Economic Update June 22, 2015

Phillip Allen Inc.

 

WEEKLY ECONOMIC UPDATE

 

 

WEEKLY QUOTE
              
“Integrity without knowledge is weak and useless, and knowledge without integrity is dangerous and dreadful.”

– Samuel Johnson

WEEKLY TIP
             
June is a time to assess your 2015 financial objectives. In terms of debt reduction, retirement saving and portfolio performance, are you on pace toward your yearly goals?

WEEKLY RIDDLE
            
What falls yet does not make noise?

Last week’s riddle:
I am the beginning of sorrow, and the end of sickness. You cannot express happiness without me, yet I am always in risk. I am never in danger, though. What am I?  

Last week’s answer:
The letter S.

 

 

 

 

 

June 22, 2015

   

WILL THE FED MAKE A MOVE IN THE FALL?
The Federal Reserve left interest rates alone last week, but its median federal funds rate forecast for the end of 2015 is now at 0.625%. That would seem to suggest multiple adjustments to the key interest rate in the last half of this year, but Fed chair Janet Yellen noted last week that the central bank is looking for “more decisive evidence that a moderate pace of economic growth will be sustained” before making any move. The Fed now projects 2015 GDP at only 1.8-2.0%, down from a range of 2.3-2.7% this spring. Futures markets point to the Fed raising interest rates from historic lows in December, though many economists think the incremental tightening will start in September.1
    
CPI UP 0.4% IN MAY, BUT INFLATION STILL MUTED
Gas prices soared 10.4% last month, prompting a notable rise in the headline Consumer Price Index. The Federal Reserve might not be too concerned with that one-month advance, however. The core CPI (which strips out energy and food prices) was up only 0.1% for May and just 1.7% year-over-year.2
 
HOUSING STARTS DOWN, BUILDING PERMITS UP
These volatile indicators moved in drastically opposite directions in May. According to the Census Bureau, building permits rose 11.8% last month to an 8-year peak while groundbreaking declined 11.1%. Starts were up 5.1% and permits up 25.4% from May 2014.3
      
STOCKS ADVANCE
Rising 1.30% to 5,117.00, the NASDAQ Composite outpaced the S&P 500 and Dow Jones Industrial Average last week. The blue chips added 0.65% in five days to reach 18,015.95 and the S&P 500 rose 0.76% for the week to a Friday settlement of 2,109.99.4
       
THIS WEEK: On Monday, the National Association of Realtors presents May existing home sales figures and Sonic and Carnival announce Q2 results. Tuesday, May durable goods and new home sales reports arrive. The final estimate of Q1 GDP appears on Wednesday along with earnings from Nike, Lennar, Winnebago, Steelcase, Bed Bath & Beyond and Monsanto. Thursday, Wall Street evaluates May personal spending numbers, a new initial claims report and earnings from Accenture and Barnes & Noble. Friday brings the University of Michigan’s final June consumer sentiment index.  

 

% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +1.08 +6.47 +14.48 +6.98
NASDAQ +8.04 +17.38 +24.31 +14.51
S&P 500 +2.48 +7.68 +17.76 +7.35

REAL YIELD

4/3 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS 0.40% 0.39% 1.25% 1.74%

 

Sources: online.wsj.com, bigcharts.com, treasury.gov – 12/26/145,6,7,8

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.

 

 

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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 – washingtonpost.com/blogs/wonkblog/wp/2015/06/17/federal-reserve-rate-hike-likely-before-year-end/ [6/17/15]
2 – marketwatch.com/story/jump-in-us-consumer-prices-in-may-biggest-since-2013-2015-06-18 [6/18/15]
3 – tradingeconomics.com/united-states/housing-starts [6/16/15]
4 – markets.on.nytimes.com/research/markets/usmarkets/usmarkets.asp [6/19/15]
5 – markets.wsj.com/us [6/19/15]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F19%2F14&x=0&y=0 [6/19/15]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F19%2F14&x=0&y=0 [6/19/15]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F19%2F14&x=0&y=0 [6/19/15]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F18%2F10&x=0&y=0 [6/19/15]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F18%2F10&x=0&y=0 [6/19/15]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F18%2F10&x=0&y=0 [6/19/15]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F20%2F05&x=0&y=0 [6/19/15]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F20%2F05&x=0&y=0 [6/19/15]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F20%2F05&x=0&y=0 [6/19/15]
7 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [6/19/15]
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [6/19/15]

 

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