Highlights of this Week’s Update:

  1. The U.S. equity markets move higher last week after FED meeting as well as gold, silver, and other commodity prices.
  2. We are pleased with the 2014 year-to-date performance for portfolios in all risk levels and our outlook moving forward remains unchanged.
  3. Fed remains “dovish” on interest rates at this time and sees no major concern with inflation-for now.
  4. Last week Middle East tensions had little effect on U.S. markets–including prices at the pump so far.

READ ON FOR MORE DETAILS………………………………………………………………………

 The Markets:

The major U.S. stock indices rose last week after the completion of the Fed meeting on Wednesday.  The Dow Jones Industrial Average gained 1% for the week, while the S&P 500 increased by 1.4%.  For the year through last Friday, the Dow is now up 2.2% and the broader based Standard & Poor’s 500 index is now up 6.2%.  (MarketWatch)  Both gold and silver jumped as well, with gold gaining $37.00 per ounce last week.  (CNBC)

Interest rates held steady to up slightly, with the yield for the 10 year U.S. Treasury Bond closing at 2.63% on Friday.  Mortgage rates as of this morning are basically unchanged, with the 30 year fixed rate at 4.22% and the 15 year fixed rate sitting at 3.26%.

Our Take:

We continue to see portfolio values benefit from stable interest rates, individual stock holdings, and also the rise in commodity prices across all risk levels.  Our overall outlook has not changed and with only one week left until mid-year, we are on track to have a good first half.  We would not be surprised to see flat to slightly higher interest rates in the summer months, but then a possible turn lower again in the fall.  We are monitoring the situation and will make adjustments as warranted.  We will keep you advised and are looking forward to visiting with each of you for your upcoming 2014 “Half-Time” review.

The Federal Reserve Maintains its “Dovish” Stance

You may have already heard the expressions – Federal Reserve hawks versus Federal Reserve doves. If not, a quick definition is in order. Hawks focus on sound money, are more worried about inflation, and are more likely to want to raise interest rates to snuff out any hint of inflation that may be on the horizon. The dovish side is more likely to tolerate a very modest level of inflation. The doves on the Fed are more worried about slow economic growth and favor low interest rates as a way to promote economic activity.

If you’re keeping score over the last five years, the dovish view has triumphed. Monetary policy has been extremely easy, inflation has remained low, and economic growth has failed to live up to expectations.

The latest Fed meeting last week, including the accompanying press conference with Fed Chief Janet Yellen, confirmed the leadership at the Fed is in no mood to change direction. That comes despite a recent uptick in inflationary pressures. But then, it was highly unlikely the Federal Reserve would threaten the fragile recovery by tightening the monetary screws or hinting at such a move.

The Consumer Price Index (CPI) rose 0.4% in May, which is the fastest pace in over a year. It’s only one month, but price hikes have modestly accelerated and that has the inflation hawks buzzing. Some but not all can be blamed on rising food and energy prices, two volatile subcomponents of the CPI.

CPI

Checking in on Iraq

Events in the Middle East continue to unfold in an unsettling manner.  Yet, the broad market averages were unfazed last week.  The current line of thinking in the markets appears to be that Iraq will not have a direct effect on consumer and business-buying decisions in the U.S. Simply put it means markets don’t currently foresee any major impact on the economy from the turbulence in the Middle East.

Additionally, since June 10, the average price of regular unleaded gasoline in the U.S. has risen by just four cents per gallon to $3.68 as of June 22, according to GasBuddy.com. Uncertainty regarding Iraq is likely to underpin oil prices. But for now, a four cent rise in the price of gasoline is hardly enough to slow the U.S. economy.

We hope you have a great week ahead.  Please don’t hesitate to call if we can be of further service in any way.  Check your calendar now and be sure to schedule a mid-year review at your convenience beginning the week of July 7th after the July 4th Holiday.

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.