Vorisek Financial Weekly Market Update for June 21st, 2017

 

Good morning!

To the surprise of no one, the Federal Reserve raised its benchmark short-term interest rate last week, the 4th increase of ¼ of 1% since the rate hike cycle began in late 2015.  Information released concurrent with Chair Janet Yellen’s post-meeting press conference suggest the Fed may initiate one more rate hike in 2017, to be followed by further bumps that could move the Fed funds rate to 3% (from 1.25% currently) over the next 2 years.  In the 18 months since its 1st rate hike on 12/16/15, the S&P 500 has gained +21.2% (total return), but surprisingly the yield on the 10-year Treasury note has fallen from 2.30% to 2.15% (source: BTN Research).   

Investors scrambled to find their financial dictionaries when Fed Chairman Ben Bernanke announced his unique plan of “quantitative easing” (QE) in November 2008.  Bernanke’s revolutionary idea designed to keep the US economy from falling into a 1920s style depression involved the creation of “bank reserves” to be used by the Fed to purchase assets from US banks, i.e., using “newly created money” to buy Treasuries from banks.  Even though Bernanke first outlined his “exit strategy” to end QE in early February 2010, the “print and purchase” program continued unabated until late October 2014, buying $3.5 trillion of Treasury bonds along the way.  Not until last week however did current Chair Yellen officially outline the central bank’s plan to shrink its bloated balance sheet, swollen during its 6-year intervention (source: Federal Reserve).        

The number of operating oil rigs in the United States reached 933 last week, up +42% YTD.  The total has now increased for 22 consecutive weeks.  The price of oil closed last Friday (6/16/17) at $44.74 a barrel, down 17% YTD (source: Baker Hughes).   

 

Notable Numbers for the Week:

1.     POPULATION - Between 2014 and 2060, the population of the USA is projected to increase by +98 million, i.e., 197 million births less 163 million deaths plus 64 million immigrants (source: Census Bureau).  

2.     BIG CHANGE – Online shopping of retail apparel is predicted to grow from 17% of total sales today to 37% by the year 2030 (source: Credit Suisse).   

3.     I’M GOOD TO GO - 4 of 5 Americans surveyed (78%) are confident in their ability to “maintain the lifestyle they want throughout their retirement.”  1,007 adults were surveyed in February 2017 for this study (source: Wells Fargo).  

4.     WATCH YOUR STEP - 67% of Americans working in the private sector (i.e., not working for the government) do not have long-term disability insurance (source: Social Security). 

 

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