For the full year, the Barclays Aggregate Index posted a 2.65% gain. Treasuries and municipals had more modest advances of 1.04% and 0.25%, respectively. As is often the case in periods when interest rates increase, high yield bonds easily outpaced these indices and increased by 17.13%.

Monthly Recap


U.S. equities continued their post-election rally and furthered their advance in December. Similar to last month, small cap stocks again outpaced large cap stocks and value outperformed growth stocks. International stocks generated positive returns, with developed markets outpacing the S&P 500 and emerging markets barely in the black. For the full year, U.S. equities easily outpaced international markets. Small cap and value stocks handily outperformed large cap and growth stocks.


Interest rates, in a repeat of November, again increased across the yield curve, though at a more modest pace. After hitting 2.60% in the middle of the month, the yield on the 10-year Treasury ended December with an 8 basis point increase to 2.45%. High yield bonds, yet again, outpaced more interest rate sensitive fixed income sectors. Municipal bonds recovered some of the losses experienced last month and outperformed corporates and Treasuries. For the full year, credit fared better than interest rate exposure. High yield bonds easily outpaced investment grades and Treasuries. Despite the challenges of the last few months, munis posted a modest positive return for 2016.


As expected, the Federal Open Market Committee voted to increase the target range for the federal funds rate to ½ to ¾%. Economic data were mostly positive for the month. Third quarter GDP was revised up to 3.5%, the best level since the third quarter of 2014. The ISM Manufacturing and Non-Manufacturing indices signaled improving business conditions, and the University of Michigan Consumer Sentiment Index bounced to its highest level since January 2004. Existing home sales recovered to levels last seen in February 2007. Moving toward the critical holiday selling season, retail sales missed expectations and declined from the prior month.

Nonfarm PayrollNov180,000178,000161,000142,000
ISM ManufacturingNov52.553.251.9
ISM Non-ManufacturingNov55.557.254.8
Retail Sales ex Auto & GasNov0.40%0.20%0.60%0.50%
PPI MOMNov0.10%0.40%0.00%
PPI MOM ex Food & EnergyNov0.20%0.40%-0.20%
PPI YOYNov0.90%1.30%0.80%
PPI YOY ex Food & EnergyNov1.30%1.60%1.20%
CPI MOMNov0.20%0.20%0.40%
CPI MOM ex Food & EnergyNov0.20%0.20%0.10%
CPI YOYNov1.70%1.70%1.60%
CPI YOY ex Food & EnergyNov2.20%2.10%2.10%
Industrial ProductionNov-0.30%-0.40%0.00%0.10%
Housing StartsNov1,230,0001,090,0001,323,0001,340,000
Building PermitsNov1,240,0001,201,0001,229,0001,260,000
New Home SalesNov575,000592,000563,000
Existing Home SalesNov5,500,0005,610,0005,600,0005,570,000
Leading IndexNov0.10%0.00%0.10%
Durable Goods OrdersNov (P)-4.80%-4.60%4.60%4.80%
S&P CoreLogic CS 20-City YOYOct5.03%5.10%5.08%5.03%
Personal IncomeNov0.30%0.00%0.60%0.50%
Personal SpendingNov0.30%0.20%0.30%0.40%
GDP Annualized QOQ3Q (T)3.30%3.50%3.20%
Univ. of Mich. SentimentDec (F)9898.298