Economic Update for the week of October 3rd, 2018

In this week’s recap: the Fed hikes, consumers feel optimistic, personal income and new home sales improve, and the major indices have a mixed week.

Weekly Economic Update

Presented by Troy L Thompson, CFP, October 3, 2018

FEDERAL RESERVE MAKES ITS THIRD RATE HIKE OF 2018

The central bank set the target range for the federal funds rate at 2.00-2.25% last week, in a move that economists and investors widely expected. One development was unexpected: the Fed removed the word “accommodative” from its latest policy statement, a hint that it may be on the verge of altering its monetary policy outlook. The Fed dot-plot still shows one more interest rate hike for 2018 and three hikes in 2019.¹

 

HOUSEHOLDS SEE A VERY STRONG ECONOMY

Both marquee U.S. consumer confidence indices finished September in good shape. The Conference Board’s index reached an 18-year peak of 138.4, rising 3.7 points from its August mark. The University of Michigan’s gauge declined 0.7 points to a still-impressive reading of 100.1.^2,3

 

A PERSONAL SPENDING MISS; A NEW HOME SALES GAIN

Looking at other economic indicators in a data-heavy week, consumer spending rose 0.3% in August, falling short of the 0.4% gain forecast by economists polled by Briefing.com. While reporting that advance, the Commerce Department also announced an improvement of 0.3% for personal incomes in August. The National Association of Realtors said that its pending home sales index declined 1.8% in the eighth month of the year; in better real estate news, the Census Bureau found new home buying up 3.5% in August, measuring a 12.7% yearly increase in the pace of new home sales.^3,4

 

NASDAQ ADVANCES FOR THE WEEK, BUT S&P and DOW RETREAT

The S&P 500 finished the month at 2,913.98, losing 0.54% during a relatively calm week on Wall Street, which also saw the Dow Jones Industrial Average head 1.07% lower to 26,458.31. In contrast, the Nasdaq Composite gained 0.74% on the week to wrap up September at 8,046.35. Across the month, the S&P rose 0.43%, and the Dow, 1.90%, while the Nasdaq declined 0.78%. The small-cap Russell 2000 sank 2.62% in September, settling Friday at 1,695.10.⁵

 

T I P   O F   T H E   W E E K

When you inherit real estate, you immediately face some financial questions. Do you want to sell the property, rent it out, or keep it? What would each choice mean, tax-wise? Can you handle payments on an outstanding mortgage and maintenance costs? Talking to tax or real estate professionals is essential.

THIS WEEK

Monday, the Institute for Supply Management presents its September manufacturing PMI. | Paychex and PepsiCo announce earnings Tuesday morning; just before the closing bell, Fed chairman Jerome Powell delivers a speech on the U.S. inflation and employment outlook in Boston. | On Wednesday, ADP’s latest payrolls report appears along with the latest ISM service sector PMI and earnings from Lennar. | The September Challenger job-cut report and a new weekly initial jobless claims snapshot arrive Thursday, plus earnings from Constellation Brands and Costco. | The Department of Labor issues its September employment report on Friday.

Q U O T E   O F   T H E   W E E K

“A pound of pluck is worth a ton of luck.”

James garfield

% CHANGE	Y-T-D	1-YR CHG	5-YR AVG	10-YR AVG
DJIA	7.04	18.22	14.68	15.53
NASDAQ	16.56	24.68	22.56	30.56
S&P 500	8.99	16.09	14.45	16.34
REAL YIELD	9/28 RATE	1 YR AGO	5 YRS AGO	10 YRS AGO
10 YR TIPS	0.91	0.44	0.46	2.03

Sources: wsj.com, bigcharts.com, treasury.gov - 9/28/18^5,6,7,8

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

T H E   W E E K L Y   R I D D L E

What can be broken, but should not be forgotten?

LAST WEEK’S RIDDLE: You go into the forest and get it, you sit down to find it, and then you go home, just wanting to get it out. What is it?

ANSWER: A splinter.

Troy L Thompson, CFP may be reached at 515-432-5421 or troy@thompsonfinancialinc.com www.thompsonfinancialinc.com

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Troy Thompson, CFP

DBA: Thompson Financial, Inc.

and Hanson Asset Strategies

troy@thompsonfinancialinc.com 

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FIRST HEARTLAND CAPITAL, INC.

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Thompson Financial is not affiliated with

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

CITATIONS:

1 - businessinsider.com/federal-reserve-fomc-statement-and-interest-rate-decision-september-2018-2018-9 [9/26/18]

2 - conference-board.org/data/consumerconfidence.cfm [9/25/18]

3 - briefing.com/investor/calendars/economic/2018/09/24-28 [9/28/18]

4 - cnbc.com/2018/09/26/august-new-home-sales.html [9/26/18]

5 - markets.wsj.com/us [9/28/18]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F28%2F17&x=0&y=0 [9/28/18]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F28%2F17&x=0&y=0 [9/28/18]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F28%2F17&x=0&y=0 [9/28/18]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F27%2F13&x=0&y=0 [9/28/18]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F27%2F13&x=0&y=0 [9/28/18]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F27%2F13&x=0&y=0 [9/28/18]

6 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F29%2F08&x=0&y=0 [9/28/18]
6 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F29%2F08&x=0&y=0 [9/28/18]
6 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F29%2F08&x=0&y=0 [9/28/18]
7 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [9/28/18]
8 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [9/28/18]