Last week, markets kept relatively quiet despite the continuing drop in oil prices. A global glut of oil has led to 5-straight weeks of price declines. OPEC's attempts to curb oil production have not yet played out as expected, as prices are down roughly 20% for the year.
Though oil rose slightly on Friday due to a weaker U.S. dollar, oil markets closed the week at a 10-month low. Still, oil stocks and energy companies in general comprise less than 6% of stocks in the S&P 500 on a capitalization basis, down from 11% only 3 years ago. As such, they are less significant to the overall markets today than in the past.
What We Learned Last Week
Despite oil's problems, a few economic indicators for the week pointed to the potential for mildly stronger Q2 consumer spending.
- Existing Home Sales Rebound: Overall, existing home sales for May rebounded with a 1.1% increase from April to an annualized rate of 5.62 million sales. Single-family sales rose 1.0% for an annualized rate of 4.98 million, while condos sales rose by 1.6% for an annualized rate of 640,000.
- New Home Sales and Pricing Surge: New home sales for May rose 2.9% to a 610,000 annualized rate on strong pricing. Median house pricing jumped to $345,800, an 11.5% rise for the month. The 16.8% year-on-year increase is roughly double the actual sales gain of 8.9%.
- Low Jobless Rate Stays Steady: June jobless numbers have so far remained on track and consistent with the current historic lows. Last week's data revealed that the 241,000 claims matched general consensus.
- Flash Purchasing Managers' Index (PMI) Slows: The PMI flash composite index came in at 53.0 for the month versus 53.9 for the prior month. The single index is a synthesis of data such as new sales orders, inventories, and employment. A reading above 50 indicates rising output versus the previous month.
What Is Next?
With Q2 ending this week, markets will look at the durable goods orders, additional home sales data, and consumer sentiment, while continuing to watch oil prices. In addition, the second part of the Fed stress test for banks will report on Wednesday. The second half of the stress tests evaluates banks' abilities to pay dividends and buy back stock. All 34 major banks passed the first part of the test last week, indicating their strength in an economic downturn.
If you have any questions about this content or your financial future, we welcome you to contact us. Our team is here to provide the perspectives you need for the road ahead.
Quote of the Week
"Remember there's no such thing as a small act of kindness. Every act creates a ripple with no logical end."
Golf Tip of the Week
Tap Into Your Imagination to Improve Your Putt
The ability to imagine the path your ball will take is a powerful trick. By envisioning the effect the terrain has on your ball, you can better anticipate the best path to the pin. If predicting your path on the green is challenging, here are some tips that will help tap into the power of your imagination. To do this practice, you'll want to be within a few feet of the hole.
Focus on Distance
- Step 1: Look at the hole and imagine the place your ball will be right before it lands in the hole.
- Step 2: Place a ball 6 inches away from where you imagine the first landing. Next, place another ball a foot away from where you imagine the first landing. Repeat in consecutive intervals at 1½ feet and then at 2 feet. Continue doing this until you land at the place from where you are practicing.
Focus on Speed
- Step 3: Envision the speed the ball will need to travel your imagined path and sink the putt. You also need to analyze how speed can work against you.
- Step 4: Square yourself to the imagined line.
- Step 5: Practice putting and using the right speed by aiming for a coin or tee at the fall line. Putt in such a way that your ball arrives at your identified spot on the high side.
Tip courtesy of GolfTips Magazine
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.