The Markets (as of market close September 23, 2016)

Buoyed by news from the Fed, as well as the Bank of Japan, that measures intended to stimulate the economy would continue — at least in the short term — U.S. stocks and U.S. bonds posted gains for the week. While the response last Wednesday and Thursday was positive in the equities markets, falling oil prices sent stocks tumbling by last week’s end. So, last week was all about the Fed as investors seem cautiously optimistic that the FOMC won’t raise interest rates at least until December.

The price of crude oil (WTI) closed at $44.59 a barrel last week, up from $43.19 per barrel the previous week.

The price of gold (COMEX) increased, closing at $1,341.10 by late Friday afternoon, up from the prior week’s price of $1,313.20.

Last Week’s Headlines

  • The Fed decided to keep interest rates at their current level — at least until it meets again in November. They said, “The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.”  The Committee noted that economic activity has picked up, spurred on by increased household income and spending. The employment sector has also been solid, averaging 180,000 new jobs per month. However, business investment remains soft, particularly in the energy sector. Overall consumer price inflation — as measured by the price index for personal consumption expenditures — was less than 1% over the 12 months ended in July, still short of the Committee’s 2% objective. As to the prospects of future rate hikes, Fed Chairperson Janet Yellen said the federal funds rate projects to increase only gradually to 1.1% at the end of next year, 1.8% at the end of 2018, and 2.6% by the end of 2019.
  • The real estate sector was not as robust in August as it was in July. The Census Bureau report on new residential construction revealed that privately-owned housing starts fell 5.8% in August, compared to the prior month. Building permits dropped slightly and housing completions were down a bit for the month. On the plus side of the report, building permits for single-family home construction rose in August over July — a positive indication that builders have confidence in that segment of the real estate market moving forward.
  • Existing home sales also fell in August, according to the latest figures from the National Association of Realtors®. Higher home prices and scant inventory were the main reasons sales of existing homes declined
  • While the real estate sector may have slowed down in August, home builders are optimistic about the new home market in September with the highest reading since October 2015. Builder confidence is high based, in part, on rising household incomes, low mortgage interest rates, and relatively tight inventory of new and existing single-family homes.

Eye on the Week Ahead

The last week of September brings the final economic reports for August, including the GDP and personal income and outlays — both of which can move the markets.

At BWFA, we monitor these short term reactionary market movers in the news week to week, but focus more on each client’s plan, and investment risk parameters, when making their individual portfolio investment decisions.