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December 24, 2018 — Concerns over a potential government shutdown ended an eventful but fun-starved week in financial markets as investors looking for a Santa Claus rally were disappointed last week. The S&P 500 traded down over 7%, Treasury yields fell sharply across the yield curve, and oil fell more than 10% to close out the week at $45.59 per barrel. In the S&P 500, only six companies posted positive returns last week. The move in oil was the worst weekly move in almost three years and is raising concern that weakening economic growth coupled with increased U.S. supply will lead to a surplus of barrels next year.
The Federal Reserve raised rates, as expected, on December 19th and tempered their forward view of future rate hikes slightly. Markets reacted negatively with concern that the Federal Reserve may not be responsive enough to changes in financial conditions. The official statement noted that unemployment remains low and inflation excluding food and energy remains near 2 percent on a 12-month basis. The statement concluded by noting that "future adjustments to the target range will be based on the committee's assessment of realized and expected economic conditions relative to its maximum employment objectives and its symmetric 2 percent inflation objective."
In economic news, the Producer Price Index registered a slight increase of 0.1% in November while Consumer Price Index was unchanged as expected. Housing Starts were up 3.2% in November and Existing Home Sales were up 1.9% bettering expectations. However, personal income rose 0.2% in November, missing expectations, third quarter Real GDP Growth was revised down to a 3.4% annual rate, and November new orders for Durable Goods were lower than expected, increasing only 0.8% in the prior month.
Sources: briefing.com, Yahoo Finance, Kitco.com, U.S. EIA, First Trust, Wintrust Wealth Management analysis. Returns are total returns calculated through 12/21/2018 and 5 year returns are annualized. Gold is the New York spot price in $/oz. Oil is the Cushing, OK WTI spot price FOB in $/BBL. Securities, insurance products, financial planning, and investment management services are offered through Wintrust Investments, LLC (Member FINRA/SIPC), founded in 1931. Trust and asset management services offered by The Chicago Trust Company, N.A. and Great Lakes Advisors, LLC, respectively. ©2018 Wintrust Wealth Management
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