Markets remained mixed last week as the Dow closed at another record high, while the NASDAQ fell and the S&P 500 held steady. By Friday, the Dow gained 0.52%, the NASDAQ fell -0.92%, and the S&P 500 gained a slight 0.05%. Meanwhile, the MSCI EAFE remained virtually unchanged from last week, down only -0.002%.
In other markets, oil closed at $44.74 a barrel, down 2.4% on the week - its fourth week of declines. Overall, European equity markets remained steady while most Asian markets recorded modest gains at week's end.
The Fed Increases Interest Rates
As expected, the Fed announced last week that it raised the short-term interest rate target by 25 basis points to a range between 1.00 and 1.25%. This was the third interest rate hike by the Fed in the last six months. The Fed also announced its intention to reduce the $4.5 trillion balance sheet by selling off assets acquired in the wake of the 2008 financial crisis. The Fed currently plans to sell approximately $10 billion monthly starting later this year.
Further, last Wednesday, Federal Reserve Chair Janet Yellen reported on the Fed's belief that the current weak inflation numbers are temporary. However, the Fed's plan to continue raising interest rates going forward and sell off its assets may change if the economy does not gain momentum in Q3 and Q4. To date, the economic data continues to point to a Q2 Gross Domestic Product (GDP) that may be weaker than previously anticipated.
Soft Economic Data Continues
Consumer Sentiment Dampens: The preliminary consumer sentiment index for June dropped to 94.5, the lowest since last November. The index fell from May's reported 97.1.
Retail Sales Soften: Retail sales had their largest monthly drop since January 2016. Sales declined 0.3% in May against predictions of a 0.1% gain over April. The report includes a variety of disappointing numbers:
- 0.1% decrease for restaurants
- 0.2% dip for automotive vehicles
- 1.0% fall for department stores
Business Inventories Drop: In April, business inventories dropped 0.2% from the prior month, which was 0.1% under the consensus. Further, retail inventories also dropped 0.2%, and wholesale inventories abruptly fell 0.5% for the month.
CPI Falls: The Consumer Price Index fell 0.13% in May. The disappointing numbers mark another decline - the 2nd in 3 months - as economists had expected a 0.2% increase from April's number.
Housing Weakens: In May, housing starts dropped 5.5% from April and permits fell 4.9%. The trend continues the decline from Q1 and could signal another negative quarter.
Market Details on the Horizon
More housing news will influence the week ahead as the existing home sales report comes out on Wednesday and the new home sales report comes out on Friday. Markets will continue to watch the fundamentals, including consumer spending, which makes up 69% of GDP. So far this year, consumer spending has been soft with vehicle sales and restaurant sales sliding downward most months.
As always, we are here to talk should you have any questions about the markets or your own financial objectives. Our goal is to help you understand your financial life with clarity and confidence.
Quote of the Week
"I think a hero is an ordinary individual who finds the strength to persevere and endure in spite of overwhelming obstacles."
Golf Tip of the Week
Exercise to Improve Your Strength - and Game
Golf may not be the most strenuous sport, but that doesn't mean you should let your athleticism slip. As a golfer, you need endurance and a strong core when facing long, difficult courses. You also need power for maximizing your swing. Making sure to regularly exercise by working on your strength and conditioning will help your game improve. One effective exercise is The Box Step. Easily done at home, this exercise builds strength by engaging your quads, hamstrings, glutes, and hips.
The Box Step
Set a box or stack platforms at 12 - 14 inches high.
- Step up on the box with your right foot, remaining in control of your body.
- Lift your left knee, pause, and then return your left leg to the starting position. Keep your movements fully controlled and with a soft landing.
- Rest, then repeat and rotate legs.
Tip courtesy of Golfweek
Financial Question of the Week
How often do you review my portfolio?
Although our clients all have customized portfolios, most portfolios hold similar investments that we have chosen as best in class from throughout the investment universe. The customizations typically come in the form of asset allocation - determining the appropriate mix of investments for your particular situation.
That being said, we constantly review the investments we have chosen. During our daily meetings with clients we continuously evaluate these investments to ensure they remain in line with our expectations throughout changes in the market and economy. An even closer look is taken outside of meetings where we perform more detailed fundamental analysis.
With investments constantly analyzed, we take the opportunity to review each client's customized portfolio on at least a monthly basis. At this time we review how your investments are performing as a whole, your asset allocation strategy, and how your portfolio is working towards achieving your goals, among other factors effecting your financial situation.
Please let us know if you or someone you know has any questions about their portfolio.