SFM Observer - December 2018

Glenn Sweeney |
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Sweeney Financial Management

A concise review of the month in investment markets.

The Dow closed the month of December at 23,327 for a loss of -2,211 points or -8.7%.  The market was unusually volatile for the month with several daily swings of 800 points or more intraday.  It was the worst month for the Dow in many years and the typical “Santa Claus Rally’ was nowhere to be found.  Signs of a slowdown in China and Europe were hitting the overseas markets and the negative sentiment worked its way to the U.S. market.  Our economy is slowing compared to 2018 but most market forecasters expect the U.S. market to have positive GDP in the 2% range during 2019.  A typical growth rate for the past 5 years or so.  The trade war with China is becoming an issue as many companies cannot simply absorb the tariff costs and are raising prices.  A successful resolution to the trade war would be a big positive for the stock market.

For the full year, the S&P 500 was down -4.4% and the Dow was down -3.5%.   

Some interesting events from the month just passed:

  • Detroit issued $130 million in general obligation bonds that were well subscribed after being the largest U.S. city to declare bankruptcy in 2013.  Although the city is still struggling with the fallout from the Great Recession, investors scooped up the bonds with yields as high 4.95% tax-free.
  • The United States became a net exporter of oil and refined products for the first time in over 40 years.  Oil independence has been a goal of America for many decades since the Arab Oil Embargo during the 1970s strangled our transportation network.  The shale oil production boom has resulted in the U.S. producing over 11 million barrels of oil per day.
  • Apple reported it is opening a new campus in Austin, Texas where it plans to employ 5,000 people.  Austin is the number two employment site for Apple behind their world headquarters in Cupertino, California.  Apple is on track to become the number one employer in Austin.
  • Credit reporting agencies are increasing the scope of data they use to determine a person’s credit score.  Utility and cellphone bill history, as well as bank account management transactions, will now be included.  The agencies are trying to develop credit scores for people that do not borrow money or use credit.
  • Amazon is changing the way it sells some items.  Inside Amazon, certain products are referred to as “crap” which is an acronym for “Can’t Realize A Profit”.  Bottled water and other low costs, expensive to ship items are either being discontinued or being shipped in larger quantities.
  • Christmas season retail sales increased by 5% over last year as consumers spent with confidence due to a strong job market and rising incomes. 

2019 is upon us and we look forward to the challenges and opportunities that the investment markets will present to us.  A happy and healthy New Year to all.

Thank you for reading this issue of the SFM OBSERVER.  If you have any comments or questions, please send us an email.  

Until next month,
Glenn Sweeney