The two biggest overhangs of 2019 have been resolved: Morning Brief

Sam Ro
Managing Editor

Monday, December 16, 2019

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2019 is over

On Friday, stock markets closed at a record high as the world got some clarity on two major geopolitical risks: the U.S.-China trade war and Brexit.

The S&P 500 (^GSPC) gained a modest 0.2 points or 0.01% to close at 3,168.80. Sure, it wasn’t much. But you can’t exactly say investors and traders were selling the news.

U.S. and Chinese officials agreed on terms for the so-called Phase One trade deal, which among other things prevented a new round of tariffs from going into effect on Dec. 15 while also reducing previously implemented tariffs.

“There is still some uncertainty regarding details, but the most important development is that the White House has agreed to reduce September 1 tariffs (List 4A) on roughly $120 billion in imports from China from 15% to 7.5%,” Goldman Sachs’ Alec Phillips said.

Hours earlier, voters in the U.K. handed prime minister Boris Johnson’s Conservative party a decisive victory, clearing the way for Brexit.

“I will admit that I’m not sure why Brexit is such a good thing, but the clear majority supposedly removes a lot of uncertainty which the market wanted,” Academy Securities’ Peter Tchir wrote in an email on Friday.

Whether or not you like the idea of the U.S.-China trade war or Brexit, these were big milestones achieved on Friday. And the next major developments are now 2020 matters.

In other words, 2019 is over.

2019 is over. 2020 is coming. (Getty)

No more jobs reports. No more FOMC meetings. Investors and traders will be going into holiday mode and so will many of the policymakers and executives capable of making news that moves markets.*

On to 2020, where as usual “uncertainty” will be a dominant theme.

“The fact that President Trump announced a pivot to Phase 2 negotiations immediately implies that there may be more headline risk on the trade issue next year than previously envisaged,” Renaissance Macro’s Neil Dutta said in an email on Friday. “In other words, some of the short-term uncertainty risk goes away, but there might be a bit more uncertainty in the outlook that is entrenched.”

*Just because 2019 is “over” doesn’t mean markets won’t move. Just look at what happened late December last year.

By Sam Ro, managing editor. Follow him at @SamRo

What to watch today

Economy

  • 8:30 a.m. ET: Empire Manufacturing, December (4.3 expected, 2.0 in November)

  • 9:45 a.m. ET: Markit US Composite PMI, December preliminary (52.0 prior); Markit US Manufacturing PMI, December preliminary (52.6 expected, 52.6 prior); Markit US Services PMI, December preliminary (51.8 expected, 51.6 prior)

  • 10 a.m. ET: NAHB Housing Market Index, December (70 expected, 70 in November)

  • 4 p.m. ET: Net Long-term TIC Flows, October ($49.5 billion in September); Total Net TIC Flows, October (-$37.6 billion in September)

Read more

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