this time. Consumption came in at 3.5%. Both numbers were slightly under expectations.

Durable Goods for November also came in light of projections, to +0.8% from the 1.3% consensus estimate. This is still far better than October’s -4.3%, but the underlying numbers were also mildly disappointing: ex-Transportation brought in -0.3%, and the proxy non-defense ex-aircraft figure wound up -0.6% (ex-Defense alone reached -0.1%). Shipments were -0.1%, better than the downwardly revised -0.8% for October, and Orders were -0.6%.

We also see a partial U.S. government shutdown on the horizon, should passage of a near-term budget fail in Congress today. Should this shutdown last into next week or even next year, this will also have a detrimental effect on the overall U.S. economy.

Crude oil prices are down 25% year to date, without a new OPEC meeting or agreement to stifle production and keep prices from slipping further. Memories of a tumble back down to the $20s per barrel range from a few years ago presents another challenge to the global economy.

In short, we’ve got difficulties. For an economy with such stellar and steady employment, 3% economic growth, slow-moving inflation and healthy consumer sentiment, we’re sure focused on the negative right now. Not having the answers is worse than anything for the markets — even worse than grappling with unpleasant news. And that’s why we’ve really hit the skids in market activity for the past two months.

But keeping an eye on the strengths we maintain in our domestic economy and elsewhere will do us a good turn in the long run. Our current challenges do not currently dominate our forward outlook, meaning brighter days are indeed ahead. What and where these days are has yet to be determined.

Mark Vickery
Senior Editor

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