This week brought the end to 2018 and the first down year for US stocks this decade. The volatility continued at the start of 2019 as the market digested a lowered sales projection from Apple and the political standoff between President Trump and the new Democratic House regarding funding for a border wall. The current government shutdown, which began on December 22, has no clear end in sight. On the bright side, Fed Chair Powell’s dovish tone in his speech and the surprisingly strong December jobs report provided a boost to the markets. Wage growth increased to 3.2%, the highest rate since 2009. Employers added a seasonally-adjusted 312,000 jobs, far surpassing expectations.
US markets ended the week up strongly to post solid gains in both large and small cap stocks. Despite a dismal performance in 2018, both segments of the market still have strong three and five-year returns. International stocks also ended with gains this week but still have a wide gap in performance to catch up to the US markets. Bond prices also went up this week with a significant drop in rates. The 10-Year US Treasury ended the week at 2.67% compared to nearly 3.25% at the beginning of November. The market is betting and pricing in that the Fed will cut rates to provide economic support rather than continuing with its plan to tighten.