After a brief rally after the Federal Reserve announced its historic decision, markets ended another choppy week in the red, battered by plummeting oil prices and rocky investor sentiment. For the week, the S&P 500 lost 0.34%, the Dow dropped 0.79%, and the NASDAQ fell 0.21%.
If you’re one of the millions of Americans who have better ways of spending time than watching the Federal Reserve, you may be wondering what will happen now that the Fed has voted to raise interest rates last week for the first time since 2006.
In her remarks, Fed Chair Janet Yellen said that the Fed believes that the recovery has come a long way and that the economy is ready for a “modest increase” in interest rates. The chart below will help put the rate increase in perspective:
After years of historically low rates, the Fed voted to raise rate targets by just a fraction of a percent. Though we don’t have definitive information about the pace of future rate increases, experts believe that the Fed is likely to raise rates several more times in 2016 and 2017, always assuming the economy remains on track for growth. Even if the Fed continues to raise rates regularly, it will take years to get back to historically average rates.
We can expect the coming weeks to be volatile for both stocks and bonds as investors adjust to the new rate environment. Historically, markets have experienced volatility after rate increases and occasionally moved into correction territory (defined as pullbacks of 10% or more). However, stocks and bonds usually experience positive returns in the initial years after the Fed begins tightening policy. That being said, the past doesn’t predict the future, and we’ll be closely monitoring markets in the weeks and months to come.
Bottom line: The Fed rate raise is not necessarily a bad thing. The hike underscores the fact that the U.S. economy has made tremendous progress in the last 7 years. However, the raise also comes at a time when millions of Americans are underemployed, inflation is still below targets, and global headwinds are blowing in the face of U.S. firms. Realistically, there was never going to be a perfect time to raise rates, and it’s clear that the Fed is planning to take a gradual approach to future hikes.
Can the economy maintain its pace of growth without the Fed’s foot on the accelerator? We’ll see.
Tuesday: GDP, Existing Home Sales
Wednesday: Durable Goods Orders, Personal Income and Outlays, New Home Sales, Consumer Sentiment, EIA Petroleum Status Report
Thursday: Jobless Claims
- Housing starts increase sharply. Groundbreaking on new construction rebounded from a seven-month low and jumped 10.5% last month. Permits for new buildings also surged to a multi-month high, highlighting strength in the housing market.
- Weekly jobless claims fall. The number of Americans filing new claims for unemployment benefits dropped last week from a five-month high, suggesting that the labor market continues to improve.
- Inflation remains stable. A measure of inflation – the general increase in the cost of goods and services in the U.S. – remained flat in November. However, core prices that exclude volatile food and fuel increased by 0.2%, indicating that inflation is firming up.
- Industrial production drops in November. Warm weather and other factors drove the industrial sector of the economy lower by 0.6% last month. Though seasonal factors are affecting the data, lower global demand is making the effects more severe.
Quote of the Week
“Life is about making an impact, not making an income.” – Kevin Kruse
Serve this herbaceous drink at your next party.
Makes 1 drink
1-1 ½ ounces rosemary syrup
3 ounces limeade
4 ounces club soda
Garnish with a thin round of fresh lime and a rosemary sprig
4 fresh sprigs of rosemary
1 cup sugar
Bartender’s Tip: To make this an alcoholic cocktail, add 1 ounce of dry gin or vodka.
Mix the rosemary syrup and limeade in a tall glass over ice. Top it off with soda and stir gently to mix. Garnish with the rosemary sprig and lime round inside the glass.
To make the rosemary syrup, heat 1 cup of water in a small saucepan with the rosemary sprigs. Add the sugar and stir until completely dissolved. Discard the rosemary and refrigerate up to two weeks.
Recipe adapted from Sarah Karnasiewicz | RealSimple.com
Tax Tip: IRS Updates Mileage Rate
The IRS updated the standard mileage rates used to calculate the deductible costs of driving for business, charitable, medical or moving purposes for 2016.
Beginning on January 1, 2016, the standard mileage rates for the use of a vehicle (including cars, vans, pickups or panel trucks) will be:
$.54/mile for business miles driven
$.19/mile for medical or moving purposes
$.14/mile driven in service of charitable organizations
Taxpayers always have the option of calculating the actual cost of using their vehicle instead of using the standard mileage rates.
For more information about deductions and calculating mileage rates, contact a qualified tax specialist or read IRS Revenue Procedure 2010-51 or Notice 2016-01.
Tip courtesy of IRS.gov
Golf Tip: Warm-Up Tips
Every tour pro knows the importance of warming up before you head out onto the green. Here are a few tips that can help you make the most of that time:
Avoid the rush and head to the putting green. If the driving range is crowded, spend your warm-up time dialing in your short game.
Use your head. Your warm-up should be mental as much as physical. Take some time to visualize the holes you’ll be playing and develop a game plan.
Stretch. Few things will help your swing more than some stretches to help your range of motion.
Tip courtesy of Golf Digest
Healthy Lifestyle: Take More Time Brushing Your Teeth
Researchers have linked inflammation of your gums and other dental troubles to heart issues and dementia. One way to take care of your mouth is to improve your daily hygiene routine. Experts recommend taking at least two minutes to brush your teeth. However, since most Americans brush for only 45 seconds, a rushed routine can cause you to press harder and damage your teeth or leave plaque behind. Try setting a timer or taking the toothbrush into the shower with you to make sure that you take enough time and are gentle with your teeth.
Tip courtesy of AARP
Green Living: Shut Down That Computer
If you’re like most people, you probably don’t shut down your home computer every night. However, you can save $90 a year and reduce your carbon footprint by turning it off every time you don’t expect to use it for two hours or more. If you don’t want to shut the computer down completely, at least turn off your monitor. If you’re shopping for a new computer, remember that laptops use just 25% of the power needed to run a desktop.
Tip courtesy of Seattle PI
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.
The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
By clicking on these links, you will leave our server, as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.