Will volatility seize Wall Street? Or will calm prevail? Wall Street has had a rather calm summer. How about fall? Will volatility increase before and after Election Day? So far, the market is performing roughly in line with historical patterns. In 19 of the prior 22 presidential election years, the S&P 500 advanced from June through October. The median gain for the index during that 5-month period: 4.1%.1 During those 22 election years, the S&P averaged a gain of 1.5% in June, 1.9% in July, and 3.0% in August. This year, the S&P rose 0.1% in June and rallied 3.6%
YELLEN HINTS AT A RATE HIKE Speaking Friday at the Federal Reserve’s annual retreat in Jackson Hole, Wyoming, Fed chair Janet Yellen commented that “the case for an increase in the federal funds rate has strengthened in recent months.” That statement was interpreted by some economists as a sign that the central bank could adjust interest rates this fall, but perhaps only after the presidential election.1 NEW HOME SALES ACCELERATE, RESALES DECLINE The good news, from the Census Bureau: July brought a 12.4% leap in new home buying. Sales approached a 9-year peak, even with only 4.3 months of new
The Markets Attention investors: U.S. interest rates may be moving up and it might happen this year. During last Friday’s speech at the Federal Reserve’s annual economic symposium in Jackson Hole, Wyoming, Fed Chairwoman Janet Yellen signaled that a rate hike is probably coming but, as usual, she didn’t offer any specifics about the timing: “…Indeed, in light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months. Of course, our decisions always depend on the
IS A 2016 INTEREST RATE HIKE STILL POSSIBLE? According to the minutes from the Federal Reserve’s July monetary policy meeting, some Federal Open Market Committee members felt “that economic conditions would soon warrant taking another step in removing policy accommodation.” Others favored waiting longer to adjust rates, contending that the strong hiring seen in recent months would presently moderate. Fed officials broadly agreed that more economic data would be needed before any action.1 NO CPI ADVANCE IN JULY The federal government’s Consumer Price Index went nowhere last month, leaving yearly inflation at a mere 0.8%. The core CPI advanced another
MONTHLY NEWS AND INFORMATION FOR CURRENT AND FUTURE RETIREES WHO CLAIMS SOCIAL SECURITY AT 62, AND WHY? According to the Center for Retirement Research at Boston College, 48% of men and 42% of women take Social Security benefits as soon as they are eligible for them. A baby boomer who claims those benefits at age 62 will get 25% less monthly Social Security income than a boomer who waits to claim benefits at age 66, and 32% less than a boomer who puts off filing for benefits until age 70. Those who claim at first opportunity may have urgent reasons
The Markets Last week, Wall Street was speculating about monetary policy with the enthusiasm of commentators trying to predict who will bring home Olympic gold. The Federal Open Market Committee (FOMC) is expected to introduce another rate hike before the end of 2016, according to the BBC, and it has just three opportunities to deliver the goods – during its September, November, or December meetings. Analysts and pundits parsed minutes from July’s FOMC meeting looking for clues about timing and found relatively few because there was no consensus view at the July meeting. The BBC wrote, “According to the minutes,
RETAIL SALES WEAKEN July was the first month since March without a gain in U.S. retail purchases. The Census Bureau’s latest report showed retail sales were flat last month, a disappointment in the wake of June’s 0.8% climb. Car and truck sales advanced 1.1% during July, but, minus auto buying, retail sales were actually down 0.3% for the month.1 HOUSEHOLD SENTIMENT INDEX IMPROVES The University of Michigan’s monthly consumer sentiment index rose to 90.4 last week in its preliminary August edition. It had ended July at a mark of 90.0. A consensus forecast of economists at Briefing.com had projected a
The Markets How do you measure stock market valuation? If you look at conventional measures – like price-to-earnings (P/E) ratios – then U.S. stock markets appear to be pricey. The Wall Street Journal reported trailing 12-month P/E ratios are high when compared to 10-year averages. High P/E ratios haven’t dampened investors’ interest in U.S. stocks, and share prices have been moving higher. The Dow Jones Industrial Average (Dow), Standard & Poor’s 500 Index, and NASDAQ all reached new highs last Thursday – the first time that has happened since 1999. Barron’s suggested investors’ enthusiasm for stocks is rooted in the
THE MONTH IN BRIEF The post-Brexit bounce turned into a sustained rally across July. Second-quarter earnings were not as gloomy as anticipated, and core economic indicators often matched or surpassed expectations. Housing news was generally good, and the latest jobs report showed employers hiring in spectacular fashion. Panic did not spread through European markets; in fact, July was a great month for European (and global) equities. Precious metals shone brightly, but energy futures fell hard. July did end with a troubling initial estimate of Q2 GDP that seemed to suggest the U.S. economy would stall without its current, strong level
TWO STRAIGHT MONTHS OF IMPRESSIVE JOB GAINS The Department of Labor provided Wall Street and Main Street with some great news Friday. Last month, the population of Americans with full-time jobs rose by 255,000. About 70,000 of the workers hired in July found employment within the professional and business services sectors. In addition, the huge June hiring gain was revised slightly upward to 292,000. As labor force participation increased to 62.8% in July, the headline jobless rate stayed at 4.9% while the broader U-6 measure of unemployment came in at 9.7%; the average wage rose 0.3%. Across the past year,
The Markets It’s déjà vu all over again! The Chicago Board of Options Exchange (CBOE) Volatility Index, also known as the VIX, tracks the prices of options on the Standard & Poor’s 500 (S&P 500) Index. Since options often are used to hedge portfolio risk, the VIX is considered to be a ‘fear gauge’ that has value with regard to market volatility during the next 30 days. The VIX moves higher when investors are worried and lower when they’re feeling content. While this is not necessarily predictive, it does measure the current degree of fear present in the stock market.
CONFIDENCE INDICES HOLD STEADY Rising half a point from its previous reading, the University of Michigan’s consumer sentiment index finished July at 90.0. The Conference Board’s monthly household confidence gauge came in at 97.3 last week, near its (revised) June mark of 97.4.1 ROUNDING UP THE LATEST REAL ESTATE NEWS New Census Bureau data shows new home sales up 3.5% in June after a 6.0% May setback. Pending sales of existing homes increased 0.2% in June, reported the National Association of Realtors. The S&P/Case-Shiller home price index (20-city composite) rose 0.9% in May, putting its annualized gain at 5.2%.1 ECONOMY
The Markets Here’s a brain tickler for you: In July 2016, there were four. In June 2016, there were 10. Since 2008, there have been 673! What are they? If you guessed central bank rate cuts, you are on the money. Financial Times reported: “In the eight years since the collapse of Lehman Brothers, the world’s top 50 central banks have, on average, cut rates once every three trading days…Despite a modest global recovery, central banks have barely had any time to breathe since the summer of 2008 – carrying out mass asset purchases and entering into negative rate territory.