With the S&P now up nearly 12% since hitting a bottom on December 24th, and back up to the early December breakdown point, history would suggest the majority of the reflex rally is in the rear view mirror. Yesterday, we highlighted what could happen to cause the markets to start a downward trend, in a note that can be found here. We also highlighted what could then push the market towards new highs as we move through the year.  To date, investors have only worried about the economic slowdown, but over coming months we are going to have to get comfortable with the actual slowing.   The reason we think much weaker data could be overlooked is that similar to 1995, it could make the Fed go from potentially raising interest rates, to lowering interest rates.

Along those lines, there are two important economic data points to be released:

  • At 9:15, we get a look at December Industrial Production that is expected to show 0.2% growth, down from the November reading of up 0.6%.  Given the government shut down and lack of data from the Commerce Department, this look at manufacturing may have an outsized influence than might otherwise be the case.
  • at 10:00 A.M. EST, University of Michigan Consumer Sentiment is due out for the month of January. Current expectations are for a slight decline in sentiment, likely due to the high volatility in the stock market, from December’s 98.3 down to 96.8. While declining in recent months, Consumer Sentiment has remained fairly strong despite a lot of uncertainty both domestically and globally in the economy.

Past performance is not a guarantee of future results. Index returns are unmanaged and do not reflect the deduction of any fees or expensesAll data points are sourced from Bloomberg as of 01/17/19 unless noted otherwise.

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