2018 Economic Review

Maureen Kelliher, CFA

Maureen Kelliher, CFA

January 2, 2019

Weekly Economic Review

Weekly Macro Updates


Initial Jobless Claims (Dec 22) 216k est., 216k actual, 217k prior
Continuing Claims (Dec 15) 1675 est., 1701 actual, 1705 prior
Chicago Federal Reserve National Activity Index (Nov) 0.20 est., 0.22 actual, 0.00 prior: R-
Richmond Federal Reserve Manufacturing Index (Dec) 15 est., -8 actual, 14 prior
Dallas Federal Reserve Manufacturing Activity (Dec) 15.0 est., -5.1 actual, 17.6 prior
S&P CoreLogic CS 20-City YoY (Oct) 4.86% est., 5.03% actual, 5.21% prior: R+
S&P CoreLogic CS US HPI YoY (Oct) 5.48% actual, 5.52% prior: R+
FHFA House Price Index MoM (Oct) 0.3% est., 0.3% actual, 0.2% prior: R+
Pending Home Sales NSA YoY (Nov) -7.7% actual, -4.7% prior: R-
Conference Board Consumer Confidence Index (Dec) 133.5 est., 128.1 actual, 136.4 prior: R+
Conference Board Present Situation (Dec) 171.6 actual, 172.6 prior
Conference Board Expectations (Dec) 99.1 actual, 112.3 prior: R+
Chicago Purchasing Manager Index (Dec) 60.2 est., 65.4 actual, 66.4 prior
Advance trade, inventories data postponed by government shutdown

 Strong or Improving
 Inconclusive or lacking trend
 Weak or declining
R+ Revised up
R- Revised down

Capital Market Implications

As the year drew to a close, the U.S. economic landscape became decidedly more mixed.  Five Federal Reserve indexes of regional manufacturing all demonstrated weakness in December, which was the first time they had fallen in unison since 2016.  The Dallas Fed’s factory index unexpectedly contracted in December, falling to a two-year low of -5 from 17 in November.  Although falling oil prices contributed to the Dallas decline, that was not the case with factory gauges in the other four districts of Richmond, New York, Philadelphia and Kansas City.  On the consumer front, holiday sales were exuberant through December, but consumer confidence, especially as it relates to future expectations, fell for the first time in months in December.  All of which suggests economic activity in 2019 is unlikely to be as strong as it was in 2018.   

Although the year began on a high note, as both business and consumer confidence climbed in the wake of the tax cut, 2018 ended with the poorest performance from the capital markets since 2008. For the year overall, the Dow Jones Industrial Average declined -3.5% while the S&P 500 Index sank -4.4%.  Five of the 11 sectors of the S&P 500 Index fell more than -10.0% (energy, the poorest performer, plunged -18.5%) and only two sectors posted positive returns, health care and utilities, which gained 5.8% and 3.9% respectively.  International stock markets fared even worse, as foreign developed and emerging markets both lost approximately -14.0%.  The year was not kind to bonds either, as the Federal Reserve hiked interest rates four times in 2018 (which took short-term interest rates up to 2.5%).  Nonetheless, some areas of the bond market suffered more than others; credit markets were hardest hit as spreads widen throughout the year.  Thus, for the year, corporate bonds and high yield bonds both declined more than -2.0%.  The U.S. Aggregate Bond Index closed relatively flat and ten-year municipal bonds managed to end in the black having gained more than 1.0%.