Last Week

• Most Major Asset Classes Struggled in 2018. The Federal Reserve’s rate hike campaign and U.S.-China tensions were a focus for investors in 2018. Back and forth threats and tariffs as well as Fed rate hikes not matching market expectations led to volatility spikes.
• Apple Cuts Revenue Forecasts. Blaming low projections of iPhone sales in China, Apple lowered its revenue forecasts for the first time in 16 years. U.S.-China trade tensions may continue to hinder revenue growth for Apple which derives 15% of revenue from China.
• Final Manufacturing Data Worries U.S. Investors. Manufacturing PMI revealed moderating growth as manufacturing PMI measured by ISM dropped significantly from 59.3 in November to 54.1 in December
• Labor Market Surprises to the Upside. Friday’s jobs added figure of 312,000 brings the 2018 total to an average of 220,000 monthly jobs added. Wage inflation as measured by average hourly earnings ticked up to 3.2% year-over-year, above consensus and last month’s reading. After staying between 3.7% and 3.8% in the last three months, the unemployment rate moved up to 3.9% which is likely a result of the increased labor force participation rate.

This week

• Fed Chairman Powell to Speak Following Meetings Release. Markets will closely follow Fed Chairman Powell’s comments after December’s meeting minutes are released on Wednesday. At odds with the Fed’s projection, markets now give about a 67% probability of rates staying put for 2019.
• Soft Inflation Data Expected to Finish the Year. Friday’s Consumer Price Index (CPI) and core CPI readings are expected to come in below November’s headline figures at 1.9% year-over-year and in line with the core reading at 2.2% year-over-year, respectively. Both figures have been decreasing since mid-2018 and are moving back closer to early-2018 levels.
• U.S. Officials Travel to China to Discuss Trade. As economic growth slows across the U.S. and China, investors will look for progress toward a trade deal. The U.S. still has the goal to prevent China from having unfair advantages due to intellectual property theft when working in China.

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