8Oct

WHAT IS HAPPENING WITH U.S. AND CHINESE TARIFFS?

The U.S. buys a lot from China. That may be the understatement of the year. The number is actually a half a trillion dollars annually. That is a very big number, even by Washington’s standards. It may seem like just about everything that we buy as American consumers is made in China and that isn’t far off base. Cell phones, computers, toys and furniture are some of the leading imports and the first two make up the biggest percentage of imports. The problem is that the Chinese government does not want to reciprocate. China imports about $15 billion annually of U.S. farm crops such as soy beans and $10.5 billion of transportation equipment such as airplanes. They also import about $7 billion annually of oil and gas products. While much of the attention in talk of a “trade war” has centered on steel and aluminum, those two products represent a

24Sep

GOLD PRICES HAVE BEEN PLUNGING; WHAT IS CAUSING IT?

When the world becomes filled with more uncertainty and markets become more volatile and geopolitical unrest is afoot, gold is considered a safe harbor. During volatile markets of the recent past, many investors have been driven to gold by putting at least a portion of their portfolios into the precious metal. In the past, it was a safe haven during times of high inflation. In the first half of August, the price of gold hit an 18-month low. That trend happened concurrently with the strengthening of the U.S. dollar. A downtrend had begun in 2013, but saw some reversal in 2014 and the first half of 2015. After peaking in 2011, when there was more uncertainty in the economy, gold prices were volatile. Decisions by the Federal Reserve also impacted gold prices during this time. Quantitative easing, which was a fed initiative in reaction to the 2008/2009 financial crisis, was

10Sep

S&P 500 – LONGEST BULL MARKET IN HISTORY

Strong economy, strong market; that seems to be the rational that can explain the market surge as of late. The S & P actually hit an all-time record high on August 24, 2018. The Nasdaq Composite followed suit. The market’s gains were broad-based. Running for the past nine and a half years, the Standard and Poor’s 500 Index has risen 325 percent. In that time, the Dow Jones Industrial Average is up 294 percent and the Nasdaq Composite is up 526 percent. This year, the Dow had been in correction territory for around six months and emerged from it on August 27. This was the longest stretch of days at these levels since 1961. The market had entered correction territory on February 8. On August 27, the Dow hit 26,049. There are some analysts on Wall Street who argue that the bull market of the 1990s remains the longest bull

27Aug

EMERGING MARKET’S OFF YEAR TO DATE; WHY?

The stock market has certainly rewarded investors in recent years with the Dow up 25 percent in 2017 alone. This was also the best year in four years for the Nasdaq and the S & P 500. Not all sector have enjoyed stellar performance this year though. One of the hardest hit sectors of the market recently has been emerging markets. The sector, which was up 8.8 percent in January, lost that advantage in the following five months, making the second quarter of 2018, the largest decline on record for the emerging markets sector. A couple of exchange traded funds (ETF’s) that track emerging markets have been good gauges of the sectors performance year-to-date. From the technical side, professional investors have taken notice of the iShares ETF MSCI Emerging Market fund (EEM), which in late May, showed a classic “death cross” on their charts. This is illustrated by the crossing

13Aug

OIL PRICES; WILL THERE BE CONTINUED DREAD AT THE GAS STATION?

The pain at the pump has really hit home for many Americans during the recent holidays with prices that have averaged 73 cents more than a year ago. The average price of regular gas nationwide was $2.26 a year ago. The price of gas on Independence Day was the highest in four years. A barrel of Brent crude increased by five dollars from April to May. More than one variable has been at play creating a surge in the price of oil. The OPEC member countries voted to cut back on oil production in 2016. With demand staying high, and even higher in China, the price of oil, and by extension gasoline, was impacted by the falling supply. The U.S. supplies Saudi Arabia with military weapons, including a $350 billion deal last year. The president has asked the Saudi King to increase oil production. The head of OPEC said that

30Jul

TARIFFS: WILL THEY THROW A WRENCH IN THE MARKET?

For years, the United States has held the distinction of being an economic superpower. We have been the world’s banking center, our currency has been the reserve currency for the world and English has been the language of international business. The U.S.’s economy dwarfs most and few countries were even a close second place in the past. China has had a goal of challenging all of these paradigms. The world moves at such a fast pace today that many geo-political events, that should startle the markets only produce a yawn. The potential for a trade war between the U.S. and its many trading partners offers the prospect for getting Wall Street’s attention. The introduction of tariffs came out of promises made on the campaign trail by the president. As a businessman, he had been dismayed for many years at what he saw as poorly negotiated deals between the U.S. and

2Jul

RETURN TO PAIN AT THE PUMP

Americans had become somewhat complacent about fuel prices in the past few years, enjoying prices at the pump that had dropped from $4.11 in 2008 to $3.64 a gallon in 2012 to $3.37 in 2014 and much further during the next three and a half years. Those sky-high prices of 2008 through 2014, which had been putting a real dent in many people’s budgets, had resolved. Oil producers had a glut of product on their hands and OPEC had even resorted to cutting production. That complacency can be thrown out the window now. In the past five months, gas prices have increased by 50 cents a gallon. Prices at the pump are now hitting levels not seen since 2014. It was that year that a barrel of oil last hit $100. During a period of less than 40 years, a gallon of gas went from 36 cents in 1970 to

18Jun

INTEREST RATES AND BOND YIELDS; BOTH IMPACTING MARKETS AND THE ECONOMY

Investors are watching two bellwethers that can impact both the stock market and signal the direction of the economy. The rising yields on government bonds can become an inviting factor for those who want to reduce the risk profile of their portfolios. Also the confluence of yields on short and long duration government bonds can be a sign of a downward turn in the economy. Likewise, any increases in interest rates by the Federal Reserve can impact the stock market and cause a drag on economic growth. Both have been in flux or have waded into territory that has prompted more attention. After acclimating to a culture where the federal funds rate was near zero for a long stretch of time, those who benefit by low interest rates have flourished. Since the financial crisis ended, home sales have rebounded and home prices have been back on an upward trajectory. Sales

21May

TAKING A HIKE; A NEW FED CHAIRMAN STEPS IN

After several years of keeping the federal funds rate near zero, the drama around meetings of the Federal Reserve’s Federal Open Market Committee (FOMC) has increased and garnered more attention. With hints of impending inflation, and unemployment numbers looking much better, the stage has been set for more intervention by the central bank. The variables that the Fed watches, and often acts on, have seen changes, and with economic improvement, often comes an economy that might be improving too fast. The Fed uses several “tools” to help keep the economy healthy and raising the benchmark rate is just one of them. On March 21, 2018, after their FOMC meeting, the Fed announced a quarter point rate increase. The news immediately affected the markets, causing some intra-day volatility. The news out of the meeting was mostly positive though, with an expectation of some manageable inflation and affirmation of a growing economy.

26Mar

RISING INTEREST RATES; IMPACT ON BONDS

After lots of speculation the last couple of years, interest rates have begun a slow climb out of the cellar, thanks to a more robust economy. It is a double-edged sword in many ways, with borrowing costs going up as economic stimulus simultaneously accelerates. The Federal Reserve, under its new chairman Jerome Powell, has its eye keenly focused on the low unemployment rate and the threat of encroaching inflation. After near zero interest rates for years, these factors are forcing their hand. Chairman Powell’s recent remarks before the House Financial Services Committee were encouraging in terms of the economy and its direction, but that is where that double-edged sword can be found. This good news means that the Fed can see the prospect of increasing inflation and their answer is to raise interest rates. An overheated economy, means that the pace of rate increases has to increase, and that increases