18 Dec December, 2017 Mid-Month Update
Merry Christmas and Happy New Year! -Market and Office Holiday Schedule:
We want to wish you all a very Merry Christmas and hope you all get to spend some extra family time between now and year-end. Our offices will be closed this coming Friday, December 22nd as well as Monday, December 25th for the Christmas Holiday. We will be back again Tuesday, December 26th for business as usual. The U.S. financial markets are closed Monday, December 25th as well. Our offices and the U.S. financial markets will also be closed Monday, January 1st for the New Year Holiday. Happy Holidays!
New Office Building Update:
We are still awaiting the final permits from the City in order to give us the go ahead to be able to formally move into our new office building. Our original plan was to move on December 27th, but we may have to postpone our move until after January 1st. We will keep you posted and give you plenty of advance notice along with the specific location and address once the final move date can be confirmed. Even after the move, our phone numbers and email addresses will remain the same. Don’t hesitate to call us if you have any questions whatsoever. We can’t wait to show you our new offices!
The major U.S. stock indices continued their climb higher last week, with the Dow Jones 30 Industrial Average gaining another 1.33%, while the broader Standard & Poor’s 500 stock index rising .92%. So far this year, the S&P 500 is now 19.52% higher than at the start of 2017. (MarketWatch)
Longer term interest rates dipped last week, while short term rates rose. The yield for the 10 year U.S. Treasury dipped .03 to finish last week at 2.35% compared with 2.45% on January 1st. (U.S. Treasury) The National average for a 30-year fixed rate mortgage now sits at 3.83% and 3.16% for the 15-year fixed rate. (Bankrate.com)
The price of gold is now at $1,254.60 per ounce and oil closed Friday at 57.30 per barrel for West Texas Intermediate Crude. (CNBC)
We continue to be pleased with the net results for our client portfolios this year across all risk levels. Both our stock/equity positions and fixed income/bond holdings continue to perform very well relative to their respective indices and we hope to finish out 2017 on a continued positive note. Even though we opted to be somewhat more cautious back in late spring, we have still been able to generate returns above average relative to risk so far in 2017.
Fed Expresses Optimism, Hikes Rates:
The Federal Reserve’s December meeting has come and gone. To almost no one’s surprise (Bloomberg), the Fed hiked the range of its key rate – the fed funds rate – to 1.25–1.50% from 1.00–1.25% and continued to view economic progress through an optimistic lens. It’s the third rate hike this year, matching projections offered by the Fed at the end of last year.
There were three important themes or takeaways that came from the meeting and subsequent press conference with Fed Chief Janet Yellen: stock valuations, the potential impact of tax changes on the economy, and the expected future path of interest rates. It’s all available on the Fed’s website, but we’ll summarize here.
Let’s start with stock market. Yellen characterized current valuations as “elevated.” But was quick to add, “Economists are not great at knowing what appropriate valuations are. We don’t have a terrific record, and the fact that those valuations are high doesn’t mean that they are necessarily overvalued.” That’s a fair assumption.
She also pointed out, “Risks to the global economy look more balanced than they have in many years,” while adding that low interest rates support higher stock prices.
She also offered cautious praise for the tax bill winding its way through Congress. A vote on the plan that has been reached through reconciliation by both houses of Congress is expected this coming week. If the final plan becomes law, we will provide you with the changes and how they may affect you and your taxes.
While she believes “it would be challenging to achieve” 4% growth with the tax cuts being discussed, tax changes “would tend to provide some modest lift to Gross Domestic Product (economic) growth in the coming years.” Moreover, the Fed is open to the idea that tax cuts could boost the longer-run potential for GDP growth.
Finally, the Fed maintained that it expects three quarter-point rate hikes in 2018. Market expectations, as measured by the CME Group, are more muted – two increases.
Last Date: 12.13.17
All projections and expectations are subject to change without notice
2017 YTD fed funds rate (thick blue line) represents the midpoint of the quarter-percentage point range of the fed funds rate
2018 and 2019 Federal Reserve projections represent the median forecast from Fed officials as to what he/she believes should be the appropriate year-end fed funds rate
U.S. economic growth has recently accelerated. If that trend continues, expect to see the ‘red line’ move closer to the ‘blue line,’ as investors price in more than two rate increases next year. Of course, the Fed could always revise its forecast upward. Much will depend on how the economic outlook unfolds in 2018. Either way, rates are currently expected to remain near historical lows.
It’s time for Christmas
Christmas is a week away. It’s a great time to take in all the Christmas shows that now appear on TV during the holidays. A Charlie Brown Christmas, The Grinch, and many others.
With December 25th nearly upon us, we want to take a moment to wish each of you and your family a very Merry Christmas!
Your TEAM at F.I.G. Financial Advisory Services, Inc.
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1 The Dow Jones Industrials Average is an unmanaged index of 30 major companies which cannot be invested into directly. Past performance does not guarantee future results.
3 The S&P 500 Index is an unmanaged index of 500 larger companies which cannot be invested into directly. Past performance does not guarantee future results.
5 New York Mercantile Exchange front-month contract; Prices can and do vary; past performance does not guarantee future results.
6 London Bullion Market Association; gold fixing pricing at 3 p.m. London time; Prices can and do vary; past performance does not guarantee future results