1. The partial government shutdown in the U.S. continued throughout the week, and the situation only added to what was one of the most chaotic weeks of the year in the equities markets. This week closed out the final trading week of 2018 and the massive volatility in the final quarter of 2018 ensured that stocks ultimately underperformed on a year-on-year basis.
2. The seasonally adjusted number of Americans filing initial claims for state unemployment decreased by 1,000 claims to a new level of 216,000 for the week ending December 22. The previous week’s level was revised higher by 3,000 claims. The four-week moving average of claims decreased by 4,750 to a new level of 218,000. The previous week’s moving average was revised higher by 750 claims. The usual surge in temporary hiring for the holiday season can be expected to continue through the post-holiday returns season, continuing to skew the unemployment data despite supposed “seasonal adjustments”.
3. The U.S. government went into a partial shutdown last Friday at midnight as was largely expected. The shutdown persevered throughout the week as President Trump faced off against Congress in an attempt to get funding for his border wall project placed into the hotly contested spending bills that would have kept the government fully operational. The shutdown is likely to carry forward into 2019 as the stalemate between Trump and Congress continues, possibly carrying on through January 3rd, when Democrats will take over a majority in the House of Representatives. Once the Democrats take over the House, it is highly likely that the dysfunctional gridlock that seems to constantly plague Washington D.C. will increase substantially, only serving to make the situation worse.
4. President Donald Trump has cancelled his New Year plans and said he will stay in Washington, D.C. in hopes that the partial government shutdown can be resolved. Trump had planned to spend both Christmas and New Year’s Eve at his Mar-a-Lago resort in Florida but cancelled his plans for both holidays and remained in the White House in the hopes that the Democratic party would come through with a deal to reopen the federal agencies whose funding expired Saturday. Most of Congress has left the Capitol for the holiday season so Trump’s cancellation of his own plans for the holidays is likely not have much effect.
5. David Rosenberg, chief economist and strategist at Gluskin Sheff, is among the first to say that not only will the U.S. Federal Reserve likely pause its rate hikes in 2019, they may actually reverse course and begin cutting rates. Rosenberg said “When I tell people the Fed will be easing monetary policy in coming months, the view is met with derisions of laughter. But it is not a laughing matter. These folks who sneer and shake their head just because of what the central bank is saying today are not students of history.” Rosenberg continued, saying “The Fed is predictably slow to see the turning points. But when policymakers see the turn, the shift in policy comes quickly and often spectacularly.”
6. Stocks appear to be signaling that a recession could be heading towards not only the U.S. economy, which has managed to become a global leader out of the chaos that was the 2008 financial crisis, but for the overall global economy as well. Joseph LaVorgna, chief economist of Americas at Natixis, said “I’m real worried about a recession next year because the Fed seems to have a tin ear with respect to what its quantitative tightening and rate projections mean for the markets and global risk taking. The Fed is too focused on domestic data…the vast majority of the macro data looks solid but that’s almost always the case before the economy goes into recession.” Should the economy head into a full recession in 2019 then it is almost a certainty that the Fed will not be able to conduct additional rate hikes at all during the year, and may in fact be forced to return to cutting rates.
7. The Trump administration ordered the withdrawal of 7,000 U.S. troops from Afghanistan, roughly half of the U.S. forces present there. Afghan officials say they had not been briefed on the withdrawal plans prior to the announcement and they are highly concerned that scaling back the U.S. presence in the region could lead to renewed violence as Taliban and ISIS forces move to take advantage of the confusion. The troop reduction is set to take place by the summer and Afghan generals warned after the announcement that the withdrawal would be a major blow to the Afghan military’s morale. Afghan forces still face almost daily attacks from insurgents and depend heavily on U.S. airpower to back them up.
8. U.S. crude oil posted its third straight weekly loss this week despite prices edging higher on Friday. U.S. light crude ended the week at $45.33 while Brent crude oil was hovering around the low $50-a-barrel mark. Earlier in the week oil prices had fallen to their lowest levels in 18 months on rising supply concerns and uncertainty over the state of the global economy.
9. The euro began the week drifting higher through Christmas Eve and then dipping lower as markets reopened post-Christmas. The euro quickly recovered but could not maintain the upward momentum and had moved into negative territory against the U.S. dollar by late Wednesday. The euro hit its lows late Wednesday and began rising higher in a fairly steep climb that lasted all the way through Friday morning. The euro had hit its high for the week by Friday morning and drifted relatively sideways through the close of trading. The euro closed the week out higher against the U.S. dollar. The Japanese yen started the week drifting sideways, but began climbing late Monday and continued its upward moves through Christmas Eve. The yen hit its high against the U.S. dollar for the week on Christmas Eve but had quickly dropped to its lows by Wednesday night in post-Christmas trading. The yen recovered ground early on Thursday and began drifting higher through Friday morning trading. The yen drifted sideways into Friday’s close and will end the week higher against the U.S.
Stock markets closed out the final trading week of 2018 in spectacular fashion, wildly swinging back and forth and wrapping up the month of December with their worst performance since the financial crisis. The continued plunge this week ensured that equity markets closed the year out to the downside despite what had been massive gains earlier in the year.
Fourth quarter performance for stocks was horrendous amid escalating global tensions and renewed crisis in Washington, D.C. in the form of yet another partial government shutdown. President Trump has indicating that he is willing to force a prolonged shutdown if the Democrats do not approve funding for his pet border wall project. The Democrats, secure in the fact that they will be taking a majority in the House of Representatives come January 3rd, are standing their ground and refusing to endorse or put forward any spending bill containing funding for such a wall.
President Trump’s abrupt announcements that he would be ordering the withdrawal of troops from both Syria and Afghanistan have sparked concerns that the Middle East could explode into renewed violence. In Syria, the announcement has appeared to embolden government troops, leading to a renewed push to regain total control of the country.
In Afghanistan, the announcement that the U.S. will be reducing its troops by half has been met with concern by the Afghan government and apparent joy by the Taliban. Afghani generals worry that the morale of their troops, who still come under daily attacks by insurgents, will be severely impacted by the news of the withdrawal. Efforts to reach a peace deal between the Afghan government and the Taliban are also likely to be complicated by the removal of those U.S. troops since local Afghani forces receive heavy backup from U.S. troops and equipment. Afghan military officials pointed out that the country’s security is at its worst state since 2014 when NATO withdrew over 100,000 troops.
In Europe, fears that the United Kingdom will be exiting the European Union in March with no ratified deal in place to govern their relationship continue to grow. U.K. Prime Minister Theresa May continues to try to garner support for the draft agreement that U.K. and EU negotiators put together but it remains highly likely that when the issue finally comes up for a vote in parliament early in January that the draft agreement will be voted down.
As we close out 2018 and prepare to move into 2019, market analysts appear to be fearful that the stock corrections, which accelerated as we came to the close of the fourth quarter, could continue unabated. Many of these analysts have begun to throw the word “recession” around and now project that if the global economy slows further then the U.S. Federal Reserve will be forced to reverse course and begin cutting rates instead of conducting further hikes in the face of a global recession.
The trade dispute between the U.S. and China continues and is relatively unchanged. China announced on Friday that it would allow the import of U.S. rice in an apparent concession ahead of additional trade negotiations between the two, but market watchers pointed out that the appetite for U.S.-grown rice in China is not likely to skyrocket enough to make a dent in any of the trade deficits between the two countries. The Trump administration has postponed plans to increase the tariffs on imported Chinese goods for 90 days but if that time period passes with no progress on trade talks then the frictions between the two countries will escalate even further as tariffs eventually increase.
As global geopolitical uncertainty increases, wise investors seek out ways to ensure that their investment portfolios remain diversified against a continued downturn in equities. Many investors appear to have returned to the view that precious metals offer a “safe haven” play during times of uncertainty that could help them in their quest to maintain a well-diversified portfolio. As precious metals prices have remained suppressed and equity prices have skyrocketed this year (only to plunge in the final quarter), savvy investors took advantage of the depressed prices in precious metals to add more physical product to their investment portfolios at a discount.
Remember that precious metals should always be viewed as a long-term investment and that the key to profitability through the ownership of physical precious metals is to actually acquire and own the physical products and to hold them for the long term. Always remember that you should never overextend your ability to maintain ownership of your precious metals over the long term.
Precious Metals International, Ltd.
Friday to Friday Close (New York Closing Prices)
|Dec. 21st2018||Dec. 28th2018||Net Change|
|Gold||$1258.10||$1280.00||21.90 + 1.xx%|
|Silver||$14.70||$15.35||0.65 + 0.xx%|
|Platinum||$795.80||$791.50||(4.30) – 0.54%|
|Palladium||$1158.70||$1254.00||95.30 + 8.22%|
|Dow Jones||22445.37||23062.40||617.03 + 2.75%|
Month End to Month End Close
|Nov. 30th2018||Dec. 31st2018||Net Change|
|Gold||$1226.00||$1279.00||53.00 + 4.32%|
|Silver||$14.22||$15.43||1.21 + 8.51%|
|Platinum||$799.80||$794.50||(5.30) – 0.66%|
|Palladium||$1144.60||$1262.00||117.40 + 10.26%|
|Dow Jones||25538.46||23327.46||(2211.00) – 8.66%|
Previous Year Comparisons
|Dec 29th2017||Dec. 28th2018||Net Change|
|Gold||$1304.00||$1280.00||(24.00) – 1.84%|
|Silver||$16.98||$15.35||(1.63) – 9.60%|
|Platinum||$931.00||$791.50||(139.50) – 14.98%|
|Palladium||$1066.00||$1254.00||188.00 + 17.64%|
|Dow Jones||24719.22||23062.40||(1656.82) – 6.70%|
Here are your Short Term Support and Resistance Levels for the upcoming week.
This is not a solicitation to purchase or sell.
© 2018, Precious Metals International, Ltd.