For the US and many other markets, the week ending Dec 12th was the worst week in several years. The Dow Industrials suffered its worst loss since November 2011, -3.8%, while the S&P 500 lost -3.5%, its worst performance since May 2012, with both indices snapping seven-week winning streaks after each hit a new high the prior Friday. The Nasdaq Composite index fell a second consecutive week, losing -2.7%.The Russell 2000 Small Cap index was the best performing US index, at -2.5%, but fell back into the red for the year to date.The rest of the world fared even worse. Once again, commodity-dependent markets performed the poorest, led by Brazil at -9.3%. Emerging Markets as a whole dropped -6.2% while Developed Markets on average retreated -4.7%. The Greek stock market, for political rather than commodity reasons, crashed -20%, the worst performance since 1987. Canada’s TSX index declined by -5.1%, and has given up almost all of its gains for the year.
Even in the midst of the stock market gloom, there were good US economic reports away from the news-dominating price of oil. US retail sales rose +0.6% month over month, better than expected. Consumer confidence came in at 93.88, which was much better than expectations. The National Federation of Independent Business (NFIB) small business optimism index was reported at 98.1, the highest in almost 8 years. Initial jobless claims were 294,000, down 3,000 from last week and a bit lower than expected. The Mortgage Bankers Association reported that home-refinance applications rose +13.2% week-over-weeks. And, of course, oil fell -12.6% just this week and is off more than -40% from its 2014 highs.
The Canadian dollar (the “Loonie”) fell to a 5 1/2 year low of 86.42 cents US. The Loonie has tumbled almost a full US cent just this week as oil prices continued to plummet. Partially offsetting the negative Loonie news was a government forecast of stronger non-petroleum exports on the back of new competitiveness from the lower Loonie.
In Europe, poor economic reports for the Eurozone continued. Eurozone industrial production for the month of October was released, up just +0.1% month over month (and up a scant +0.7% year over year). German industrial production for October was also up a less-than-expected +0.2% from September. The New York Times reported on a French poll revealing an astonishing 90% public disapproval of French President Hollande’s economic policies.
China’s national statistics bureau released a number of reports this week, none of which were particularly good.
November exports rose +4.7% year over year, far less than expected, while imports fell -6.7%. Exports to the US rose +2.6% year over year, but this was far less than October’s +10.9% pace. Another key barometer of economic activity, electricity output, rose only +0.6% in November vs last year. Producer prices (called “Factory Gate” prices in China) fell an amazing 33rd consecutive month, down -2.7%. This is outright industrial deflation, brought about by severe overcapacity, lower commodity prices, and no pricing power. Nonetheless, the Shanghai stock exchange index is up +39% for the year to date after having lain dormant for the prior several years. Unlike most other investor populations around the world, the majority of domestic Chinese individual investors are…women. Middle-aged women, in particular, called “dama”. The Beijing Economic Information Daily publication identifies these “dama” investors as the main factor behind the Chinese market’s recent bullish behavior.
Although this past week was a bust for the markets worldwide, it also is the only week in December which is historically negative. The remainder of December has historically straightened up and sailed profitably through the end of the year, as this chart from SentimentTrader.com illustrates: