That’s a wrap for 2016! Equity markets limped to the finish line, breaking a seven week winning streak, while interest rates declined across the curve. Last week was a light economic calendar and very thin holiday trading volume. There is rarely much to deduce in the last few trading sessions of the year with holiday break, tax selling, and window dressing as driving forces but a wrap it is.

Last Week’s Market Anecdotes:

  • Emerging market equities finished out the year on a positive note with a nice gain. Economic surprise indices for the emerging markets have also established a nice uptrend.
  • Energy markets added 1.5%-2.5% in the last week of the year to push 2016 gains well into the 40%+ territory. Light inventories and a decline in the Baker Hughes rig count last week, primarily in Canada, provided a bid in oil prices.
  • Well known blogger, Mark Constantine (@vexmark), noted that at 8.8 million barrels a day, US already pumps almost as much crude as two years ago, with just a third of the rigs it operated at the peak.
  • The U.S. dollar fell on the week, likely in sympathy to declining interest rates.
  • University of Michigan’s consumer sentiment survey hit its highest level in 12 years and the Conference Board’s measure of consumer confidence was a monster (113.7), rising to its highest level since August of 2001.
  • Increasing confidence, stock market optimism, and soaring expectations seem to be intact, with investors anticipating market friendly moves from the incoming Trump administration and republican congressional majorities.
  • For Q4 2016, the estimated earnings growth rate for the S&P 500 is 3.2%. If Q4 comes in positive, it will be the first back to back positive quarters since Q4’14 – Q1’15. Meanwhile, the forward 12-month P/E ratio for the S&P 500 is 16.9.

Last Week’s Economic Anecdotes:

  • After a surprise jump the prior week, the weekly jobless claims figures came in line with expectations at 265k. The weekly jobless claims have printed sub-300k for a 95th straight week, the longest streak since 1970.
  • The latest GDP forecast from the Atlanta Fed (GDPNow – Dec 22) has fourth quarter GDP growing at 2.5%.
  • The latest inflation forecasts from the Cleveland Fed (Inflation Nowcast) are 1.66% and 1.72% for headline and core PCE.
  • The latest Labor Market Conditions Index readings from the Kansas City Fed (LMCI) are exhibiting strong momentum but the level of activity is just slightly above the long-run average. The model provides both momentum and level of activity measures based on 24 labor market variables.