A Glimmer of Hope
Last week, we talked about how we are watching the rising tensions between the US and China very carefully. Over the weekend, China announced that they were pausing part of the trade deal which is already causing some volatility in the markets. However, we are seeing some good things. The data points we have seen the past 2-3 weeks is showing that the worst might be over. Personal income rose 10.5% which was due largely to the federal stimulus from the government. We also saw that the savings rate rose 33% in April. With income rising, we saw consumption fall, but that could be creating some pent-up demand for the 3rd and 4th quarters and could potentially give us a pop in that area. New home sales reported a slight increase which proves that there is an underlying demand for residential housing. Even though consumer spending was down in April, consumer confidence came up in May. That was refreshing to see reported as we go forward with the economy reopening. Hopefully, we will see an increase in spending. We are not out of the woods yet, but we are starting to see that, based on recent data points, the worst might be behind us.
Consumer Confidence
Mortgage applications have gone up for six consecutive weeks. That proves that the consumer is keeping pace with new home buildings, which was a big area of focus not too long ago. This increase is important from a consumer and interest rate level because people are most likely getting a better interest rate when buying or refinancing their house right now. When our financial planning team here at Fi Plan Partners do Financial Blueprints, they make sure to look at these types of things. These things could have an impact on your plan so the team makes sure to evaluate the current market to see if rates could be better for new home purchases or a refinance and plug it in to see if it could benefit you. The Fed has taken strong action on lowering interest rates and we have had clients make comments on whether we will ever see interest rates this low again. This creates opportunities in peoples’ minds that could benefit individuals in certain situations.
Flexibility
It clear that the data is starting to look better. We have covered the Payroll Protection Program extensively on our vlogs but, this week, we wanted to give you a positive update that came from the House of Representatives. We expect the Senate will approve it this week, but they are looking to pass a bill that will provide major flexibility in the Payroll Protection Program. Originally you had to use at least 75% of the proceeds on keeping your payroll intact but with the changes, they are now dropping that to 60%, which provides more flexibility of what you can do with the money that’s already out there. Also, there was a rule, originally, that on the payroll program, you had to pay that back or justify the loan within an 8-week period and they’re now expanding that to 24 weeks. These changes give a lot more money to a business and allows for more flexibility, which is a positive thing. Through the summer these updates could start to have a major “behind the scenes” impact on the economy.
Oil Production
As people start to go on vacation and get out of the house more, it may be a good idea for people to go ahead and fill their gas tank because we’ve seen gas prices start to come up. We have also seen some calming in the oil markets after a record volatility time period when the oil futures market went negative back in April. We’ve actually seen some calming in that area for the last few weeks, but that may change come this Thursday. OPEC Plus, which includes Russia, is working on having a meeting this Thursday to discuss either extending the cuts in production or possibly eliminating their cuts in production. The US shale production has dropped considerably along with the number of rigs due to recent record lows. The oil market has definitely been hurt by the drop in demand and we might see foreign producers use this weakness as a chance to pounce and potentially increase their production or they may continue to keep their production low. It brings a large amount of uncertainty back to a market during a time where we had seen some calming and just in time for reopening and a potential increase in driving. These low gas prices may not be here for long. We aren’t predicting the future, but in the moment, it’s good to take some caution as we see global producers try and potentially flex their muscles.
Greg Powell, CIMA®
President and CEO
Wealth Consultant
Email Greg Powell here
Bobby Norman, CFP®, AIF®
Managing Director
Wealth Consultant
Email Bobby Norman here
Ashley Page, JD, MBA
Senior Vice President
Wealth Consultant
Email Ashley Page here
Trey Booth, CFA®, AIF®
Senior Vice President
Wealth Consultant
Email Trey Booth here
Adam Vansant, AIF®
Associate Vice President
Wealth Consultant
Email Adam Vansant here
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.
No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.
Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.
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