U.S. GDP rose at an overall rate of 2.0% in the third quarter of 2015, representing a slight downward revision from the previous estimate of 2.1%. U.S. economic growth remains stuck in low-gear relative to past recoveries with overall growth likely to come in around 2.1% for the full-year when fourth-quarter GDP estimates are released at the end of January. The last time the U.S. economy grew at a rate greater than 3.0% for the full year was in 2005 when GDP expanded at 3.3%. Despite the low top-line growth in the overall economy, employers in the U.S. continued to add jobs at a relatively healthy pace throughout the year. November non-farm payrolls grew by 211,000, which was in-line with the average for the first 11 months of the year of 210,000. The unemployment rate currently stands at 5.0%, down from 5.6% at the end of 2014, and half of the peak unemployment rate of 10.0% reached during the recession. Weakness in the energy sector was one of the prominent themes in 2015. WTI crude oil traded around $53 per barrel at the beginning of the year, down about 50% from where it traded in mid-2014. Late-spring and early-summer saw oil prices rebound to the low-$60’s before continuing their downward trajectory to finish the year in the mid-$30’s. Consumers have been the primary beneficiary of lower oil prices with the average price of a gallon of regular gasoline dropping below $2 for the first time since early 2009.
As trading came to a close for 2015, the overall US stock market ended the year approximately where it began. Major US stock market averages rebounded smartly in the fourth quarter with the Dow, S&P 500, and NASDAQ all rising by 8% to 10%. However, most of those gains were concentrated in the month of October with the S&P 500 returning 8.4%, followed by relatively flat performance in the months of November and December. Any positive returns that stocks did experience throughout the year were concentrated among a small handful of companies. According to Strategas Research Partners, market performance was very narrow with the 10 largest S&P stocks up +18% and the remainder of the index down approximately -4% as of late-December.
After seven years of holding short-term interest rates near zero percent, the Fed moved to increase the benchmark rate by a quarter of a percent on December 16th. This marks the first time the FOMC has increased interest rates in nearly a decade. Yields on U.S. Treasury securities rose throughout the quarter as investors anticipated the Fed’s move to raise short-term rates. The yield on the 10-year U.S. Treasury ended the quarter at 2.27%, up from a yield of 2.04% at the end of September. Two-year treasury notes, which are among the most sensitive to Fed interest rate changes, also rose during the last quarter of the year, touching a high of 1.10% in the closing days of 2015. This marks the first time the two-year note has risen above 1% in over five years.