MARKET RECAP

• US stocks +1.81%, international +1.69%, bonds +0.31%. The SP500 closed at an all-time high. Small stocks had a really big week, +4.6%.
• 50,000 new jobs were added in December, less than the 70k expectation.  Manufacturing jobs fell for the 8th time in a row. The unemployment rate fell to 4.4%.
• The ISM PMI for manufacturing fell to 47.9 from 48.2. Economists were looking for 48.3. It was the 10th month in a row projecting a contraction in manufacturing activity.
• Economists at the Federal Reserve Bank of San Francisco, looking for at data from 1886 to 2017, found that tariff increases have tended to lower inflation and raise unemployment in the short run. A 1% increase in tariffs lowered inflation by 0.6%. This was due to an “aggregate demand shock.” Tariffs create economic uncertainty and a negative wealth effect (for example, falling stock prices). Because the economy is impacted negatively, unemployment rises.
• GDPNow estimates Q4 growth at a blistering 5.1%.
• Trump issued an executive order placing restrictions on executive pay and stock buybacks for defense contractors “until such time as they are able to produce a superior product, on time and on budget.”

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