Highlights of this Week’s Update:
- Do you know your own “risk score”? Complete the risk questionnaire link on our website to find out.
- Volatility continued last week but the major U.S. stock indices were able to eke out small gains.
- Interest rates inch higher.
- Jobs number better than expected.
- Fed is expected to raise rates at their next meeting later this month.
- Signals of a growing economy help fuel stock prices last Friday.
READ ON FOR FURTHER DETAILS…………………………………………….
Check Your Personal “Risk Score”:
You can now take our updated risk questionnaire from a link on our website that will provide you with your own “risk score”. Simply go to our website: www.figfinancial.com, and click the link on the home page titled “Find Your Risk Score” and complete the questionnaire. Once you have answered the questions, you will see your current risk score and we will receive an email with your results to discuss with you. You all should complete the questionnaire today if you have not done so within the last six months.
Last week volatility in the stock/equity markets increased once again, but by Friday’s close, the major U.S. stock indices were able to eke out small gains. The Dow Jones Industrial Average rose .28% while the Standard & Poor’s 500 stock index gained just .08% through last Friday’s close. (MarketWatch)
The stock indices this year have been able to stay flat with the performance of a few large growth stocks, while many blue chip stocks are still off double digits in 2015. For example, through last week, Proctor & Gamble’s price is still down 14.56%, Wal-Mart is off 30.53%, IBM has fallen 12.47%, and ConocoPhillips is now 25.88% lower so far this year. On the other hand, Amazon is up 116.74%, Net Flix is 168.3% higher, Microsoft has risen 20.37%, and Google (now Alphabet, Inc.) has gained 45.67% as of Friday’s close for 2015. (Google Finance) Bottom line: 2015 has been a market of very mixed results.
Interest rates have inched higher, with the yield for the 10 year U.S. Treasury rising .06 to 2.28%. This compares with 2.17% at the start of the year. As of Friday, the average rate for a 30 year fixed mortgage stood at 3.88%, while the 15 year fixed rate ended the week at 3.05%. (Bankrate.com)
The Economy and the FED:
Following a respectable rise in November nonfarm payrolls of 211,000 (U.S. Bureau of Labor Statistics), Fed Chief Janet Yellen indicated that the Fed is gearing up for its December 15-16 meeting.
The last time the Fed raised rates was June 2006, when it bumped up the fed funds rate from 5.0% to 5.25% (St. Louis Federal Reserve). Of course, Yellen isn’t the only voice. There are nine other voting members of what’s called the Federal Open Market Committee (FOMC), which is the policy-making arm of the Fed. But her views wield considerable influence, and comments made last week by Yellen and other Fed officials strongly suggest rates are set to rise in a couple of weeks (NY Times, WSJ).
Though inflation remains below the Fed’s 2% target, Yellen hinted that labor and inflation goals for finally raising the fed funds rate are being met, or will likely be met.
While total employment is well above the pre-recession peak, note that nearly all of the growth has been generated by the private sector – Figure 1. Total government employees remain well below the recession’s peak and have only gradually begun to rise.
Whatever happens at the December meeting, an expected rate hike is a hugely symbolic move. It is the beginning of an attempt by the Fed to move away from the “zero bound.” Still, based on current expectations, rate hikes will be gradual, and how the Fed frames its intentions going forward will be carefully watched.
Because the Fed is cognizant that shifts in policy, even subtle shifts, can create volatility in financial markets, they have done a decent job this time around of prepping investors. In other words, they are being as transparent as possible about their intentions without actually telling investors what will happen.
If one day is any guide, the Dow’s 370 point advance on Friday, which was in response to the employment report, suggests a growing economy (makes a rate hike(s) more likely) is a less of an impediment to the stock market than a weak economy that guarantees low rates. Plus, it allows investors to move past all of the “when” speculation.
We wish you all a great week ahead and please don’t hesitate to call if you have any questions, or if we can be of further service at any time.
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.