Last week, the S&P 500, Dow, and NASDAQ closed at all-time record highs. The S&P 500 rose 0.96%, the Dow gained 0.6%, and the NASDAQ grew by 1.54%.
Despite strong equity markets, bond yields dropped to their lowest point of the year. The drop in yield caused by rising bond prices, combined with soft employment numbers and low wage growth, could suggest a slowing economy or a tightening labor market.
While the U.S. equity markets advanced to new highs and bond prices rose, other markets were mixed for the week. Pending home sales dropped 1.3% in April, a second straight month of decline. Oil fell to $47.66 a barrel, the dollar dropped to a seven-month low against the euro, and gold gained 0.8% closing at $1,280.20.
Additionally, soft employment numbers and flat wages could lead to a disappointing Q2 Gross Domestic Product (GDP). With an eye on dropping inflation, the Fed will have to decide whether to still raise interest rates.
Mixed Job Numbers and Slow Wage Growth
May's job growth reported an anemic 138,000, well below the expected 185,000. At the same time, average hourly wages increased on a year-over-year basis by only 2.5%. Moreover, the revisions to March and April's payroll numbers fell by 66,000 jobs. The economy is currently averaging 162,000 new jobs per month for the year - again, well below 2016's 187,000 average.
Despite the unemployment rate falling to 4.3%, the lowest it's been in over 15 years, the employment-to-population ratio also fell. Still, the data confirms that demand for experienced and skilled workers exists, while the supply is falling.
Fed Will Discuss Raising Interest Rates
On June 14, the Fed FOMC will meet to determine if an interest rate increase is in order. Despite the soft employment numbers and an inflation rate below the Fed's target of 2%, traders still believe there is a nearly 88% chance that the Fed will raise rates in June. However, the market consensus currently suggests only a roughly 50/50 chance for another rate increase before the end of the year.
International News and Looking Ahead
Manufacturing in China has posted strong returns. Both the manufacturing and non-manufacturing PMIs reported gains above 50. The numbers suggest that China is on track to reach its targeted 6.5% growth for the year. This matters because China is the world's second largest economy at $11 trillion GDP for 2017.
Other developments in the international arena could influence markets going forward. Reaction to President Trump's decision to leave the Paris Climate Accord could adversely affect American products in the international markets. The landmark decision also runs the risk of hurting U.S. tech and alternative energy companies.
As always, if you have questions about how these events may affect your finances, please contact us. We are here to help you remain informed and in control of your financial future.
Quote of the Week
"Honesty is the best policy."
--English proverb, 16th century
Golf Tip of the Week
3 Essential Swing Tips
Still perfecting your swing? You're not alone. Remembering techniques like pulling power from your body and avoiding an open clubface can make a difference on the course. They also are easy tricks to forget. Because everyone can have an off-day, here are three ways to immediately improve your swing.
1. Keep your hands low.
If you're looking to reduce the height of your shot, remember this mantra: Lower your hands to lower your ball flight. When you keep your hands low in the finish, you limit your follow through's height and keep the trajectory low.
2. Make impact with thumbs down.
For those who hook their shots, make sure your thumbs point down on impact. Doing so will keep your clubface from closing too soon and help you avoid curving shots to the left.
3. Pull power from your body, not your arms.
Your arms are there to guide the ball, not to drive power. For this, you need your body. To make this fix:
- Place your club behind your ball at address.
- Keep your body in a dead-stop position.
- Drag the ball into the air without taking a backswing.
- While pulling power from your body may be challenging at first, with practice, you should consistently get your ball in the air. On the downswing, remember to fully turn through the ball.
Financial Question of the Week
Why do I need an estate plan?
The biggest reason to have an estate plan is to make sure that your personal values about both medical and financial matters are honored in the event that death or incapacity prevents you from acting for yourself. In addition, tax minimization is a further and very important goal of estate planning for persons with taxable estates. To create an estate plan for yourself or update an existing plan, you will most likely need the services of an estate planning attorney.
When you consult with an estate planning attorney, the attorney considers how you want assets distributed to heirs, what taxes your estate might be liable for and whether there are tax-minimization strategies that would be appropriate and appealing; what your preferences and values are with respect to the management of medical and financial affairs in the event of incapacity; and any complicating family issues. To deal with these issues, we often work with you and your attorney to help provide full and accurate information about you.
When an estate plan is formulated, be sure you understand what the attorney is saying. Estate planning ideas can be elusive, but strive for a working knowledge of the material presented for your consideration.
Please contact my office if you or someone you know would like help getting the estate planning process underway.