WEEKLY MARKET SUMMARY
Global Equities: Stocks finished the holiday-shortened week comfortably higher, extending the year’s rally with light trading volume. The S&P 500 gained 1.4%, hitting a new all-time high, supported by strength in basic materials and technology sectors. The Nasdaq Composite and the Dow Jones Industrial Average also fared well, both with a 1.2% weekly gain. Optimism continued over resilient corporate earnings and a potentially accommodative stance from the Federal Reserve next year. US small cap stocks lagged large caps, but still finished out the week positive, up 0.2%. Foreign developed markets gained 1.2% during the week, while emerging markets were strong outperformers with a 2.0%weekly gain.
Fixed Income: It was a relatively steady week for rates, with the 10-Year Treasury yield falling slightly from around 4.16% to 4.14%. Yields on 2-year US Treasury notes also saw a slight dip. Trading volume in the bond market was light due to the holiday period, with investors digesting delayed Q3 GDP data that reinforced confidence in economic growth but tempered expectations for rapid Fed easing in the near term.
Commodities: US West Texas Intermediate Crude prices rose slightly during the week to end at approximately $56.93 a barrel. The energy sector was supported by renewed US actions and rhetoric toward Venezuelan oil exports. Gold prices continued to rise, hitting a record level of $4,540.10/oz, but the biggest winner was silver, which surged 18% during the week to a record level of over $79.68/oz due to Chinese export controls set to commence in January, as well as demand for safe haven assets as a hedge against inflation and unsustainable government spending.
WEEKLY ECONOMIC SUMMARY
GDP Shocker: Third quarter Gross Domestic Product data surprised investors and economists, coming in at 4.3% and blowing past the 3.2% consensus forecast. The primary driver of growth was a 3.5% jump in consumer spending, along with government defense spending and a net gain in exports as fewer imports entered the country. The strong data was met with some scrutiny, however, as it was noted that the primary driver of consumer spending was higher healthcare costs, driven by a surge in insurance premiums and higher cost medical treatments.
Rate Cuts Postponed: Investors were not expecting a rate cut prior to the strong GDP print, and the odds of one fell even further in response to the data, with markets now pricing in less than an 18% chance of a January interest rate reduction. President Trump voiced his disagreement on social media, arguing that rates should be aggressively reduced to spur economic growth to a rate of 20% or even higher, and threatening that “anybody that disagrees with me will never be the Fed Chairman!”
Consumer Confidence Fades: Despite the GDP data indicating consumers are freely spending, they are not feeling optimistic about the economy, according to the latest Conference Board reading on Consumer Confidence. The index fell for the fifth consecutive month to 89.1, its lowest reading since the April tariff announcement. Consumers were most concerned with inflation and prices, while also expressing anxiety over the job market.
CHART OF THE WEEK
The Chart of the Week shows the price of silver over the last twenty years, highlighting the parabolic move in in recent days to hit nearly $80/oz. Gold and silver have both been rising all year in response to a record-setting level of government spending and data that shows inflation barely budging and, in some cases, accelerating. The recent surge reflects a continuation of those worries but also manic buying in advance of Chinese export controls over the precious metal, which is also a key component in the technology industry. From a technical perspective, silver appears to be massively overbought, with a Relative Strength Index (RSI) reading of over 87 (a reading over 70 is considered overbought). However, the mania could continue into the new year as speculators rush into the trade.
