Highlights of this Week’s Update:
- What vehicle do you drive and where do you live?
- Market volatility continues with the major U.S. stock indices ending last week slightly lower.
- Interest rates fall, mortgage rates back to levels not seen since May, 2013.
- Oil prices continue their decline, dropping below $47.00 per barrel.
- Payroll numbers rise, but wage gains stay muted.
- Adjustments in our client portfolios asset mix across all risk levels made to start the New Year.
READ ON FOR FURTHER DETAILS………………………………………………………………..
What Vehicle do you drive? Where do you live?
Interesting data released on the type of vehicle most likely to be subject to theft across the U.S.
The Markets: A Rocky Start to the New Year
Stocks began the first full week of the New Year in a volatile fashion. The Dow Jones Industrials registered a triple-digit move in each of the five trading sessions. But it wasn’t all bad. Two of the five days saw the Dow post an advance, with Wednesday and Thursday racking up a combined gain of 536 points (St. Louis Federal Reserve). For the week, the Dow ended down .54%, while the broader Standard & Poor’s 500 dropped .65%. For the year, the Dow is down .48% and the S&P 500 is .68% lower as of Friday’s close. (MarketWatch)
Interest rates have continued to decline so far in 2015, with yields on the 10 year U.S. Treasury now under 2%, ending last week with a yield of just 1.98%. Mortgage rates are now at their lowest point since May of 2013. The average rate for a 30 year fixed mortgage is around 3.625%, while the 15 year fixed rate has moved below 3%, to around 2.8%. (Bankrate.com, Zillow)
Oil prices slid lower again last week, with the price for a barrel of West Texas Intermediate Crude dropping to $48.21, compared with $53.27 to start the New Year. Prices continued to drop in today’s trading, breaking below $47.00 per barrel. (MarketWatch, Energy Information Admin.)
On Friday, the U.S. Bureau of Labor Statistics (BLS) reported nonfarm payrolls rose a solid 252,000 in December, which comes on top of an upwardly revised 353,000 in November.
Meanwhile, the unemployment rate fell from 5.8% in November to 5.6% in December (BLS); yet, there are few indications the Federal Reserve is about to lift the fed funds rate, which has been near zero since the end of 2008 (St. Louis Federal Reserve). This may be due in part to the fact that there is still a large number of either part-time or “under-employed” workers within the positive numbers that are somewhat hidden in the “good news”.
Another reason for the hesitation to raise rates – wage gains remain muted. November’s initial report that average hourly earnings rose 0.4% (BLS) raised hopes that we might finally be seeing a long-awaited boost in wage growth. But November’s preliminary reading was revised to 0.2%, and December’s 0.2% (BLS) decline dashed such hopes.
Volatility within the stock market appears to have resurfaced over the past four months. Since September 18th, 2014, the S&P 500 has seen 3 declines of over 4%, with a drop of over 7% in less than a month. There have also been 3 moves of 3% or more to the upside for the same time frame, with a jump of 3% in just two days last week. (Google Finance) With continued global uncertainty, speculation over when the FED might start raising interest rates, and oil price declines, we would expect market volatility to possibly be the norm rather than exception for 2015. We still feel interest rates could stay low at least for the first half of the year, providing opportunities to secure a fixed rate home mortgage or refinance an existing one. We have taken steps to further diversify our client portfolios across all risk levels by re-balancing assets and reducing exposure in the “alternative” asset category. We also increased the number of individual stock issues held in all three stock models without increasing net stock exposure within the models.
We hope you all have a great week ahead, and don’t forget to call today to schedule your personal review and 2015 financial planning session if you have not already done so. We appreciate the privilege to serve each and every one of you and look forward to working with you in the years to come.
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.
4 New York Mercantile Exchange front-month contract; Prices can and do vary; past performance does not guarantee future results.