04 Apr Economy Update
With so much going on in politics and current events, its hard to narrow down our focus on the economy. But this is especially important when you need to keep track of what is happening with your money. There have been some changes that you should definitely be aware of in many sections of the market, so lets get right into it.
The Economy’s growth has slowed recently, but that isn’t stopping the FED from doing what they can to pump some life back into our markets. One move they have made has been to maintain the current interest rate of 2.25%-2.5%. Whether this strategy has been successful or not is hard to tell. Especially with the general performance of the market as of late. The Dow Jones dropped a whole -1.34%, bringing them back to their early Decembers numbers. The S&P 500 dropped only about -45.86 points, about half as bad as the Dow. The Russel 2000 however really got the short end of the stick, plummeting a whopping -3.07% in just a five business day span.
The fixed income sector of the market was not a bystander either, this sector took a hit as well. The yields of the 1-Year Treasury bond sunk to a single-year low with a -14 basis point loss. That puts these treasuries at a -24 basis point loss on the year-to-date, the lowest yield since the end of 2017. The Federal Open Market Committee (FOMC) has met recently on the 19th and 20th of March to agree upon maintaining the current interest right. However, they have also stated that the labor market is growing faster than before. This becomes harder to believe the more you read into the state of the economy and market. The rate of growth in household spending as well as diminished fixed investments make it hard to believe any good news regarding growth. All the FOMC can really do is maintain the interest rates and convince us to hope for the best, just the same as they are.
Commodities have a different story however. Gold rose $20.20 per ounce and is now sitting just underneath the high in February of $1,330.20. Copper, however, fel roughly -7 cents to about $2.90 per pound. With gold on the rise and industrial metal falling, the claims of a rising labor industry are again attracting skepticism. Oil has maintained a steady price of around $60 per barrel, just a few cents under last years price this time of the year.
The U.S. Economy had a surprise, and not the good kind either. The news we received of an $8.7 billion federal surplus was not long celebrated after being hit with the news of a -$234 billion deficit. After just a five month period of the current fiscal year, the federal government now sits with a daunting $544 billion deficit, a $153 billion dollar deficit on the same five month period in the previous fiscal year. There is still some hope in this dark tunnel, and it seems to be coming from the housing market of all places. The National Association of Realtors published data showing the sales of existing homes increased the most over the prior month for the first time since February of 2016. During this month to month shift in 2016, the sales jumped up 11.8% while the growth sales of this February boasted an optimistic 13.3% increase. On top of this, new initial unemployment insurance claims numbered at 221,000, a drop of about 9,00 from the prior week. These numbers on unemployment are from the 16th of March.
In conclusion, the growth of the economy is slowing down and the FOMC is doing everything they can (which isn’t much) to encourage further growth. Although Wall Street hasn’t done much to back their claims of the labor market, and commodities are still vague, the housing market seems to be our black horse in this race. With existing home sales boasting the strongest numbers we’ve seen in three years, there is more than enough hope for the new housing market as well as the labor market. Although the economy doesn’t seem to be paying out anytime soon, it still pays to keep track of where the market, and your money, are going. It is always best to react to the market not the red numbers in your bank account. Remember, Plan Smarter Live Better.