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Olde West Chester Christmas Walk!

Despite a number of sharp swings this week, the markets look to finish right about where they started.  As in recent weeks, news regarding trade with China, as well as potential new tariffs threatened by President Trump whipsawed investors who traded with reckless abandon.  While the rumors continue to fly, there appears to be no solid evidence, one way or the other, that a deal is any closer to being reached.  Until then, expect the markets to occasionally veer sharply higher (or lower) based on the rhetoric and rumor du jour.

Perhaps the best news this week is a piece of economic data released today. The November nonfarm payrolls grew by 266,000 vs an estimated 186,000 and 156,000 previous. Additionally, the unemployment rate unexpectedly fell back to 3.5% which marks a fifty-year low. Even the broader U6 unemployment rate fell to 6.9%. The U6 figure includes those who are working but underemployed or those working part-time who wish to work full-time. A coincident indicator is Consumer Sentiment which also surprised to the upside today. December Consumer Sentiment can in at 99.2 vs an expected 96.9 with both current conditions and future expectations beating estimates. Unlike last year, both investors and consumers appear in the Christmas spirit.

In less important news, the Federal Reserve is mulling over allowing hotter inflation. The reason I say this is less important, at least in the near-term, is that inflation has been well below trend for a long time now. However, it would be a big change in policy to allow inflation to run faster than 2% to make up for times it’s below that level. The Fed wants to avoid the situation Japan finds itself in, where expectations are permanently anchored at too low of a rate. This change in policy would certainly give the Fed room for further quantitative easing, if the need arose, without being limited by its current inflation policy.

There was quite a bit of news from corporate America this week. We learned that McDonalds is working on a new chicken sandwich which is aimed squarely at customers of Chick-Fil-A. Starbucks adds an Irish cream holiday cold brew to its menu. Apparently, according to Starbucks, cold brew accounts for more than half of all sales. Ford announced it has formed a sustainability partnership with McDonalds to make some of its car parts, i.e. headlamp housings, from coffee waste. This sounds bizarre but it will make the cars “greener”, provide the company with up to 25% energy savings, make the parts 20% lighter, and make the car smell like coffee as it passes you on the street. Ok… I made that last part up.

In more controversial news, it seems Peloton has stepped in it, proverbially. You know the old expression, “There’s no such thing as bad publicity?” Well, Peloton, the maker of a popular $2,500 exercise bike, got a large dose of media attention this week. The company released a new online ad that touched a nerve for some people. In the ad, the husband gives his wife a Peloton bike for Christmas, to which she exuberantly says she’s excited. The excitement wanes over the following year, although it ends with her thanking her husband. However, some suggest the underlying message is sexist. I’m going to side step the controversy other than to say, watch the original ad and the following spoof which went viral this week. Be warned, the spoof includes some bad language which is not appropriate for children. I’m curious what your take is on this controversy. Are we too easily outraged these days?

In closing, I want to take this opportunity to invite all our clients and friends to the annual Olde West Chester Christmas walk which takes place tomorrow. For those who live within driving distance, it is a fun day which starts at 2pm and culminates in a parade at 7pm. The crowd begins to pick up around 5pm. The weather looks fantastic with a sunny forecast and mid-40’s temperatures. As always, we will be offering cookies, hot cider, and a balloon artist for the children. Please stop by and say hi if you are in the neighborhood. We hope to see you tomorrow!

Bruce J. Mason, MBA