In this week’s recap: equities are hit by considerable
volatility, following developments in the bond market as well as the U.S.-China
trade dispute.
Weekly Economic Update
THE
WEEK ON WALL STREET
U.S. stock indices saw significant ups and downs last week, with
traders looking for economic cues from Treasury yields and also developments in
the tariff fight between the U.S. and China.
The S&P 500 lost 1.03% on the week; the Dow Jones Industrial
Average and Nasdaq Composite respectively declined 1.53% and 0.79%. Overseas
shares also retreated: the MSCI EAFE index lost 2.34%.1,2
Attention
on the Bond Market
Wednesday, the yield of the 2-year Treasury bond briefly exceeded
that of the 10-year Treasury bond. When this circumstance occurs, it signals
that institutional investors are less confident about the near-term economy.
That view is not uniform. Asked whether the U.S. was on the verge of an
economic slowdown, former Federal Reserve Chair Janet Yellen told Fox Business
“the answer is most likely no,” noting that the economy “has enough strength”
to avoid one.
The demand for bonds has definitely pushed prices for 10-year and
30-year Treasuries higher, and their yields are now lower (bond yields usually
fall as bond prices rise). The 30-year Treasury yield hit a historic low last
week.3,4
Some
China Tariffs Postponed
Last week, the Office of the U.S. Trade Representative announced
that about half the Chinese imports slated to be taxed with 10% tariffs
starting September 1 would be exempt from such taxes until December 15.
The White House said that the reprieve was made with the upcoming
holiday shopping season in mind, so that tariffs might have less impact on both
retailers and consumers.5
FINAL
THOUGHT
Lower interest rates on bonds are now influencing mortgages.
According to mortgage reseller Freddie Mac, the average interest rate on a conventional
30-year home loan was just 3.6% last week. That compares to 3.81% roughly a
month ago (July 18).6
30-year and 15-year fixed rate mortgages are
conventional home loans generally featuring a limit of $484,350 ($726,525 in
high-cost areas) that meet the lending requirements of Fannie Mae and Freddie
Mac, but they are not mortgages guaranteed or insured by any government agency.
Private mortgage insurance, or PMI, is required for any conventional loan with
less than a 20% down payment.
T
I P O F T H E
W E E K
If you do any freelance work, keep your freelance budget spending separate from your personal budget spending, for clarity at tax time and for a clearer view of your business expenses.
THE WEEK
AHEAD: KEY ECONOMIC DATA
Wednesday: The minutes of the July Federal
Reserve meeting and the latest existing home sales data from the National
Association of Realtors.
Friday: Federal Reserve Chairman Jerome
Powell delivers a speech at the Fed’s annual Jackson Hole economic conference
on monetary policy, and July new home sales numbers arrive from the Census
Bureau.
Source: Econoday / MarketWatch Calendar, August 16, 2019
The content is
developed from sources believed to be providing accurate information. The
forecasts or forward-looking statements are based on assumptions and may not
materialize. The forecasts also are subject to revision. The release of data
may be delayed without notice for a variety of reasons.
THE WEEK
AHEAD: COMPANIES REPORTING EARNINGS
Monday: Baidu (BIDU),
Estee Lauder (EL)
Tuesday: Home Depot
(HD), Medtronic (MDT), TJX Companies (TJX)
Wednesday: Analog
Devices (ADI), Lowe’s (LOW), Target (TGT)
Thursday: Salesforce
(CRM), Intuit (INTU)
Source: Zacks, August 16, 2019
Companies mentioned are for informational purposes only. It should
not be considered a solicitation for the purchase or sale of the securities.
Any investment should be consistent with your objectives, time frame, and risk
tolerance. The return and principal value of investments will fluctuate as
market conditions change. When sold, investments may be worth more or less than
their original cost. Companies may reschedule when they report earnings without
notice.
Q
U O T E O F T H E W E E K
“Human felicity is produced not so much by great pieces of
good fortune that seldom happen, as by little advantages that occur every
day.”
BEN FRANKLIN
T
H E W E E K L Y R I D D L E
Without fingers, I
point; without arms, I strike; without
feet, I run. What am I?
LAST WEEK’S RIDDLE: You write
the word “one” on a piece of paper. An observer tells you she can make “one”
disappear by adding something to it. Is this true, and how can she do it?
ANSWER: Yes. Simply by adding
the letter G, "one" becomes "gone."
Troy L
Thompson, CFP may be reached at 515-432-5421 or troy@thompsonfinancialinc.com
www.thompsonfinancialinc.com
www.thompsonfinancialinc.com
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Troy
Thompson, CFP
DBA
Thompson Financial and Hanson Asset Strategies
Securities
offered through FIRST HEARTLAND CAPITAL, INC. Member FINRA & SIPC.
Thompson
Financial is not affiliated with FIRST HEARTLAND CAPITAL, INC.
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
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recommendation to purchase or sell any investment or insurance product or
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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
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market-weighted index of all over-the-counter common stocks traded on the
National Association of Securities Dealers Automated Quotation System. The
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CITATIONS:
1 - wsj.com/market-data
[8/16/19]
2 - quotes.wsj.com/index/XX/990300/historical-prices [8/16/19]
3 - cnbc.com/2019/08/15/us-bonds-30-year-treasury-yield-falls-below-2percent-for-first-time-ever.html
[8/15/19]
4 - foxbusiness.com/economy/janet-yellen-to-wall-street-a-recession-is-unlikely
[8/14/19]
5 -
reuters.com/article/us-usa-trade-china-tariffs/trump-delays-tariffs-on-chinese-cellphones-laptops-toys-markets-jump-idUSKCN1V31CX
[8/13/19]
6 - freddiemac.com/pmms/archive.html [8/16/19]
quotes.wsj.com/index/SPX/historical-prices
[8/16/19]
treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
[8/16/19]
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