Wages are not growing at the pace they have historically that has scared the Fed, i.e., 3% over the past 12 months. Historically, a 4.5% type print has caused the Fed to slam on the breaks.
In this week’s Market Signals podcast, LPL Research strategists discuss what they see as three major factors holding back the market: the Fed, trade, and crude oil. However, the strategists also note that these issues seem to be resolving, opening the door to potentially higher equity prices during the historically bullish month of December.
Fed Chairman Powell’s speech last Wednesday highlighted that policy was “just below” neutral, contrasting comments from the previous month. This provided relief, as stocks subsequently had their best day in months. LPL Research continues to expect a rate hike in December and possibly two more next year.
Ongoing trade issues with China appear to have settled to some extent at the G20 over the weekend. The Trump administration announced a 90-day détente in the trade war to give the US and China time to negotiate a broader trade deal. This means the US won’t raise the 10% tariff rate on $200 billion worth of Chinese goods to 25% on January 1 as originally scheduled.
In November, crude oil experienced its worst month in years, losing 22%. LPL’s research strategists note that this may be more of a supply issue instead of a global demand slowdown. The US is now the swing producer, pumping more than 12 million barrels a day.
The S&P 500 tends to do well in December, as no month is up more often (75% of the time) than December. Also, the S&P 500 gains 1.6% on average, again the best out of all 12 months on average.
Tune into the podcast for more insights from LPL’s research strategists on the latest news-making factors shaping the economic future. And make sure not to miss future podcasts by subscribing to LPL Market Signals on your favorite podcast platform.
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