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Potential Government Shutdown Adds to Drama | LPL Financial Market Signals Podcast

December 17, 2018

LPL Research

In this week’s podcast, LPL Research strategists discuss the effects on the market and the economy of a potential government shutdown, another rate hike, the Brexit and China issues, and December’s bad start for equities.

The medium return on the S&P going back to the mid-1970s is essentially flat during a government shutdown. History tells us that the markets tend to take it in stride.

- Ryan Detrick - LPL Senior Market Strategist

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In this week’s Market Signals podcast, our LPL Research strategists discuss four major topics creating drama in both the market and the US’s economic outlook: a bad December start for equities, another rate hike, the Brexit and China issues, and a potential government shutdown.

First, we’ve just experienced the worst start to the month of December for equities since 1980. Nonetheless, LPL’s strategists see reasons to be on the lookout for a potential “Santa Claus” rally. Stocks tend to do well the second half of December. In addition, various measures of market sentiment are flashing extreme pessimism. That could mark a contrarian low.

Second, the Fed is set to announce an interest rate hike on Wednesday. Another hike is likely but may not occur until the first half of next year.

Brexit continues to make the news headlines, as the situation gets messier. At the same time, China’s economic growth is slowing down. Still, 5% is impressive for a country that large.

The fourth topic is the possibility of a government shutdown later this week. The good news is that stocks have historically taken shutdowns in stride and this could be the case again.

Chart

December is known for being one of the best months of the year, but it is interesting to note that the majority of the gains for the S&P 500 tend to happen the second half of the month. Suggesting there is still time for Santa to come in 2018.

Listen in to the full Market Signals podcast by LPL Financial to hear more, and make sure not to miss future podcasts by subscribing to LPL Market Signals on your favorite podcast platform.

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