Market News Update - All is Not Rosy

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 their 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 bond 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.

Market moving reports for next week are:

• Wednesday August 21^st - MBA Applications, Existing Home Sales and FOMC Minutes
• Thursday August 22^nd - First Time Jobless Claims and FHFA Home Price Index
• Friday August 23^rd – New Home Sales

I appreciate your business and look forward to talking to you soon! Have a great day!!!
 
Sincerely,

Cindy Tomlinson
Loan Officer

USLending Company

DRE Lic # 01520422
NMLS # 214851   

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