THE BIGGEST STORIES THAT MATTERED FOR THE MARKET LAST MONTH
WHAT MOVED THE MARKET
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producer. The world is awash in oil, the dollar is strong, and levered traders were caught offsides... all reasons oil has crashed 34% from its peak. There were also scandals throughout the month that amplified investor fears. Goldman Sachs was implicated in one of the biggest financial scandals in history. A Malaysian investment fund called 1MDB was looted through a network of financial intermediaries and banks scattered across the globe. Two Goldman employees have plead guilty to nefarious crimes and pointed fingers at the bank for a lack of internal controls. And although a government probe has begun, the company has yet to respond. Tariffs took a toll in China as the top 10 luxury- goods makers’ stocks lost an average of 30% year to date. The threat of a prolonged battle has exacerbated the problem and Chinese officials kept silent heading into the G-20 meeting between President Trump and President Xi. Meanwhile, global investors received a “Hail Mary” pass from the Federal Reserve late in the month. The general complaint about Fed policy is that it’s raising rates too quickly, choking off economic growth. Fed chair Jerome Powell appeared to listen when he stated interest rates were close to the “neutral level” (neither help nor hurt the economy) and that future rate hikes would be data dependent. This dovish statement implied a slowdown in rate hikes and touched off a late rally in the markets.
ENDING THE YEARWITH UNCERTAINTY...
November was another volatile month. China-U.S. trade turmoil and Federal Reserve rate-hike concerns caused a shakeup in the markets. The S&P 500 Index was down 2.5% at the closing lows before rallying back late in the month for a gain of roughly 1.8%. The news from Apple wasn’t much better... On its earnings call, the company lowered earnings expectations in addition to saying it would no longer provide unit sales forecasts. Abandoning the quarterly update on iPhone sales caused fears that demand for the new $1,000 iPhone was lacking. The other FAANG stocks (Facebook, Amazon, Apple, Netflix, and Google) were also devastated. Amazon lowered earnings forecasts and lost $250 billion in market cap before recovering... Facebook is mired in scandals surrounding the 2016 election and fake news... At the low point, the FAANGs had dropped $1 billion in market gains. This move lower caused a stampede out of tech sectors. Semiconductors, cloud computing, social media, and financial technology were all left for dead. Oil prices also collapsed. Iranian sanctions were supposed to take hold November 1, creating global supply shortages. However, the U.S. provided waivers to eight countries, easing the impact. The Saudis and Russians have upped their output levels, but the US has surpassed both to become the top global
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10
December 2018
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