by Lynn Berry | Apr 26, 2019 | Economic Newsletter, General, Retirement
In this month’s recap: the Federal Reserve sees no rate hikes in 2019, investors watch Treasury yields with interest, hiring suddenly weakens, home sales pick up, and the price of oil tops $60.
THE MONTH IN BRIEF
The Federal Reserve altered its outlook on interest rates in March, and the stock and bond markets certainly took notice. Both the Fed and the European Central Bank communicated that they saw economic growth moderating. Even so, the S&P 500 managed to advance 1.79% for the month. Trade talks continued between the U.S. and China, but without much in the way of real developments. New reports revealed a sudden slowdown in hiring and only mild inflation. Existing home sales accelerated, crude oil gained value, and the Brexit saga took yet another turn.1
DOMESTIC ECONOMIC HEALTH
Without a doubt, the major story of the month was the Federal Reserve’s newly dovish stance on monetary policy. The central bank had forecast two quarter-point rate hikes for 2019 in late 2018. On March 20, it held rates steady while projecting only one quarter-point hike through 2021. In announcing this dramatic pivot, the Fed also lowered its estimate of 2019 U.S. economic expansion to 2.1% from the prior 2.3%. Talking to the media after the release of the March 20 policy statement, Fed Chairman Jerome Powell remarked that the “growth of economic activity has slowed,” adding that Fed policymakers saw “some weakening” in the economy, but no signs of a recession.2
More than a few investors interpreted the Fed’s revised outlook as a commentary on the near future. Demand for longer-term Treasury bonds increased, sending their prices higher and their yields lower (bond yields fall when bond prices rise and vice versa). On March 22, the yield on the 2-year Treasury exceeded the yield on the 10-year Treasury. Analysts call this an “inverted yield curve,” and when it happens, the financial media is quick to point out that it could signal a weaker economy ahead. This is open to debate, but rising demand for longer-term Treasuries does imply less appetite for risk in the financial markets.3
By March 26, the CMEGroup’s FedWatch Tool – a gauge of market expectations about interest rate changes – gave the Fed a 71.7% chance of making an interest rate cut by the end of the year, with a 57.7% chance of a cut by September.4
The latest employment report from the Department of Labor showed payrolls expanding by just 20,000 net new hires in February. Even so, the main jobless rate fell 0.2% to 3.8%; the U-6 rate, including the underemployed, dropped 0.8% to 7.3%. (Both reductions could reflect furloughed federal workers returning to their jobs.) Also worth noting: hourly wages were up a nice 3.4% year-over-year.5
Inflation remained muted. The latest Consumer Price Index (February) showed just a 1.5% annualized gain, hardly the kind of pressure that begs action from policymakers.5
On Main Street, there was a slip in consumer confidence. The Conference Board’s monthly index came in at 124.1 for March – a good reading, but well below the 131.4 mark of a month earlier. The latest available data on consumer spending showed a mere 0.1% gain in January.6
A much-watched index tracking the U.S. manufacturing sector showed solid growth, but a slightly slower pace of business activity. The Institute for Supply Management’s purchasing manager index for the factory sector fell from 56.6 in January to 54.2 in February.5
Last month, the federal government downgraded its estimate of fourth-quarter gross domestic product. The final estimate was 2.2%, revised from 2.6%.6
GLOBAL ECONOMIC HEALTH
As March ended, a positive note was sounded in the trade negotiations between the U.S. and China. Secretary of the Treasury Steven Mnuchin tweeted that “constructive” discussions were taking place, to be continued in April in Washington, D.C.7
The Brexit did not occur on March 29. Instead, the United Kingdom’s Parliament rejected Prime Minister Theresa May’s (revised) Brexit plan on that day, for a third time. The European Union had earlier granted the United Kingdom a short-term extension of the Brexit deadline; the revised deadline, April 12, now looms large. If Parliament cannot agree on a Brexit deal at the start of this month, May will be left two choices. She can try to carry out a “hard” Brexit by April 12, a move that has little apparent support in Parliament. Alternately, she can ask the E.U. to extend the Brexit deadline again, which is hardly a given.8
On the continent, the European Central Bank decided to bring back some of the stimulus measures it had announced an end to in 2018. In its latest policy announcement, the ECB said that it would hold off on raising interest rates until at least 2020. (It last raised interest rates at the start of this decade.) Elsewhere, the Organization for Economic Cooperation and Development (OECD) forecast 2019 growth of less than 1% for the economies of Germany, Japan, and the United Kingdom, and growth of only 1% for the 19-country Eurozone.9
WORLD MARKETS
Last month, some of the best-performing foreign indices were in the emerging markets. China’s Shanghai Composite advanced 5.09% in March, and India’s twin benchmarks outgained it: the Nifty 50 soared 7.70%; the Sensex, 7.82%. Interestingly, the United Kingdom’s FTSE 100 rose 2.89%; France’s CAC 40 added 2.10%. Taiwan’s TWSE 50 improved 2.19%. Two other indices were basically flat for the month: the German DAX eked out a 0.09% advance; the Australian All Ordinaries, a 0.14% gain. MSCI’s Emerging Markets and World indexes respectively improved 0.68% and 1.05%. Three indices took notable losses: South Korea’s Kospi lost 2.49%, Malaysia’s KLSE Composite fell 3.75%, and Argentina’s Merval retreated 4.62%.10,11
COMMODITIES MARKETS
Unleaded gasoline had another great month, rising 14.26%. That said, all eyes were on oil. WTI crude regained the $60 level, advancing another 5.12% in March and wrapping up the month at a price of $60.18 on the New York Mercantile Exchange. In contrast, natural gas lost 4.77% in March; heating oil, 2.91%.12
The U.S. Dollar Index improved 1.09% last month. All four major metals retreated: gold took a 1.65% loss, silver fell 2.89%, platinum retreated 2.77%, and copper ceded 0.56%. At the closing bell on March 29, an ounce of gold was worth $1,290.80 on the Commodity Exchange of the NYMEX. The March gains among major crops: cotton, 4.19%; cocoa, 2.14%; wheat, 1.44%. The March losses: coffee, 1.20%; corn, 1.31%; soybeans, 1.48%; sugar, 1.57%.12,13
REAL ESTATE
In a burst of good news for the housing market, existing home sales greatly increased. The National Association of Realtors announced a February gain of 11.8%. It was the best month for residential resales in more than three years. NAR chief economist Lawrence Yun credited a “powerful combination of lower mortgage rates, more inventory, rising income, and higher consumer confidence.” Even so, sales were still down 1.8% year-over-year, and the NAR pending home sales index was 1.0% lower in February. The median sale price of a single-family residence was $249,500 in the second month of 2019, up 3.6% from February 2018.6,14
New home sales also improved in February. They were up 4.9% month-over-month, albeit 0.6% year-over-year.7
As the NAR noted, mortgage rates have declined of late. Freddie Mac’s Primary Mortgage Market Survey showed the average interest rate for the 30-year, fixed-rate mortgage at 4.35% on February 28; in the same survey, the 15-year FRM had a mean interest rate of 3.77%. By March 28, the 30-year FRM bore an average interest rate of just 4.06%, while a 15-year FRM had an average interest rate of 3.57%.15
T I P O F T H E M O N T H
In view of possible extended care needs, you may want to look at a hybrid life insurance policy that can potentially give you a pool of money to pay those costs. Unused benefits may be paid to the policy’s beneficiaries after your death.
LOOKING BACK, LOOKING FORWARD
All three big U.S. equity market benchmarks rose in March – to varying degrees, with the blue chips barely improving. The Nasdaq Composite settled at 7,729.32 on the last trading day of the month (March 29); the S&P 500, at 2,834.40; the Dow Jones Industrial Average, at 25,928.68. The Russell 2000 posted a one-month loss of 3.14%, declining to 1,539.78. The CBOE VIX, the index showing expectations of stock market volatility, ended March at 13.70, advancing 0.96%.1,16
| MARKET INDEX | Y-T-D CHANGE | 1-MO CHANGE | 2018 |
| DJIA | +11.15 | +0.05 | -5.63 |
| NASDAQ | +16.49 | +2.61 | -3.88 |
| S&P 500 | +13.07 | +1.79 | -6.24 |
| | | |
| BOND YIELD | 3/29 RATE | 1 MO AGO | 1 YR AGO |
| 10-YEAR TREASURY | 2.41 | 2.73 | 2.74 |
Sources: barchart.com, wsj.com, treasury.gov – 3/29/191,16,17,18
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends.
10-year Treasury yield = projected return on investment, expressed as a percentage, on the U.S. government’s 10-year bond.
Currently, Wall Street’s collective eye is focused not only on the upcoming earnings season, but also on domestic and global growth. Dovish notes sounded by the Fed and the ECB and declining bond yields are signaling reduced expectations of economic vitality. Perceptions of the market and the economy may be shifting as a consequence and impacting bullish sentiment. All of this may pose a significant challenge for the stock market this month, and earnings results may or may not have the power to alter such perceptions. This is a good time to remember that markets go through cycles, and over the long term, you will experience many of them as an investor. There will always be ups and downs; your investment approach takes them into account, plus your time horizon. Whether April turns out to be spectacular, disappointing, or somewhere in between, your long-run objectives should remain your focus.
Q U O T E O F T H E M O N T H
“He who knows that enough is enough will always have enough.”
Laozi
UPCOMING RELEASES
April’s major scheduled economic news releases include: ADP’s March private payrolls report and the Institute for Supply Management’s March reading on business activity in the service sector (4/3), the latest jobs report from the Department of Labor (4/5), March consumer inflation (4/10), March wholesale inflation (4/11), the initial April consumer sentiment reading from the University of Michigan (4/12), March retail sales (4/16), March housing starts (4/17), the Conference Board’s latest leading indicator index (4/18), March existing home sales (4/22), March new home sales (4/23), the latest monthly snapshot of hard goods orders (4/25), the final April University of Michigan consumer sentiment index (4/26), March consumer spending (4/29), and a new Conference Board consumer confidence index and March pending home sales (4/30). The Federal Reserve makes its next announcement on interest rates on May 1.
T H E M O N T H L Y R I D D L E
It is filled with garb, and the price is free; you can take whatever you like and return what you don’t need. What is it?
LAST MONTH’S RIDDLE: What has four legs, bears weight without complaint, and never makes a peep when food is brought its way?
ANSWER: A table.
KeyStone Financial Team may be reached at 920-969-0717 or admin@kfgwi.com.
www.kfgwi.com
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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. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. 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 market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs, or expenses. Investors cannot invest directly in indices. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a 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 a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. 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. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The Nifty 50 (NTFE 50) is a well-diversified 50-stock index accounting for 13 sectors of the Indian economy. It is used for a variety of purposes such as benchmarking fund portfolios, index-based derivatives and index funds. The BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE). The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The FTSE TWSE Taiwan 50 Index is a capitalization-weighted index of stocks comprises 50 companies listed on the Taiwan Stock Exchange developed by Taiwan Stock Exchange in collaboration with FTSE. The DAX 30 is a Blue-Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. Established in January 1980, the All Ordinaries is the oldest index of shares in Australia. It is made up of the share prices for 500 of the largest companies listed on the Australian Securities Exchange. The MSCI Emerging Markets Index is a float-adjusted market capitalization index consisting of indices in more than 25 emerging economies. The MSCI World Index is a free-float weighted equity index that includes developed world markets and does not include emerging markets. The Korea Composite Stock Price Index or KOSPI is the major stock market index of South Korea, representing all common stocks traded on the Korea Exchange. The FTSE Bursa Malaysia KLCI Index comprises of the largest 30 companies by full market capitalization on Bursa Malaysia's Main Board. The MERVAL Index (MERcado de VALores, literally Stock Exchange) is the most important index of the Buenos Aires Stock Exchange. The U.S. Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. 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. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. 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 - barchart.com/stocks/indices?viewName=performance [3/29/19]
2 - cbsnews.com/news/fed-rate-hikes-none-in-2019-federal-reserve-projects-no-rate-hikes-slower-growth-this-year/ [3/20/19]
3 - bloomberg.com/news/articles/2019-03-22/u-s-treasury-yield-curve-inverts-for-first-time-since-2007 [3/22/19]
4 - investors.com/market-trend/stock-market-today/dow-jones-futures-fed-rate-cut-odds-inverted-yield-curve/ [3/26/19]
5 - investing.com/economic-calendar/ [3/29/19]
6 - marketwatch.com/tools/calendars/economic [3/29/19]
7 - marketwatch.com/story/us-stock-futures-rise-as-wall-street-looks-to-wrap-up-week-month-and-quarter-with-gains-for-most-indexes-2019-03-29 [3/29/19]
8 - nytimes.com/2019/03/29/world/europe/brexit-britain-theresa-may.html [3/29/19]
9 - nytimes.com/2019/03/07/business/ecb-european-economy-stimulus.html [3/7/19]
10 - markets.on.nytimes.com/research/markets/worldmarkets/worldmarkets.asp [3/29/19]
11 - msci.com/end-of-day-data-search [3/29/19]
12 - money.cnn.com/data/commodities/ [3/29/19]
13 - marketwatch.com/investing/index/dxy/historical [3/29/19]
14 - nar.realtor/newsroom/existing-home-sales-surge-11-8-percent-in-february [3/22/19]
15 - freddiemac.com/pmms/archive.html [3/28/19]
16 - markets.wsj.com/us [3/29/19]
17 - markets.wsj.com/us [12/31/18]
18 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldAll [3/29/19]
by Lynn Berry | Dec 14, 2018 | Economic Newsletter, General, Retirement, Tax, Wealth Management
In this month’s recap: equities rise with a little help from the Fed, oil dives, and most key domestic indicators look quite strong.
THE MONTH IN BRIEF
Presented by KeyStone Team, December 2018
For most of November, the stock market was plagued by the same skepticism evident in October: the sense that corporate profits were declining and economic growth was slowing. Then Federal Reserve chairman Jerome Powell threw investors a line: he delivered a speech late in the month that soothed some of the considerable anxiety in the equity markets. Helped by Powell’s comments, the S&P 500 gained 1.79% on the month. While analysts sensed the bull market was in its late phase, consumers remained confident, enthusiastic participants in an apparently thriving economy. In a surprise, home sales picked up. Oil fell. The United Kingdom scheduled a critical parliamentary vote on the Brexit; China and the U.S. returned to the negotiating table regarding tariffs.1
DOMESTIC ECONOMIC HEALTH
Speaking to the Economic Club of New York on November 28, Federal Reserve chair Jerome Powell delivered a rather dovish message: if interest rates were not quite where they should be, given the robust economy, they were at least close. In his view, rates were “just below the broad range of estimates of the level that would be neutral for the economy – that is, neither speeding up nor slowing down growth.” This was what Wall Street wanted to hear. The Dow Industrials rocketed north 618 points on the day. Just a month earlier, Powell had sounded distinctly hawkish, commenting that rates were a “long way from neutral.”2,3
A trio of reports affirmed that the economy was indeed in good condition. Even after nine years of recovery from the Great Recession, the pace of hiring was still noteworthy: the Department of Labor’s October jobs report said that 250,000 net new jobs were created in the tenth month of the year. Annualized wage growth was at 3.1%, the best in ten years; headline unemployment was at 3.7%, and U-6 unemployment (unemployed and the marginally employed), at 7.4%. According to a Census Bureau report, the pace of retail sales improved 0.8% in October, quite a change from the 0.1% retreat a month before. Finally, as the month ended, the Department of Commerce announced a 0.6% rise in personal spending in October along with a 0.5% improvement for personal incomes.4,5
Burgeoning economies go hand in hand with inflation, and the annualized gain in the Consumer Price Index did grow in October to 2.5% from the previous 2.3%. The yearly advance for the core CPI ticked down 0.1% to 2.1%, however. The federal government affirmed third-quarter growth at 3.5% in its third GDP estimate.5
Consumer confidence indices retreated slightly from recent lofty heights. The University of Michigan’s monthly barometer ended the month at 97.5, down from 98.3; the Conference Board’s index declined to 135.7 from the prior 137.9.5
Now to the factory front. The latest monthly reports from the Institute for Supply Management showed its manufacturing purchasing manager index at 57.7, below the 59.8 level it was at in September. ISM’s service sector PMI dipped 1.3 points last month to 60.3. While these were descents, both readings were quite strong. Hard goods orders declined 4.4% last month, but that mostly had to do with aircraft orders in the defense industry; minus defense and plane orders, they were simply flat for October.5,6
Industrial output rose 0.1% in October, while manufacturing production advanced 0.3%. The Producer Price Index rose 0.6% in October; a 7.6% jump for wholesale gas prices was instrumental in the gain. The October PPI increase left yearly wholesale inflation at 2.9%.5,7
GLOBAL ECONOMIC HEALTH
Last month, lawmakers in the United Kingdom scheduled a parliamentary vote on a draft of the Brexit deal for December 11. If Parliament supports the plan created by Prime Minister Theresa May’s government, the next step would be a vote on a withdrawal agreement from the European Union, pursuant to a European Parliament vote and approval from the E.U. Council. If May’s deal is defeated in London, then the U.K. government will have 21 days to make a choice: it could authorize a renegotiation of the Brexit with the E.U., break off ties with the E.U. without any deal, schedule another U.K. referendum on the Brexit, or call for a general election. May’s deal received formal approval from E.U. leaders in late November.8
On November 30, President Donald Trump, Canadian Prime Minister Justin Trudeau, and Mexican President Enrique Peña Nieto formally signed the United States-Mexico-Canada Agreement (USMCA), the trade pact designed to replace the North American Free Trade Agreement (NAFTA). The accord must still be approved by the legislature of each member nation, and approval may not be easy on Capitol Hill. In the east, the major news item was the evident deceleration in Chinese factory output. China’s official manufacturing PMI dipped to 50.0 in November, meaning no month-over-month expansion for the sector. (Anything below 50 means contraction.) Some analysts see China’s GDP declining to the vicinity of 6.0% in 2019, which would be its poorest GDP in three decades. Its government may need to resort to an economic stimulus if things weaken further.9,10
WORLD MARKETS
Many foreign stock markets saw November gains. Among the biggest: the Hang Seng in Hong Kong, 7.81%; the Merval in Argentina, 6.99%; the Nifty 50 and Sensex in India, at a respective 6.65% and 6.80%. Japan’s Nikkei 225 rose 4.17%, South Korea’s Kospi added 4.08%, MSCI’s Emerging Markets index improved 4.06%, and Russia’s Micex advanced 4.02%. In Spain, the IBEX gained 3.08%; in Brazil, the Bovespa added 3.01%. There were also gains of 2.04% for Canada’s TSX Composite, 1.26% for Taiwan’s TSE 50, 0.96% for the MSCI World index, 0.82% for the FTSE Eurofirst 300, and 0.78% for the Shanghai Composite.11,12
Some indices suffered November setbacks. Germany’s DAX lost 0.27%, the United Kingdom’s FTSE 100, 0.79%. Australia’s All Ordinaries fell 2.35%, while Mexico’s Bolsa retreated 4.15%.11
COMMODITIES MARKETS
A barrel of oil was worth only $50.42 on the NYMEX at the close on November 30. WTI crude dropped 21.80% for the month. Heating oil sank 19.00%, and unleaded gasoline plummeted 20.22%. Natural gas? Quite the opposite. With winter quickly appearing, the value of that commodity jumped 41.29%.13
In crops, soybeans rose 6.74%, and coffee fell 7.88%. In between those extremes, wheat gained 2.84%; cotton, 2.37%; corn, 0.76%. Sugar retreated 2.43%, and cocoa, 3.73%. Copper advanced 4.38% in November; gold also improved, gaining 0.70% to close out the month at a COMEX value of $1,222.10 an ounce. Silver and platinum lost ground last month: silver was off 1.94%; platinum, 4.57%. As November concluded, silver was worth $14.14 an ounce. The U.S. Dollar Index ended November at 96.79 after a one-month loss of 0.35%.13,14
REAL ESTATE
In mid-November, the National Association of Realtors reported a 1.4% October gain for existing home sales. On November 29, however, it said that its pending home sales index had weakened by 2.6% in the tenth month of the year, so the autumn improvement in the pace of residential resales may prove fleeting.5
October also brought less new home buying: sales fell 8.9%. (It must be noted that these initial numbers tend to be revised later.) The Census Bureau also announced a 0.6% decline for building permits in October, but housing starts did pick up 1.5%.5
In terms of mortgages, only adjustable-rate loans grew significantly more expensive in November. The average rate on a 5/1-year ARM was 4.04% on November 1, according to Freddie Mac, but 4.12% on November 29. Mean interest on the 30-year, fixed-rate mortgage went from 4.83% to 4.81% in that period; the average interest rate for the 15-year FRM went from 4.23% to 4.25%.15
Annual home price gains were clearly lessening: the latest 20-city S&P CoreLogic Case-Shiller home price index showed only 5.1% appreciation in the 12 months ending in September.5
T I P O F T H E M O N T H
Many couples buy life insurance when they start a family, insuring both partners (even if one elects to stop working). There is a good reason to insure both partners: If a stay-at-home spouse or partner passes away and is uninsured, a surviving spouse could face sizable expenses to pay for childcare and other household needs.
LOOKING BACK, LOOKING FORWARD
Closing at 7,330.54 on November 30, the Nasdaq Composite eked out a monthly gain of 0.34%. The S&P 500’s 1.79% November rise left it at 2,760.17 at the end of the month, while the small-cap Russell 2000 ascended 1.45% to 1,533.27. (The Russell ended November down 0.15% YTD, lagging well behind the performance of the big three.) The Dow Jones Industrial Average advanced 1.68% to 25,538.46.1,17
| % CHANGE | Y-T-D | 1-YR CHG | 5-YR AVG | 10-YR AVG |
| DJIA | 3.31 | 5.22 | 11.75 | 21.34 |
| NASDAQ | 6.19 | 6.64 | 16.11 | 42.43 |
| S&P 500 | 3.24 | 4.25 | 10.57 | 23.82 |
| | | | |
| REAL YIELD (%) | 11/30 RATE | 1 YR AGO | 5 YRS AGO | 10 YRS AGO |
| 10 YR TIPS | 1.04 | 0.56 | 0.60 | 2.38 |
Sources: wsj.com, bigcharts.com, treasury.gov – 11/30/1818,19,20,21
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.
While words from Jerome Powell gladdened investors last month, Wall Street expects another interest rate move from the Fed this month. On November 30, the CME Group’s FedWatch tool put the chances of a December 19 rate hike at 82.7%. The market has probably priced in a hike, but the Street may not be in the mood for a Santa Claus rally, given the seemingly entrenched perception that the business cycle has seen its peak and the glory days of this bull market have faded. This month, investors will carefully examine the latest jobs report and Fed policy statement, react to the new agreement between the U.S. and China to suspend further trade tariffs, and watch what happens with the Brexit parliamentary vote and the OPEC-Russia meeting early in the month. Hopefully, a turbulent year for equities will end on a positive note.22,23
Q U O T E O F T H E M O N T H
“I am certain there is too much certainty in the world.”
MICHAEL CRICHTON
UPCOMING RELEASES
Here is the docket for the rest of the year: the latest Department of Labor employment report and the initial December University of Michigan consumer sentiment index (12/7), the November wholesale inflation report (12/11), November consumer inflation (12/12), November retail sales and industrial production (12/14), November housing starts and building permits (12/18), an interest rate decision at the Federal Reserve and a fresh existing home sales snapshot from the National Association of Realtors (12/19), the Conference Board’s newest leading indicator index (12/20), November personal spending and hard goods orders, the latest PCE price index, and the final assessment of Q3 growth (12/21), November new home sales and the Conference Board’s December consumer confidence gauge (12/27), and November pending home sales and the year’s final University of Michigan consumer sentiment index reading (12/28).
T H E M O N T H L Y R I D D L E
It is often surrounded by water and at risk from waves, and it has a fin rather than a sail or motor, but without water and waves, there would be no real use for it. What is it?
LAST MONTH’S RIDDLE: It is as old as the world, and yet new each month. What is it?
ANSWER: The moon.
Keystone Team may be reached at 920-969-0717 or admin@kfgwi.com
www.KFGWI.com
Know someone who could use information like this?
Please feel free to send us their contact information via phone or email. (Don’t worry – we’ll request their permission before adding them to our mailing list.)
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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. The information herein has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. 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 market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs, or expenses. Investors cannot invest directly in indices. 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CITATIONS:
1 – markets.ft.com/data/world [11/30/18]
2 – marketwatch.com/story/seemingly-dovish-powell-says-interest-rates-are-just-below-level-where-they-wont-stimulate-economy-2018-11-28 [11/28/18]
3 – markets.wsj.com/ [11/28/18]
4 – fortune.com/2018/11/02/october-jobs-report-unemployment-rate/ [11/2/18]
5 – investing.com/economic-calendar/ [11/30/18]
6 – instituteforsupplymanagement.org/ISMReport/NonMfgROB.cfm?SSO=1 [11/5/18]
7 – ww2.cfo.com/the-economy/2018/11/producer-price-index-rises-0-6-in-october/ [11/9/18]
8 – tinyurl.com/ydcrfazs [11/26/18]
9 – businessinsider.com/g20-summit-trump-signs-usmca-nafta-update-mexico-canada-2018-11 [11/30/18]
10 – foxbusiness.com/economy/china-reports-weakest-factory-growth-in-over-2-years [11/30/18]
11 – markets.on.nytimes.com/research/markets/worldmarkets/worldmarkets.asp [11/30/18]
12 – msci.com/end-of-day-data-search [11/30/18]
13 – money.cnn.com/data/commodities [11/30/18]
14 – marketwatch.com/investing/index/dxy/historical [11/30/18]
15 – freddiemac.com/pmms/archive.html [12/2/18]
16 – marketwatch.com/story/house-price-growth-slows-to-nearly-two-year-low-as-case-shiller-makes-the-slowdown-official-2018-11-27 [11/27/18]
17 – money.cnn.com/data/markets/russell/ [12/2/18]
18 – markets.wsj.com [11/30/18]
19 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=11%2F30%2F17&x=0&y=0 [11/30/18]
19 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=11%2F30%2F17&x=0&y=0 [11/30/18]
19 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=11%2F30%2F17&x=0&y=0 [11/30/18]
19 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=11%2F29%2F13&x=0&y=0 [11/30/18]
19 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=11%2F29%2F13&x=0&y=0 [11/30/18]
19 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=11%2F29%2F13&x=0&y=0 [11/30/18]
19 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=12%2F1%2F08&x=0&y=0 [11/30/18]
19 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=12%2F1%2F08&x=0&y=0 [11/30/18]
19 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=12%2F1%2F08&x=0&y=0 [11/30/18]
20 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [11/30/18]
21 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [11/30/18]
22 – cmegroup.com/trading/interest-rates/countdown-to-fomc.html [11/30/18]
23 – reuters.com/article/us-g20-argentina-trump-statement/us-china-declare-90-day-halt-to-new-tariffs-white-house-says-idUSKCN1O101U [12/1/18]
by Lynn Berry | Sep 21, 2018 | Financial Planning, General, Life Insurance, Retirement
Some good reasons to retain it.
Provided by Lynn K. Berry
Do you need a life insurance policy in retirement? One school of thought says no. The kids are grown, and the need to financially insulate the household against the loss of a breadwinner has passed.
If you are thinking about dropping your coverage for either or both of those reasons, you may also want to consider the excellent reasons to retain, obtain, or convert a life insurance policy after you retire. It may be the best decision once you take these factors into account.
Could you make use of your policy’s cash value? If you have a whole life policy, you might want to utilize that cash in response to certain retirement needs. Long-term care, for example: you could explore converting the cash in your whole life policy into a new policy with a long-term care rider, which might even be doable without tax consequences. If you have income needs, many insurers will let you surrender a whole life policy you have held for some years and arrange an income contract with the cash value. You can pull out the cash, tax-free, as long as the amount withdrawn is less than the amount paid into the policy. Remember, though, that withdrawing (or taking a loan against) a policy’s cash value naturally reduces the policy’s death benefit.1
Do you receive a “single life” pension? Maybe a pension-like income comes your way each month or quarter, from a former employer or through a private income contract with an insurer. If you are married and there is no joint-and-survivor option on your pension, that income stream will dry up if you die before your spouse dies. If you pass away early in your retirement, this could present your spouse with a serious financial dilemma. If your spouse risks finding themselves in such a situation, think about trying to find a life insurance policy with a monthly premium equivalent to the difference in the amount of income your household would get from a joint-and-survivor pension as opposed to a single life pension.2
Will your estate be taxed? Should the value of your estate end up surpassing federal or state estate tax thresholds, then life insurance proceeds may help to pay the resulting taxes and help your heirs avoid liquidating some assets.
Are you carrying a mortgage? If you have refinanced your home or borrowed to buy a home, a life insurance payout could potentially relieve your heirs from shouldering some or all of that debt if you die with the mortgage still outstanding.2
Do you have burial insurance? The death benefit of your life insurance policy could partly or fully pay for the costs linked to your funeral or memorial service. In fact, some people buy small life insurance policies later in life in preparation for this need.2
Keeping your permanent life policy may allow you to address these issues. Alternately, you may seek to renew or upgrade your existing term coverage. Consult an insurance professional you know and trust for insight.
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.
Securities and Advisory Offered Through Harbour Investments, Inc.
Citations.
1 – forbes.com/sites/forbesfinancecouncil/2018/03/06/using-life-insurance-for-retirement-purposes/ [3/6/18]
2 – nasdaq.com/article/4-reasons-to-carry-life-insurance-in-retirement-cm946820 [4/12/18]
