What are the implications of this new treaty? On July 6, the eve of a G-20 summit, a global trade pact planned for four years took a major step toward reality. In Brussels, Japanese Prime Minister Shinzo Abe, European Commission President Jean-Claude Juncker, and European Council President Donald Tusk unveiled a sweeping free trade treaty strengthening economic ties between east and west.1 The yet-unnamed pact is slated to take effect in early 2019, after details are finalized. It will create the globe’s largest economic area: a market of roughly 640 million people, accounting for about a third of the world
The Federal Reserve takes the key interest rate north by another quarter point. On Wednesday morning, futures markets put the odds at 99.6% of a June interest rate increase by the Federal Reserve. Sure enough, the central bank made a move. It raised the key interest rate by 0.25%, taking the target range for the federal funds rate to the 1.00-1.25% range. The Federal Open Market Committee voted 8-1 to hike the rate, with Minneapolis Fed President Neel Kashkari being the lone dissenter.1,2 What were the key takeaways from the latest Fed policy statement? A few are worth noting.
Monetary policy is normalizing due to economic improvement. On March 15, the Federal Reserve raised the benchmark interest rate by a quarter-point to a range of 0.75-1.00%. The increase was widely expected, and it represented a vote of confidence in the economy.1 This was the central bank’s second rate hike in three months, and Wall Street took it in stride, with the S&P 500 rising nearly 15 points on the day. One reason for that may have been the Fed’s latest dot-plot forecast, which remained as it was when the last interest rate adjustment was made in December. The Fed
If you plan to hold yours to maturity, the fluctuation in their market values need not be worrisome. Are tough times ahead for the bond market? Some investors think so. U.S. monetary policy is tightening, with the Federal Reserve planning gradual increases for the key interest rate. A rising interest rate environment presents a challenge to the bond market, but it does not necessarily imply some kind of doomsday for bondholders. Blanket advice to “get out of bonds” is imprudent, because it really all depends on what you intend to do with the debt investments you hold and how long
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%
A worldwide selloff occurs after the United Kingdom votes to leave the European Union. A wave of anxiety hit Wall Street Friday morning. Thursday night, the United Kingdom elected to become the first nation state to leave the European Union. The “Brexit” can potentially be finalized as soon as the summer of 2018.1 Voters in England, Scotland, Wales, and Northern Ireland were posed a simple question: “Should the United Kingdom remain a member of the European Union or leave the European Union?” Seventy-two percent of the U.K. electorate went to the polls to answer the question, and in the final
Can U.S. shares hold up in the wake of January’s shocks? On January 7, China halted stock trading for the second time in four days. The benchmark Shanghai Composite sank 7.0% on January 4 and dropped 7.3% three days later, both times activating a new circuit-breaker rule that stopped the trading session.(1) Markets worldwide fell in reaction to these dramatic plunges. On January 7 alone, Japan’s Nikkei 225 and Germany’s DAX both suffered selloffs of 2.3%. On the same day, the Dow Jones Industrial Average dropped below the 17,000 level and the S&P 500 closed below 2,000.(1,2,3) While the Dow
The Markets The People’s Bank of China (PBOC) started the New Year with a downward currency adjustment and fireworks followed. Last week, three distinct issues affected China’s stock market. First, the PBOC’s devaluation of the yuan (a.k.a. the renminbi), along with the knowledge the central bank had been spending heavily to prop up its currency in recent months, led many analysts and investors to the conclusion China’s economy might not be as robust as official reports indicated, according to the Financial Times. Not everyone was surprised by this revelation. During the fourth quarter of 2015, The Conference Board’s working paper
CAN STOCKS REGAIN THEIR FOOTING THIS WEEK? Investors hope so after a very rough start to 2016. Declining oil prices and disappointing manufacturing data in both the U.S. and China helped trigger a global selloff: the major equity indices in Europe and Asia fell between 5-9% last week with our benchmarks following suit. The Dow Jones Industrial Average lost 6.19% in five days to 16,346.45, paralleled by a 6.13% fall for the S&P 500 to 1,922.03 and a 7.27% descent for the Nasdaq Composite to 4,643.60. The week ended with the S&P 9.8% below its May 2015 peak, and with
As the central bank starts tightening, some positives & negatives may emerge. Economists widely expect the Federal Reserve to raise interest rates this month. Additional incremental rate hikes may follow in 2016. If you are retired (or soon will be), you will want to consider what gradually higher interest rates could mean for you financially. Some of the effects are already being felt. Glancing at Freddie Mac’s weekly surveys, average interest rates for fixed-rate home loans climbed about 0.2% between October 8 and December 10 on assumptions of the federal funds rate rising. (Bond market behavior influences these rates as
When it rains it pours, as the saying goes. If you’ve been following the financial news this summer, it probably seems like a torrential storm has been churning all around the world. Every week, people ask me about the headlines they hear on TV. “What’s going on with China?” they want to know. “Is the Greece situation over?” “Why do I keep hearing more about Puerto Rico?” “What about Canada?” You may have already seen my thoughts on some of these issues, but for the sake of convenience, I thought you might enjoy a quick round-up about what’s happening in
If you’ve been watching TV, been online, or read a newspaper over the past week or so, you’ve probably saw some of the headlines about the Greek debt crisis. It’s possible you don’t quite understand exactly what is going on and how it can affect you. In this post we’ll explain what is happening in Greece and how it can affect us. The Setting Athens, Greece. As of this writing, reports out of this proud, ancient capital are mostly calm right now, but that calmness masks the turmoil that lies beneath. Banks have shut their doors, ATMs are out of
The market as defined by the S&P 500 percolated over the past five days. We opened the week Monday May 11 at 2115.56 and closed Friday May 15 at 2122.72. That means we had new highs established on Thursday and Friday, but were only up 7.16 points for the week. We remain in a tight trading range for the S&P 500 with support remaining at 1970 and resistance at the 2120 level. You will notice that we slightly exceeded resistance with Friday’s close. It will be interesting to see the market will build on that or have short term pullback
Weekly Market Update 5/11/2015 May 4 – May 8, 2015 – More of the Same We seem to be continuing the pattern of the past several weeks with lackluster weekly movement with a couple of exciting days. After make a fake to the downside Tuesday due to a poor trade report, we bounced back with a 28 point move upward on the S&P 500 today, attributed to a strong jobs report. This was a strong move with volume increasing from around 300 million shares traded each day earlier in the week, to 524 million shares traded today. The official unemployment
Weekly Market Update April 27-May 1, 2015 – Late Excitement We once again had a fairly calm market this week. We saw the S&P 500 open at 2119.29 on Monday, and close this afternoon, Friday, May 1 at 2108.29; a small loss of 11 points for the week. The month of April was more of the same, with a monthly gain of a fraction over 17 points. We have been stuck in a very narrow trading range since December with support at 2040, and resistance at 2115. This week was very similar to what we have seen in recent months.