Market Commentary for Week Ended 01/20/2019

We are into the 2020’s, it is exciting to ponder the next decade, how will history characterize it?  Each decade has an identity.  Weren’t we supposed to be on Mars by now? Flying cars…no, ok.   Anyways, Happy New Year!

This week ended with a bang (literally, and I know…corny pun, right?).  The largest intraday volatility spike we have seen in weeks occurred as markets reacted to the fatal strike against Iran’s prominent general Qasem Soleimani.  Iran is likely to respond, and the market participants are discounting probable outcomes.  A direct strike again US soldiers or citizens seems an unlikely disaster but a possible response.  It is more likely they will continue to attack US oil interests in the region.  Luckily, we are much less reliant, if there is a reliance, on foreign oil.  According to the US Energy Information Administration, the United States produces more oil than 17.94 million barrels per day (2018 data) with the next closes, Saudi Arabia, at 12.42 million barrels per day.  We consume 19.96 Million barrels per day so there is roughly 2 million, about 10%, of our consumption that we need to outsource.

Weekly Economic Data of Note

1. 12/30/2019 Pending Home Sales:  November pending home sales increased 1.2% versus a consensus of 1.1%.  Pending home sales are a leading indicator for housing activity.  A pending sale indicates that a contract has been signed by both parties, but closure has not yet occurred. 

2. 1/2/2020 PMI Manufacturing Index:  The Purchasing Managers’ Manufacturing Index (PMI) was in-line with expectations at 52.4.  A reading above 50 indicates indicates growth in the manufacturing sector of the economy. 

3. 1/3/2020 FOMC Minutes: The release of the Federal Open Market Committees December notes did not have a meaningful impact on the markets Friday.  Their comments were in-line with the view that the Fed does not plan to increase rates this year unless there is a meaningful change to their economic outlook.  The Fed appears to be in a dovish mood.