Brexit & Trade Deal Lift Markets

December 13, 2019

Bulls breathed a sigh of relief this week, sending the S&P 500 to a new record high of 3,168.80. The move was stoked by positive geopolitical developments. First, there was the news that the U.S. and China had come to an agreement on the text for a “Phase 1” trade deal. While there are still a number of trade items to still be addressed in a future agreement, the initial Phase 1 agreement is still expected to give the global economy a much needed jolt as we head in 2020. Next, UK voters spread holiday cheer to investors as they handed Boris Johnson a clear legislative mandate. His Conservative party crushed the Labour party, securing not only a comprehensive parliamentary majority but also winning a wide swath of seats though Labour’s heartland. The election result gives Johnson the votes necessary to extract the UK from the EU following the June 2016 referendum authorizing the government to do so, while the magnitude of the victory consolidates Johnson’s power as he now turns to negotiating terms for a post-Brexit trade deal. The market has been waiting on these items to resolve themselves for months, and consequently they overshadowed the Fed’s final FOMC meeting for the year and a weaker than expected retail sales report. For the week, the S&P 500 added 0.73%.

Fed Releases 2020 Outlook

The Federal Reserve capped 2019 by concluding its final FOMC meeting of the year on Wednesday. As anticipated, the central bank held rates at the current range of 1.50% to 1.75%, encouraged by the continued strength in the labor market. The Fed also released its 2020 interest rate outlook. It’s “dot plot”, a graph that illustrates each Fed member’s future projections on rates, indicated that, on balance, most members saw no interest rate hikes in the cards for 2020. Forecasts just seem to be made just to change, however. In 2019, the Fed had to vary from the dot plot when its hand was forced to unexpectedly cut interest rates three times throughout the year in order to maintain the U.S. economy’s momentum in the face of headwinds from the U.S.-China trade war and slow global growth. With a Phase 1 deal seemingly in hand, the indication is that some of 2020’s uncertainty has been removed, making it more probable that the Fed will be able to maintain rates at these levels through at least the coming year.

Savvy Shoppers Confound Economists

A promising start to the holiday shopping season was dashed as November retail sales figures failed to hit their mark. For the month, retail sales rose 0.20% to $528 billion. That was below expectations of a 0.50% increase. Excluding autos, gasoline, building materials and food services, retail sales rose 0.10%. Although the report took the wind out of retail stocks, there are a couple of reasons to suspect November’s figures may not be as disappointing as they first appear, and that this year’s holidays’ timing may be throwing off economists’ models. Shoppers appear to have taken greater advantage of pre-season sales this year, which managed to front load sales into October. This was evidenced in this week’s revision to the October sales report which was revised higher to a 0.40% gain from a previously reported 0.30% increase. In addition, a late-in-the-month Thanksgiving resulted in pent up demand from shoppers waiting for Black Friday. This means that Cyber Monday and the broader Christmas shopping momentum fell in early December which may not be handled correctly with the government’s seasonal adjustment factor having potentially over handicapped November’s results. The market was not overly concerned by the sales report given the strong job and wages figures and these other mitigating factors. Furthermore, anecdotal evidence from several major retailers suggest solid year-over-year sales growth should be expected.

Friday’s headlines touted a Phase 1 deal with China as a done deal, but as we have seen a number of times now, the definition of “done” varies depending on whether you’re listening to the U.S. or China. At a very minimum, the Phase 1 deal looks like a de-escalation in tensions with the U.S. agreeing to roll back some Chinese tariffs and halting additional levies which were set to take effect on Sunday. China, for its part, has agreed to make significant purchases of U.S. agricultural goods and roll back tariffs it placed on U.S goods. Directionally, this is all very positive, and indeed, words to this very effect have been formalized in mutually agreed upon text. Normally this would all be seen as sure thing, but while markets may have breathed a sigh of relief, they don’t quite seem ready to rally until they know for certain that the ink has dried.

The Week Ahead

As we head into the final two trading weeks of the year, economic data looks to be light. In keeping with the theme of being home for the holidays, we’ll have the latest figures on existing home sales and housing starts.

‘Tis The Season for Tipping

It’s the time of year when we contemplate our gratitude for others and for those whose services we have appreciated over the past year. Tipping, including who you should remember to tip and how much to give, can be a tricky and sometimes awkward topic. We consulted The Emily Post Institute, the fifth-generation family business established in 1922, and a few other experts in etiquette to put together helpful guidelines for who to tip and how much is appropriate. There is no one “right” number for everyone, and this is simply intended be a helpful guide.

First, consider the following:

  • Your budget: You shouldn’t feel obligated to go beyond your personal budget
  • The quality and frequency of the service you receive
  • Your relationship with the service provider
  • The number of years you have been using the service
  • Location: tipping tends to be higher in larger cities
  • If your budget doesn’t allow for tips, consider homemade gifts or express your gratitude for a year of service with words or a card with a hand written note
  • If you already tip regularly, then you may forego the end of year tip or give a more modest holiday thank you
  • Any gift or tip should be accompanied by a heartfelt note of appreciation and recognition


Below is a guide with helpful advice and recommendations — not rules — compiled from several sources:

  • Domestic help (nanny, housekeeper, cook): Consider cash of one week up to a month’s pay depending on the recipient and the services they provide. For a live-in nanny or au pair, cash in addition to a gift from you or your children would be appropriate. If your housekeeper comes once per week, the equivalent of a day’s pay or $50. If they come daily, the equivalent of a week’s pay and possibly a gift.
  • Regular babysitter: Cash of up to one evening’s pay or a gift card. A small personal gift from your children is also appreciated as well.
  • Hair Stylist, Manicurist, Personal Trainer, & Massage Therapist: Experts say to tip the cost of one visit. For those who might spend several hundred dollars per visit for a haircut, color, highlight, and style, a tip of around $10 to $60 or a gift, particularly if you tip well after each service throughout the year.
  • Nursing home employees: Check company policy first. A gift that could be shared by the staff, such as flowers or food items.
  • Pet Groomer or Dog Walker: Gift or cash of one session for a groomer and up to one week’s pay for a dog walker.
  • Trash Collector: According to a survey by Consumer Reports, garbage collectors are the least likely to get a tip. Check local regulations for public service employees. If there are no restrictions, $10-$30 per person.
  • Lawn Maintenance: Equivalent to one week’s service.
  • Newspaper delivery: $10 to $30.
  • Teacher: Consider a group gift with other parents or something thoughtful. Check the school’s gift-giving policy before you buy. Some items, such as cash, may be considered attempts to influence grades.
  • Day Care Provider: $25 to $70 for each staff member who works with your children
  • Pool Cleaner: Equivalent of one session, divided among the crew.
  • Package delivery:
    • USPS: If you have a friendly relationship with your letter carrier, a small gift under $20 is a nice gesture but nothing more due to government employee regulations.
    • UPS: UPS does not have a limit; tipping is left to customer’s discretion.
    • FedEx: Gift of up to $25 if you get regular deliveries


One helpful tip: if you are giving cash, get fresh, crisp bills from your bank which present so much more nicely than old bills, and the gesture shows more effort on your part.

You can skip the tip for your chiropractor, dentist, doctors, tailor, and other professional or business services. Tipping isn’t meant to be stressful. It’s meant to be an opportunity to honor and thank the people who make our lives better.





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