Wall Street holiday list
The holiday season is here and Wall Street has a list, although it might not be a good list. All eyes will be on the Fed who has said they are data dependent on whether or not they will raise interest rates by December 16th. This is the week all that data comes out. Here’s the list.
- US Pending Home Sales Report
- ADP employment report
- Janet Yellen speaks
- ECB (European Central Bank) meeting on possible more economic stimulus
- OPEC meeting
- Jobs Report
Nervousness in the economy
We have a two year German bond that is yielding -0.412%. That means you give them your money and at the end of two years you get back less. In other words, you lose money. The US 10 year bond is yielding 2.22%. This is one issue that is creating a lot of nervousness in the economy because more European stimulus could make things worse in Europe. Adding more nervousness in the economy is the Fed saying they may take interest rates up.
Ramifications of a rate hike
Investors seem more worried about this potential rate hike than in the past. There is concern that it could derail the economy. History does not show this to be true. Since the 1980s we have had five interest rate hikes and in every one economic growth has either stayed steady or accelerated. Also credit has not dried up and lending has increased. This is actually a good thing because as the economy is growing, it can help keep inflation in line.
Less threat to bonds and inflation
With negative bond yields in Europe and positive yields in the US, our bond market is not threatened as demand could go up. Equities are still seeing good US growth. As the dollar continues to be strong, especially with all that is going on in Europe, that could help keep inflation down.
Oil could still go lower
We’ve predicted earlier this year that oil could go down to $20 per barrel. While oil is still around $40 per barrel, we could see that happen after the OPEC meeting on Friday. This puts more money in the consumers pockets at the holiday season. If oil drops to $30 per barrel, Russia will start having economic problems which could create Geo political stress.
Can Star Wars and Apple stimulate the economy?
There is the possibility that the new Star Wars movie along with the Apple Watch could stimulate the economy. Over the holidays it will be interesting to see what people spend their money on and how they are purchasing those items. Online sales continue to do well and as internet shopping continues to grow, retailers may have to continue slashing prices to get people in the stores. At this point the economy needs consumers to get off the sidelines and help stimulate the economy as the year comes to close.
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Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
Government bonds are guaranteed by the US government as to the timely payment of principal and interest. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds.
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