Highlights of this Week’s Update
- The major U.S. stock indices ended last week higher, but remain fairly flat year-to-date.
- Interest rates continue steady to lower, and 2014 might be the year to refinance.
- Economic news still mixed and recovery still sub-par relative to historical norms.
- We remain cautious on stocks, and portfolios continue to do well relative to risk so far in 2014.
READ ON FOR FURTHER DETAILS………………………………………………………………..
The Markets
Last week closed on a positive note before the three day holiday weekend. The major U.S. stock indices generated positive returns for the week. For the year, the Dow Jones Industrial Average is now up just 0.2%, while the Standard & Poor’s 500 stock index is 2.8% higher than year-end. (MarketWatch)
Interest rates were fairly flat, with the yield on the 10 year U.S. Treasury at 2.54% compared to 3.04% on December 31, 2013. (U.S. Treasury) Mortgage rates are continuing to move lower, with the 30 year fixed rate mortgage now at 4.16% and the 15 year fixed rate moving to 3.2% today. (Bankrate.com) This could be the year to refinance a mortgage if your current fixed rate is 1% or more above the current rate and you expect to stay in your home for the long term.
The Economy-Main Street vs. Wall Street
Even though the major stock indices moved higher last week, the rise occurs against the backdrop of one of the weakest economic recoveries in decades (Bureau of Economic Analysis). Job insecurities have diminished but remain a concern, wages for most folks have been stagnant, and those seeking employment still face tough challenges.
We’re five years into the economic recovery (National Bureau of Economic Research) and caution reins. According to the monthly survey of consumer confidence offered by the Conference Board, sentiment remains well below levels seen in the late 1990s and in the prior decade.
A number of factors are to blame, including the slow recovery in the job and real estate markets. There has been a damper on consumer spending, business activity, and hiring.
Nonetheless, stocks have risen since bottoming in early 2009. One need only look at the variables that fuel stocks – low interest rates, record corporate profits (thanks in part to a sharp eye on expenses within a slowly improving economy), and a very liberal Fed policy that’s pumped trillions of dollars into the financial system.
What might boost confidence among residents of Main Street: faster economic growth, a fully functioning housing market, job security, rising wages, and more favorable job opportunities.
Our Outlook
There continue to be signs of a stock market “topping” process and we are watching several indicators on a regular basis. Portfolios for all risk levels are still underweight stocks/equities and will remain so until we see some of the red flags for future stock prices dissipate. In the meantime, with the lower interest rate environment we are seeing so far in 2014, portfolios across our various risk levels continue to perform quite well relative to their particular risk. We will keep you advised.
We hope you all enjoyed the Memorial Day weekend! We trust everyone enjoyed a much-needed break with family and friends. Although the Old Farmer’s Almanac tells us that summer won’t officially begin until 6:51 a.m. EDT on June 21, there’s something about turning the page on the calendar after Memorial Day that seems to mark the dividing line between spring and summer.
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.
Looming Risks Overlooked