Stocks ended the week mixed with large cap U.S. stocks indexes lower and small cap U.S. stocks and non U.S. stocks higher. Technology stocks attempted to rebound Monday through Wednesday but gave up gains by week’s end.
On Wednesday, the Federal Reserve completed their meeting and indicated they “expect to maintain an accommodate stance of monetary policy” until inflation averages 2% over time and longer term inflation expectations remain well anchored at 2%. The FED expects to overshoot 2% to achieve an average of 2% over the longer term. The median projection is for ultra-low interest rates through 2023. It is important to note that while the FED has indicated it is not seriously considering negative interest rates, real interest rates, when considering inflation, are negative. The FED also made improvements to the main street lending program as participation has been miniscule compared to the monies allocated.
While economic data continues to improve, it is doing so at a slower pace, likely due to the end of stimulus. The Trump administration indicated a willingness to see a stimulus bill of up to $1.5TN and moderate House Democrats have pushed House Speaker Pelosi to consider a smaller bill.
One of the top questions clients ask us, as we are in an election year, is what effect will the elections have on their investment portfolios. We understand that emotions run high on both sides of the political divide but we encourage a calm rational approach when it comes to investing. We’ve attached a piece called Investing in an Election Year (002) which puts into perspective investment performance under different political parties going back to 1933.
Treasury yields rose with the 30-year bond yield at 1.452% and the 10-Year note at 0.694%. Crude oil rose to $40.87 a barrel and natural gas fell to $2.07 per MMBTUs. The U.S. dollar index fell to 92.95 and gold prices rose to $1957.50 an ounce.
In the economic numbers this week:
- China reported:
- Retail sales in August were 0.5% higher than August 2019.
- Unemployment in August fell to 5.6%.
- Industrial production in August was up 5.6% year over year.
- The Federal Reserve reported that U.S. Industrial Production rose 0.4% in August from July. July’s increase was revised to 3.5%. Manufacturing rose 1% in August and mining fell 2.5%, mainly due to lower oil production from Hurricane Laura. Utility output fell 0.4%.
- The Census Bureau reported that median household income rose 6.8% to $68,700 in 2019. Also the poverty rate fell to 10.5%, a decrease of 1.3%, the lowest level since 1959.
- The Commerce Department reported that U.S. retail sales increased 0.6% in August after a revised 0.9% in July. Restaurants, clothing stores and furniture outlets had the biggest increase. Sporting goods, hobby stores, department stores and grocery stores all fell. From a year earlier restaurants and clothing stores are lower while online retailers are up 22.4%
- The Department of Energy’s latest statistics show U.S. energy derived from coal has fallen roughly in half from 2007 to 2019 and is close to being overtaken by renewables which are providing over 11 quadrillion BTUs.
- The Labor Department reported:
- A seasonally adjusted 860,000 workers filed initial claims for unemployment a decrease of 33,000 from the week before.
- Continuing claims rose from 13.4MM to 12.6MM.
- The EIA weekly oil report is here: wpsrsummary. Also, the EIA reported in the past week:
- Field production of crude oil rose from 10.0MM barrels per day to 10.9MM barrels per day.
- Natural gas storage rose by 89BN cubic feet and is above the highest level at this time of year during the past five years.
- Baker Hughes reported the number of active oil rigs fell 1 to 179. The number of active natural gas rigs increased 2 to 73.
Please call us if you have any questions.
Loren C. Rex, CFP®, AIF®, MA Erik A Smith AIF®
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
Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.
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.