Some thoughts to ponder…
- A good smile is magic pill that can make you feel good in every circumstances of life
- Life is the only game where the object of the game is to figure out what the rules are
- The first great gift we can bestow on others is a good example
- You’re not as young as you used to be. But you’re not as old as you’re going to be
- People will confess to treason, murder, arson, false teeth, or a wig. How many of them will own up to a lack of humor?
Now onto the market update…
As expected, the FOMC did not raise interest rates at the end of their meeting on Wednesday.
- They will continue to hold the target rate at a range of 0.25 to 0.50 percent. T
- here is certainly a change in the Fed’s perspective on the growth of the economy.
- Whereas in prior months, the Fed was very optimistic about job growth
- The latest employment report has the Fed believing that employment continues to improve however at a much slower pace.
- The Fed is also describing the willingness of companies to invest in their own business growth as being soft.
Some of the positives to the Fed report is that household spending has improved.
- This indicator goes to the heart of the nation’s economy and has now been upgraded to showing strength according to the Fed.
The quarterly forecasts released by the Fed show that they still anticipate two rate hikes this year.
- The Fed did pull back on their expectation as to the pace and overall number of rate increases that will occur over the next two years.
- It is very clear that the Fed is taking the increasing of interest rates at a very slow and cautionary pace.
In the housing market mortgage applications declined for both purchases and refinances despite the lowest rates since January of 2015.
- According the Mortgage Bankers Association of America applications for purchases and refinances declined 5.0 percent and 1.0 percent respectively.
- Many industry professionals are attributing the decline to the end of the school year and the start of summer.
- Overall mortgage activity continues to remain strong at a pace of 16 percent higher than the same time last year.
In another sign of a strengthening economy, retail sales, another major indicator of economic health, jumped 0.5 percent for the month of May.
- Analysts were expecting only a 0.3 percent increase.
- Strength in the report is that even though auto sales, which can have a big impact on the data, increased nicely, retail sales increased a very healthy 0.4 percent without the automobile component.
One of the challenges impacting the Fed’s policy on interest rates is in trying to get a gauge on what is happening in regard to inflation.
- The Fed would like to see an annualized rate of 2.0 percent inflation on the consumer level.
- The challenge facing the Fed at this time is that inflationary pressure is starting to be felt on the wholesale side, however it is not making its way to the consumer side. Wholesale inflation rose a stronger than expected 0.4 percent for the month of May.
- Consumer prices are barely up 1.0 percent from the same time last year which is far below the Fed target for inflation.
This week’s potential market moving reports are:
- Tuesday June 21st – Janet Yellen Speaks
- Wednesday June 22nd – MBA Mortgage Applications, FHFA House Price Index, Existing Home Sales, and EIA Petroleum Status
- Thursday June 23rd – First Time Jobless Claims and New Home Sales
- Friday June 24th – Durable Goods Orders and Consumer Sentiment