The Week Ahead – Surf’s Up

Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.

While reading this latest blog entry, please tune your Apple Music, Amazon Music, YouTube Red, Spotify, Pandora, Tidal, Soundcloud, retro LP, 8-track, cassette tape, or CD to The Ventures – Hawaii 5-0.

Recent data by Dow Jones Market Data shows that the S&P 500 index has closed either 1% below its intraday high or 1% above its intraday low 76 times already in 2018! Flashbacks of 2008-2009! Looking back at 2017, the year of upward only markets, that kind of volatility was seen a total of six times. Back in 2015 the number of instances was 82! 2015 was also the most recent time where both U.S. equity and U.S. bonds both returned less than 4% (+1.38% for U.S. equities and +0.55% for U.S. bonds), something that has only occurred five times over the last seventy years (1953, 1969, 1977, 1994, and 2015). After Friday’s market close, both domestic equities and bonds are in the red year-to-date. That has only occurred once over the last seventy years, when 1969 saw a -7.16% return for U.S. equities and a -0.74% return for U.S. bonds. With two weeks left we’ll see if 2018 will look more like 1969 or 2015. (Ironically, if you’re listening to the recommended playlist from above, The Ventures Hawaii 5-0 instrumental album hit #11 on the Billboard Top LP charts … in 1969.) 

The week ahead will be packed with an updated third quarter GDP reading, Core PCE, home sales, and the much anticipated FOMC meeting. Currently the market is pricing in a 75% chance of a rate hike next week, down from 84% at the start of the month. Expect further dovish comments from the Fed as they look to soothe fears of being overly aggressive on rate hikes in 2019. We could see the median dot plot shift down to two hikes in 2019 and one in 2020. As big data has evolved, the Bureau of Economic Analysis has just released prototype statistics for GDP by county, check out the visual here. That’s 3,133 counties and going forward it should help economists and investors better understand which regions are growing or contracting. The smallest county by GDP in 2015 was Loving County, TX with $4.6 million in Real GDP, while the largest was our very own Los Angeles County coming in at $656 billion.

Data deck for December 15-December 21: