It was another volatile week in the markets. Wednesday, the markets rose based on strong earnings from some retailers and a sharp upward revision in June existing home sales. Also, on Wednesday, the FED released its minutes from the July meeting which showed members were mixed on cutting short term rates with two members voting against. The FED along with other central bankers from around the world met this week in Jackson Hole Wyoming.
On Friday, FED chairman Powell warned about trade risks and said the FED is limited in its ability to cushion the fallout from trade. This coincided with China’s announcement of increased tariffs on U.S. goods starting in September. President Trump responded shortly thereafter that he would retaliate in response. In mid afternoon he “ordered” U.S. companies to start looking for alternatives to China for sourcing goods, although it is uncertain how such an order could be enforced. Many companies have already looked at sourcing elsewhere and have found it difficult to do in a short period of time. The markets plunged on Friday having significant losses for the week. After the markets closed, Trump announced an increase in the existing 25% tariffs to 30% and that the new tariffs on consumer goods, scheduled to go into effect September 1 and December 1, would rise from 10% to 15%.
This week the 10-year Treasury note yield fell to 1.625%. The dollar fell against a basket of currencies. Crude oil fell to $53.97 and gold rose to $1536.90 an ounce.
At this point we find ourselves with a good U.S. economy with good jobs creation, low inflation and a consumers with good balance sheets. However, the economy is at risk of deteriorating due to tariffs.
In the numbers this week:
- The National Association of Realtors reported that existing home sales rose 2.5% in the month of July and are up 0.6% from a year ago. The increase was attributed to lower mortgage rates and strong job growth but limited by the supply of existing homes.
- The Commerce Department reported sales of newly built single family homes:
- June sales were revised up sharply from an annual rate of 609,000 to 728,000.
- July sales came in 12.8% below the revised June sales. From a year earlier, July sales were up 4.3%.
- The Labor Department reported:
- Its annual adjustment to the monthly jobs gains. Job gains for the 12 months ending in March was revised down by 501,000 to just over 2,000,000. The average monthly jobs gain was revised down from 210,000 to 168,000. This was still a good pace of job creation but slower than the robust numbers previously reported.
- First time claims for unemployment fell 12,000 to a seasonally adjusted 209,000 last week. The four week moving average of claims, designed to smooth out weekly fluctuations, rose to 214,500.
- The Energy Information Administration weekly report is here: wpsrsummary. Also, the EIA reported in the prior week:
- U.S. Crude oil production was unchanged at 12.3M barrels per day.
- Storage of natural gas rose 59BN cubic feet and is still below the past five year average for this time of year.
- Baker Hughes reported in the past week that the number of active oil rigs fell 16 to 754 and the number of active gas rigs fell 3 to 162.
Please call us if you have any questions.
Loren C. Rex, CFP®, AIF®, MA Erik A Smith
President Managing Partner
Generations Financial Planning & Wealth Management 269-441-4143
77 E. Michigan Ave, Suite 140
Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
Visit our Website: www.genfinplan.com
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These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly.