Highlights of this Update:

  1. Holiday market and F.I.G. office hours announced.
  2. December distributions from TCA account to be made on December 27th.
  3. U.S. stock indices continue their rise.
  4. Interest rates rise along with mortgage rates.
  5. FED raises Fed Funds target rate .25% as expected.


Christmas and Holiday Hours:

We wanted to update you on the upcoming market and office hours for the Christmas and New Year Holidays.  Our office will be closed on Friday, December 23rd and Monday, December 26th for Christmas.  The U.S. stock markets will close at noon Central, 1:00pm Eastern, this coming Friday, the 23rd and be closed Monday the 26th all day as well.  Our offices will also be closed all day on Friday, December 30th and Monday, January 2nd for New Year’s, while the stock markets will be closed on Monday, January 2nd.  As always, we will be available by email should you need anything during the times the markets are open but our offices are closed.  Due to the market holiday schedule this year, the regular monthly withdrawals for the month of December from accounts at the Trust Co. of America will be processed on Tuesday, December 27th since Monday is a banking holiday as well.  We wish you and yours a very blessed and Merry Christmas and safe and Happy New Year!

The Markets:

The U.S. stock market has continued to rally and as of today, December 19th, the Dow Jones Industrial Average is now up 14.12% so far in 2016, closing at 19,883.06.  The broader based Standard & Poor’s 500 stock index is now up 10.69% for the same period. (Google Finance, does not include reinvested dividends) Certain sectors of the market have performed better than others in 2016, and our overall equity/stock holdings have done very well relative to risk so far this year.  We do see continued stock market strength as we move into the New Year.

Interest rates have continued to inch higher, with the yield for the 10 year U.S. Treasury rising to 2.54% at today’s market close.  This compares to a 2016 low of about 1.35% back on July 5th and 2.27% at the first of this year. (MarketWatch)  Bond prices move the opposite of yields-higher rates, lower prices.  We had fortunately moved our fixed income/bond holdings to very short term maturities back in mid-to-late summer in anticipation of higher rates, so our fixed income assets have fared well in the recent higher rate environment.  Mortgage rates have also risen, with the average rate for a 30 year fixed rate mortgage now at 4.17% and the 15 year fixed is at 3.34%. (Bankrate.com)

The Fed:

Last week, the Federal Reserve raised the fed funds rate by 0.25% to a range of 0.50-0.75%. It was the second rate hike in the economic cycle (Federal Reserve website) and the first increase this year. The increase in the key lending rate was widely anticipated (Bloomberg) by the majority of analysts and investors. Note: the fed funds rate is the overnight rate banks use to lend funds to each other. It has a big influence over short-term rates such as Treasury bills and lending rates tied to the prime rate.  Because it was so highly anticipated, there wasn’t much reaction in the market. Therefore, how the Fed framed the increase and how quickly the Fed believes interest rates will rise next year were the primary focuses for investors.

For the most part, there really weren’t any surprises. The Fed highlighted in its statement it believes economic conditions “will warrant only gradual increases” in the fed funds rate; no change from recent meetings.  Looking at rate projections that are released quarterly, the median forecast for each of the 17 Federal Reserve officials now reveals the Fed believes three, quarter-point rate hikes are appropriate next year, up from two at the September meeting.

What might this mean for the stock market?

Conventional wisdom suggests that higher interest rates hurt stocks. Research from LPL Financial suggests otherwise.   LPL points out there have been 23 cycles since 1962 in which the 10-year Treasury yield rose. Of these, the S&P 500 Index experienced declines in four cycles, one of which occurred as the economy was entering the 1973 recession and inflation was soaring. Two occurred amid steep increases in yields (1983 and 1994).

The Fed normally taps on the monetary brakes when the economy is improving. While higher interest rates make safe interest-bearing investments more attractive and can siphon money away from stocks, a stronger economy lends support to corporate profits, which is a tailwind for stocks. Besides, interest rates remain low on a historical basis.

Season’s Greetings

Christmas is nearly upon us and so are the many movies with holiday themes. One that comes to mind is the 1946 classic, It’s a Wonderful Life. It’s a story about George Bailey, who resides in the fictional town of Bedford Falls and runs the Building and Loan. Whether by chance, fate, or providence, George can’t seem to exit the small town, because he continually puts the interests of others before his own.

Spoiler alert! Due to a set of circumstances beyond his control, George is given a frightening gift none of us will ever experience: a vision of life minus his mark on the world. While it’s unlikely he’ll ever be wealthy, he vividly learns he has been blessed by something far greater than riches – a loving family and deep friendships.

Many of us are extremely busy during the holidays. It’s as if we barely have time for what’s truly important. But George’s lesson and the true meaning of the season are well worth pondering.

We wish all of you a very Merry Christmas and a Happy New Year.

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.