All is not rosy in the
economy and investors are not sure where to turn to place their money. Recent economic data along with corporate
sales information indicates that the economy may be slowing down again. More and more we hear the rumor mill on Wall
Street talking about how the economy is not quite as strong as people
believe. Some analysts are raising the
expectations of falling back into a recession to the highest level of chatter
we have heard in over a year.
As far as investors, they
just don’t know what to do. The stock
market this week is down almost 300 points as of Friday morning. Usually investors in this situation would
turn to bonds as the place to stash their money however bond prices have been
rising as well. Traditionally when the
stock markets falls, bond yields rise. However
in this last week we have seen deterioration in both the stock and bond market
making it harder for investors to protect their portfolio values.
Mortgage rates have hit their
highest point in over a year and it seems like they are going to keep
rising. The cause of the rate increases
is anyone’s guess however many investors are still blaming The Fed for it
happening. Ever since the Fed indicated
that they will begin to taper their economic stimulus program in the fall of this year interest rates have
been creeping up. We are now in the
month of August and the fall is just
around the corner which has many bond holders getting more and more nervous.
Next Wednesday the Fed will
release ir minutes from their last meaning which may shed some more light on
their future economic plans. There is
certainly fear that the minutes may reveal even stronger language that the Fed
is closer to ending the stimulus program than many have been wanting to
believe. Wait until Wednesday and we
will know more.
Retail sales rose only 0.2
percent in July after the previous month was revised upward to 0.6 percent from
0.4 percent. The July number fell short
of expectations which sent some jitters through the market. Additionally Wal-Mart and Cisco reported
sales below expectations which further dampened the spirits of investors. As I said in the beginning of this report,
investors would have normally jumped into bonds on this type of news however
bonds prices are rising simultaneously making bonds unattractive as well.
Inflation on both the
wholesale and retail level continues to remain subdued and does not indicate
any upward pressure on prices coming any time soon. The producer price index came in much softer
than expected in most part due to a surprise drop in energy costs. The index remained unchanged for the month of
July after having jumped 0.8 percent in June.
The consumer price index rose a minimal 0.2 percent after jumping 0.5
percent in the prior month.
JJ Mack
916-517-1800x300
jj.mack@apmortgage.com
www.apmcroseville.com
No comments:
Post a Comment