Daily Market Color January 15, 2016Flight to Quality Trade in Full Force as Oil Plunges Below $30/barrel Global equities plunged once again while Treasuries and swaps rallied strongly across the curve as falling oil prices and disappointing economic data spooked investors. Heavy selling pushed both WTI and Brent crude firmly below $30/barrel off the back of ongoing supply concerns, soon to be exacerbated by Iranian exports. $30/barrel seemed to be acting as a resistance level, and many fear the move below may now trigger an even bigger sell-off. Crude oil has already fallen 20% since the start of the year. Even government-sponsored buying couldn’t prevent China’s Shanghai Composite from falling 3.6% today, officially crossing into bear market territory. Today’s US economic data did little to alleviate investor concerns of a global economic slowdown. A decline in December retail sales concluded the weakest year since 2009 and New York manufacturing contracted at the fastest pace since the Great Recession. The US consumer was expected to boost GDP due to a robust labor market and extra spending money from lower gas prices, but that hasn’t been realized in the consumer data to date. Separate data also showed factory production declined in December for the second consecutive month as the stronger dollar and weak global growth continued to weigh on the manufacturing sector. Industrial production declined 0.4% compared with the 0.2% drop economists were expecting. Speaking this morning, New York Fed President Dudley expressed concern about the downside risks to US inflation due to the drop in oil prices and a strong dollar. Dudley said “the possibility that inflation expectations become unanchored to the downside” is worrisome for Fed officials. Despite his concerns, Dudley expects the US economy to grow slightly above 2% in 2016 with more tightening in the labor market, and both inflation and future inflation expectations to rise over time. Have a great weekend and remember the bond market is closed Monday in honor of Martin Luther King day.