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Daily Blog

Friday, December 14, 2018
Karyn Cavanaugh, senior market strategist at Voya Investment Management, on 'Squawk Box'

Today’s market equivalent of a fruitcake is the latest China data. Both retail sales and industrial production were a disappointment. China’s industrial production was up 5.4% in November year-over-year and retail sales increased 8.1% YoY, but these figures point to a continuing slowdown in China’s economy. Although the United States is bigger than China, China accounts for twice as much global growth. On a positive note, the decelerating data could result in additional Chinese economic stimulus, which has already been working through the China economy and sets up the possibility of a boost in global growth in 2019.

Meanwhile, today’s U.S. consumer data were candy canes. Retail sales were stronger than expected, up 0.5% excluding gasoline in November; October sales were revised up to 1.1% from 0.8%. This indicates that fourth quarter GDP growth may be stronger than anticipated. U.S. industrial production was also upward, increasing by 0.6%, though this was primarily in utilities and mining. Manufacturing output was a little weak, reflecting the slower global growth, trade uncertainty and a strong U.S. dollar. Investors seem to be focusing more on the fruitcake than the candy canes: what has been a positive week for markets may end with a fruitcake thud.

Please see the Voya Global Perspectives 2019 Forecast: “The Storm before the Calm” and watch Karyn Cavanaugh’s latest comments here.

Weekly Commentary & Statistics

Monday, December 10, 2018

The hoped-for “Santa” rally took a detour this week, misrouted by unclear directions from the Federal Reserve and Tariff Man. The S&P 500 returned to correction territory.

Monthly Commentary & Outlook

December 2018

In 2019 we expect, and prudent investors should prepare for, “the storm before the calm” — tighter monetary conditions, uncertainty that includes a “disorderly Brexit” and increasing tensions between China and the United States on multiple fronts. We expect a storm though, nothing more.

  • Exceptionally strong economic growth has prompted the Fed to raise interest rates, reduce the balance sheet and generally to “Rip the Bandaid Off” from a zero rate environment.
  • The subsequent surge in volatility is cleaning house from rampant speculation that needed to be unwound - setting the stage for a healthier and calmer market in the future.
  • Two of the “Big 3” — China and the Eurozone — are struggling for geopolitical reasons but also due to the U.S. regaining its ranking as the most competitive country in the world.
  • Investors should prepare for the “storm” of tighter monetary conditions and greater geopolitical uncertainty but not at the expense of losing sight of our forecasted “calm” outlook.
  • Diversify, be disciplined and do not forget your ABCs — which in our 2019 forecast extend all the way to J-Jobs.

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