Interest Rate Hike + Facebook + Tariff Talk + 1.3 Trillion $ Budget
A Tough Week in the Markets
As expected, the Federal Reserve raised rates by .25, which is the 6th rate hike since the first in December of 2015. The concern still exists as to whether the Fed raises rates 2 or 3 more times in 2018. The Fed also upgraded its assessment of the US economy, raising its GDP target for 2018 to 2.7%. At this point in the economic cycle, I believe its normal for the markets to continue to adjust to a new range of rates, so volatility is expected. The 10-Year US Treasury Yield fell to 2.83% to close out the week as investors apparently looked to a little safety last Thursday and Friday.
Last week we learned that Facebook had a security breech. This is obviously impactful as so many people of all ages use Facebook. I believe the number is over 2 Billion users. It will be interesting to see what the government and Facebook do going forward. Perhaps here comes additional regulation? Facebook stock dropped which certainly had impact in the markets last week.
The Tariff issue is now on all investors’ minds. China let us know what imported goods from the United States they will place a tariff on. More and more countries will be examining how this issue may impact them and will take actions that are in their best interest. As I certainly agree with “fair” trade deals, it’s rather obvious we need to conduct this business differently going forward. We are not going to be able to “bully” China and other large countries. We need to negotiate and compete, really hard, not dictate. Let’s get the players to the table to make the best deal possible.
President Trump signed a 1.3 Trillion Spending Budget with significant funds being provided to our Military. Apparently there was plenty, on both sides of the government aisle, to be happy and also upset. My concern as always, is where is the future money going to come from to eventually pay our debt? We reduced the governments’ revenue with the recent tax cut and increased government spending. The interest we pay with our tax dollars is growing each year!
Add all together, and the markets had a rough week, with the S&P 500 down 5.95%, the Dow Jones Industrial Average down 5.67% and the NASDAQ Composite off 6.54%.
Paul’s Take – Going Forward
This week ushers in the Case-Shiller Home Price Index and consumer confidence on Tuesday. Wednesday brings the pending home sales index and the final reading on 4th Quarter GDP for 2017. On Thursday we’ll see the report for personal income and outlays for February.
As of the writing of this week’s blog the market futures are suggesting a snap back at the open. What will happen when the week is over? Tariff talk and actions may have a lot to do with it.
Last week was another excellent reminder that having the proper Asset Allocation for your personal situation is imperative, especially for current and soon-to-be Retirees.