TOP 10 ECONOMIC STORIES OF 2018
#10… BITCOIN. Last year, almost exactly at this point in the calendar, Bitcoin was trading at just under $20,000. Today, it’s trading closer to $3,200. Is it real? Is it a fraud? The debate continues.
#9… THE 10-YEAR TREASURY. Five years ago, the 10-year was at 3.0%. For years the 10-year has been in the 2’s, and it began 2018 at 2.4%. But for the last 4 months, it’s been near/at/above 3.0%.
#8… OIL. It started the year at $60/barrel. Just 2-3 months ago it was in the low $70s. Now it’s in the low $50s. Our economy likes lower energy costs.
#7… THE MID-TERM ELECTIONS. We were supposed to see a “Blue Wave”. The Democrats did take the House. But Republicans strengthened their position in the Senate. For the last two years markets have seen less regulation and lower corporate taxes. With divided government, what we are likely to see in the next two years is gridlock. Markets generally like gridlock.
#6… VOLATILITY. The market’s roller-coaster is back. What goes up significantly one day, comes down the next. It’s been a couple of years since we’ve experienced it, but volatility appears to be here for a while to come.
#5… RECORD HIGHS. Although it’s been a bumpy year, we got a new high in the Dow in early October. The intra-day high was above 26,900, with a closing high above 26,800.
#4… THE FED. They’re in my list every year, it just depends on where. In 2018 the Fed met their inflation objective of 2%. They’ve given us three rate increases (and likely a fourth this week). A couple of months ago Fed Chair Powell said the Fed’s interest rate wasn’t close to neutral, and then a month later we’re told the rate is very close to neutral. Hmmm. One thing is for sure: when the Fed is talking, the markets are listening.
#3… TRADE DEALS. Out with NAFTA; a new deal gets done with Mexico and Canada. Trade discussions continue with our European allies, and the hope for a new trade deal with China continues as well. Actual trade deals, and the ramifications of possible trade deals, have seen markets respond in both directions in 2018.
#2… THE UNEMPLOYMENT RATE. The U.S. government actually publishes six unemployment rates each month. The one we normally discuss is the “U3” rate, and it’s at 3.7%. The last time it was that low was 49 years ago (1969). Simply stunning.
#1… GDP ABOVE 3%. During the Obama years annualized GDP was seemingly stuck at 2%. Some referred to this as “the new normal”. Others called it “the plow-horse economy”. Today, the rolling four-quarter average is 3.2%. That means between $2 to $3 trillion new dollars came into the Treasury this year. In my view: having GDP finish above 3% is the #1 economic story of 2018.
Due to how the Holidays hit this year, this is the final blog of the 2018.
To you and yours, I wish you a very Merry Christmas and a Happy New Year!
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