NATIONAL MARKET UPDATE
The national lack of housing inventory led to July's 2.5% drop in the Pending Home Sales index of contracts signed on existing homes. But after June's 2.8% gain, closed sales in August should be roughly unchanged.
Consumers are willing to buy, as the Conference Board reported Americans are brimming with confidence about the economy and the labor market. The August gauge of present conditions hit its highest read in 19 years!
Add to that the fact that price gains have slowed. The Case-Shiller home price index grew just 0.2% in June, up only 3.1% from a year ago, exactly half the annual price gain we saw in June 2018.
REVIEW OF LAST WEEK
STOCKS SPIKE AS TRADE TENSIONS EASE... Beijing and Washington seemed to adopt less strident tones in their negotiating gamesmanship. This, plus solid economic data sent stocks soaring, to end August on a high note.
Accounting for 70% of our economic growth, consumer spending shot up 4.7% in Q2, its biggest gain in four years. And economy-wide corporate profits gained 5.3% in Q2 after pundits predicted declines.
Fold in the stimulus of Fed rate cuts and you can see why some analysts see an extension of the economic expansion. Yes, others are calling for a recession, but in reality no one's showing up.
The week ended with the Dow UP 3.0%, to 26,403; the S&P 500 UP 2.8%, to 2,926; and the Nasdaq UP 2.7%, to 7,963.
Although stocks rose, the volatility drove investors to the safe haven of bonds. The 30YR FNMA 4.0% bond ended UP .16, to $103.80. In Freddie Mac's Primary Mortgage Market Survey, the national average 30-year fixed mortgage rate rose slightly but is almost a full percent lower than last year. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
DID YOU KNOW?... Despite all the reports of a "looming" recession, a realtor.comsurvey reports 98% of economists, strategists, academics, and policymakers do not believe one will start this year, and more than 60% do not see one in 2020 either.
THIS WEEK'S FORECAST
MANUFACTURING AND SERVICES SECTORS, JOBS ALL GAIN... The ISM Manufacturing and ISM Services indexes are expected to show both sectors of the economy continuing to expand. Also growing should be Nonfarm Payrolls and Average Hourly Earnings in Friday's August Employment Report.
U.S. financial markets were closed Monday, September 2, for Labor Day.
NOTE: Weaker economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and higher loan rates.
FEDERAL RESERVE WATCH
Forecasting Federal Reserve policy changes in coming months... The Fed Futures market still expects September and October rate cuts, but no further moves in December. Note: In the lower chart, a 100% probability of change is a 0% probability the rate will stay the same.
Current Fed Funds Rate: 2.00%-2.25%
AFTER FOMC MEETING ON:CONSENSUSSep 18 1.75%-2.00%
Oct 30 | 1.50%-1.75%
Dec 11 | 1.50%-1.75%
Probability of change from current policy:
AFTER FOMC MEETING ON:CONSENSUSSep 18 100%Oct 30 57%Dec 11 51%
BUSINESS TIP OF THE WEEK
Instead of focusing on the numbers, focus on serving your customers and your community. When you give to others, it's astonishing how much others will give back to you.