Weekly Economic Update 6/13/2016

A LITTLE LESS OPTIMISM IN EARLY JUNE

On Friday, the University of Michigan’s initial June survey of consumer sentiment showed a slight retreat, with the index coming in at 94.3 versus its final May mark of 94.7. The survey’s chief economist, Richard Curtin, noted “consumers rated their current financial situation at the best levels since the 2007 cyclical peak largely due to wage gains” and also had “record low inflation expectations.” On the downside, consumers felt the economy was stronger a year ago.1

YELLEN OFFERS NO HINT OF SPRING RATE HIKE

Speaking in Philadelphia last week, Federal Reserve chair Janet Yellen said she felt “the current stance of monetary policy is generally appropriate,” adding “at the same time, I continue to think that the federal funds rate will probably need to rise gradually over time to ensure price stability and maximum sustainable employment in the longer run.” Investors interpreted her comments as a sign that the possibility of a June interest rate increase was very remote.2

BORROWING BECOMES CHEAPER FOR HOMEOWNERS

The average interest rate on a conventional home loan fell to 3.60% in Freddie Mac’s June 9 Primary Mortgage Market Survey. A week earlier, the average interest rate for a 30-year FRM was at 3.66%; a year ago, it was at 4.04%.3 

BREXIT FEARS REIN IN BULLS

Concerns about the United Kingdom leaving the European Union sent bond yields falling worldwide late last week and hampered stocks, ending a 4-week win streak for the S&P 500. The 5-day performances: DJIA, +0.33% to 17,865.34; S&P, -0.15% to 2,096.07; NASDAQ, -0.97% to 4,894.55. Oil settled at $49.07 on the NYMEX Friday; gold, at a 3-week high of $1,275.90 on the COMEX.4,5

THIS WEEK: Nothing major is scheduled on Monday. May retail sales figures arrive Tuesday, plus Q1 results from Bob Evans. Wednesday, the Fed concludes a policy meeting (with a press conference to follow); the May Producer Price Index is released; and Jabil Circuit and Progressive present earnings. Thursday, the May Consumer Price Index appears, along with a new initial claims report and earnings from Kroger, Oracle, Red Hat, and Rite Aid. The Census Bureau releases its report on May groundbreaking and building permits on Friday.

% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +2.53 -0.75 +9.90 +6.40
NASDAQ -2.25 -3.59 +17.03 +12.92
S&P 500 +2.55 -0.43 +12.98 +6.74
REAL YIELD 6/10 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS 0.12% 0.63% 0.79% 2.45%

Sources: wsj.com, bigcharts.com, treasury.gov – 6/10/165,6,7,8

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

WEEKLY QUOTE

“Early to bed and early to rise makes a man healthy, wealthy, and wise.”  

– Ben Franklin 

WEEKLY TIP

Millennials should not fall for the myth that you need to carry a lot of consumer debt to build a good credit score. A positive payment history can be established while carrying relatively little debt.    

WEEKLY RIDDLE

At the sound of it, you may dream, dance, laugh, weep, or even stamp your feet. What is it?

Last week’s riddle:

Three feet have I, yet not a single leg. What am I?

Last week’s answer:

A yardstick.

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

Citations.

1 – sca.isr.umich.edu/ [6/10/16]

2 – cnbc.com/2016/06/07/european-stocks-shell-yellen-oil-prices.html [6/7/16]

3 – forbes.com/sites/redfin/2016/06/09/mortgage-rates-down-for-first-time-in-four-weeks/ [6/9/16]

4 – marketwatch.com/story/us-stock-futures-slammed-by-jitters-over-fed-and-brexit-2016-06-10 [6/10/16]

5 – markets.wsj.com/us [6/10/16]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F10%2F15&x=0&y=0 [6/10/16]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F10%2F15&x=0&y=0 [6/10/16]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F10%2F15&x=0&y=0 [6/10/16]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F10%2F11&x=0&y=0 [6/10/16]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F10%2F11&x=0&y=0 [6/10/16]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F10%2F11&x=0&y=0 [6/10/16]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F9%2F06&x=0&y=0 [6/10/16]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F9%2F06&x=0&y=0 [6/10/16]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F9%2F06&x=0&y=0 [6/10/16]

7 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [6/10/16]

8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [6/10/16]

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