Highlights of This Week’s Update:
- MyWealth training scheduled in June to be held at the F.I.G. offices conference room.
- The major U.S. stock indices end last week flat ahead of the Memorial Day weekend.
- Interest rates rise slightly, mortgage rates little changed.
- Federal Reserve hints at possible timetable for first rate hike, but still remains vague.
- We continue our focus on individual equity issues and look for value and/or dividend income.
READ ON FOR FURTHER DETAILS……………………………………………………
MyWealth training sessions scheduled for June:
Please make note of the following dates/times that we have scheduled special training sessions for our new MyWealth financial management/planning system. These sessions will be geared to those of you that have started working with the system and would like more detailed information on how to use the system and what information is available to you. The following sessions are currently planned and will be held in our conference room:
Wednesday, June 10th: 10:30am-12:00noon
Thursday, June 11th: 3:00pm-4:30pm
Friday, June 12th: 1:00pm-2:30pm
Call today to reserve your spot as spaces are limited. Also, bring your laptop, iPad, or other device you might use to access this system online.
If you can’t make one of these sessions call us any time if you have questions on the MyWealth system and would like to either initially set this up or need more information on using the system to its fullest advantage.
The Markets:
Last week the major U.S. stock indices ended basically flat before the Memorial Day weekend. For the week ending last Friday, the Dow Jones Industrial Average ended down .22%, and is up 2.29% so far in 2015. The S&P 500 rose .16%, and is still up 3.26% year-to-date as of the market close on May 22nd. (MarketWatch)
Interest rates crept higher last week, with the yield on the 10 year U.S Treasury ending Friday at 2.21%. Mortgage rates now range from 3.625%-4.125% for 30 year and 2.875-3.375% for 15 year fixed rate mortgages. (Bankrate.com)
The Federal Reserve – Still Eyeing a 2015 Rate Hike
As many of us were gearing up for the Memorial Day holiday weekend, Federal Reserve Chief Janet Yellen reiterated in a speech last Friday the central bank remains on track for a 2015 rate hike. But she also remains cautious since inflation is still low and more needs to be done to create new jobs.
“Delaying action to tighten monetary policy (raise interest rates) until employment and inflation are already back to our objectives would risk overheating the economy,” she said as she distanced herself from some Fed officials who want to wait until 2016 before boosting rates.
While Yellen had initially believed a six month window between the end of its bond buying program last October and the first rate increase might be appropriate (Yellen March 2014 press conference), the Fed is once again grappling with a slowdown in economic activity.
The Commerce Department reported last month that First Quarter Gross Domestic Product grew just 0.2% on an annualized basis, and most economists expect this week’s revision to show the economy actually contracted in Q1 (Bloomberg).
Furthermore, most of the economic data is signaling the economy has yet to gain much steam, including weak retail sales’ (U.S. Commerce Dept.) and manufacturing numbers (Federal Reserve). The stronger dollar’s negative effect on export competitiveness and steep cutbacks in spending by energy companies “might be larger and longer-lasting than previously anticipated,” according to the minutes from the Fed’s April meeting, released last week.
Stocks still remain near their 2015 highs and longer-term Treasury yields continue to hover near the highs of the year. Historically, strength in Treasury bonds (falling yields) are a sign of economic weakness. Both of these suggest investors anticipate the extended lull in the economy will eventually give way to faster growth.
Economic honesty
One final comment from Yellen’s speech – and it’s an honest moment you won’t hear often.
“Of course, the outlook for the economy, as always, is highly uncertain. I am describing the outlook that I see as most likely, but based on many years of making economic projections, I can assure you that any specific projection I write down will turn out to be wrong, perhaps markedly so (emphasis added).” Rarely will you hear an economist admit his or her forecast might not be worth the paper it’s written on, especially one who leads the world’s most powerful central bank.
Our Outlook:
Even though stocks remain generally overvalued, we continue to look for individual stock issues that can currently bring value and/or dividend income to our client portfolios. We continue to focus on individual stock issues for the majority of our overall equity exposure, and have diversified the number of individual issues held in all risk levels. We believe we can continue to see a certain amount of volatility in the stock market overall and may also experience more of a “sideways” market for the major indices. This has basically been the case so far in 2015. Fixed income or “bond” assets have come off their 2015 highs recently as yields have risen, especially in Europe. The dollar’s strength has also has some impact on bond yields, especially in the U.S. Treasury sector. We have focused on corporate, bank loan, high yield, and foreign bonds. Diversifying among various bond sectors has helped our portfolios maneuver through the recent rise in Treasury yields relatively well. We will continue to monitor and keep you advised.
We hope you and your families had a wonderful and relaxing Memorial Day weekend! The rain locally and through the central plains put somewhat of a damper on outside activities, and we hope you all were able to escape the flooding or storm damage some had to endure. For most, the long weekend still provided a great time for rest and relaxation. We appreciate the privilege of serving all of you 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.
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.
Looming Risks Overlooked