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December
6
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Week In Review

U.S. Economy

The ISM readings for U.S. manufacturing activity sunk further into contractionary territory for November.  November employment and wage gains far outpaced expectations, even when adjusting for the effects of the end of the GM strike.  Payrolls rose 266,000 with the previous two months revised up by 41,000, and wages rose 3.1% from a year ago.

Our Take

The global slowdown and manufacturing contraction have thus far not negatively impacted employment and earnings, and this is supportive of the U.S. consumer continuing to drive growth.  The strong jobs and wages readings strengthen the Fed’s case for remaining on hold.


China

President Trump stated that there is no deadline for reaching a phase 1 agreement with China, and Commerce Secretary Ross stated that the scheduled tariffs would go into place on December 15th if no agreement is in place.  Later in the week negotiators indicated that the two sides are making progress, and Chinese authorities began procedural steps to allow waivers of tariffs on soy and pork imports.  Markets whipsawed in response to these positive and negative indications about the state of negotiations.

Our Take

Capital markets are likely to remain volatile as long as the status of trade negotiations remains unclear.  The significant impact of news about the negotiations indicates the importance that investors are placing on resolution of the conflict.


Municipals

Moody’s Investors Service upgraded Chicago Public Schools debt from B2 to B1 and changed its outlook from stable to positive.  Moody’s cited the district’s improved liquidity and “significant infusion of new state and local revenue”.

Our Take

While the upgrade is good news for CPS and bondholders, the district remains in junk territory.  The school district has received additional state aid and has improved its fiscal health for the short term.  However, CPS has rising pension costs and other long-term liabilities which could affect the credit rating in the future.


All expressions of opinions are subject to change without notice in reaction to shifting market conditions.  All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.  Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice.