Highlights of this Mid-Month Review:
- Congrats to Sam and his wife Betsy on the birth of their first child.
- Call us today to schedule your personal review if you have not yet done so this quarter.
- The major U.S. stock indices continue to rally in August.
- Interest rates remain low along with mortgage rates.
- Our outlook for stocks still positive in the coming weeks.
- Oil off 2016 highs, even with summer travel.
READ ON FOR FURTHER DETAILS………………………………………………….
Congratulations to Sam and his Wife Betsy:
On Thursday morning, August 11th at 12:08am, Jack Samuel Jurrens was born weighing 6lbs. and 1oz. This is their first child and mom and baby are doing fine. Dad is doing great as well and is one proud father!
Review:
This is a great time of year to review your overall long term goals, financial plan, and investment portfolio and risk. Please call us today if you have not yet done so this quarter to schedule your personal review. We can either meet in person or schedule your review by phone if you prefer. Also, if you are not yet utilizing the MyWealth financial management and planning system that is available to you, you are missing out on a very valuable service. Call us today!
The Markets:
The U.S. stock indices continue to rally since the end of July, and the Dow Jones Industrial Average has gained another .7% so far this month as of Friday, August 12th. As of Friday’s close, the Dow is now up 6.63% so far this year. The S&P 500 is now 6.89% higher since the beginning of the year through last week. (Google Finance)
Interest rates have continued low, with the yield for the 10 year U.S. Treasury now in the 1.51% range compared with 2.27% at the beginning of this year. The yields remain negative for both the German and Japanese 10 year governments. (MarketWatch) This has helped keep mortgage rates low as well, with the average 30 year fixed rate at 3.35% and the 15 year rate at 2.64%. (Bankrate.com)
Outlook:
We continue to view equities/stocks as a favored asset in the next few weeks based on our indicators and the overall market environment. All risk levels we manage continue to hold their maximum equity exposure and this has allowed portfolios to participate in the market rally we have been experiencing over the past few months. Our fixed income assets have remained in intermediate to short-term maturities. We will continue to monitor the overall markets on a regular basis and make adjustments as warranted.
Oil:
Oil prices have inched slightly higher and the price per barrel for West Texas Intermediate Crude closed Friday at $44.69. This compares with the previous week’s close of $41.98 per barrel. (MarketWatch)
Have you noticed the price of gasoline lately? We’ve just moved through the middle of summer and prices have taken an unexpected drop. As of August 1, the average price of regular gasoline in the U.S. was $2.16/gallon, down from a June 13 peak of $2.40 (Energy Information Administration (EIA) – weekly data).
It’s a boon for drivers and companies that use plenty of fuel, but it puts added pressure on the energy industry.
There are two major factors that are weighing on oil prices: the fundamentals and the dollar. First, let’s look at the fundamentals.
- OPEC oil output in July likely hit its highest level since 1997, per a Reuters survey.
- Recent gains past $50 per barrel encouraged an uptick in the U.S. oil rig count (Baker Hughes), which could bring new supply to the market.
- S gasoline demand this summer may not be as strong as had been forecast (Bloomberg).
- There is also a glut of gasoline (Reuters).
Though it hasn’t been discussed much, “Oil-exporting countries accounted for more than one-third of the global increase in oil consumption outside the United States between 2004 and 2014,” according to Thomson Reuters Senior Energy Analyst John Kemp. “Their economies have slowed or gone into recession, removing one of the most dynamic drivers of oil demand.”
There’s also the recent strength in the dollar. When oil is sold around the globe, it is sold in dollars. In theory, a stronger dollar should pressure a commodity that is priced and sold in dollars.
In reality, the data bear this out – see Figure 1.
The inverse correlation between the dollar and the price of oil is not perfect, but it is quite close. As the dollar peaked early in the year, oil soon began to rally. And a late spring bounce in the dollar was soon followed by a downturn in the price of crude oil. Also note the collapse in oil prices that started in 2014 was tied to the long upward march of the dollar.
Over the last 15 years, data show that oil typically declines in price during the fall (EIA). Oil may or may not follow its historical pattern. But what happens to the dollar seems likely to exert a considerable amount of influence over oil going forward.
We hope you are all enjoying the last weeks of summer as we get ready to move into the fall season. Many are already back-to-school, or will be at the end of this week with schedules starting to get increasingly busy again. We appreciate the privilege to be of service, and look forward to working together in the years to come.
God Bless,
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.
Uncertainty and Volatility