Vorisek Financial Weekly Market Update for August 30, 2017

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Good morning!

It was 12 years ago on the last Monday in August (8/29/05) when the deadliest hurricane in US history made landfall in Louisiana.  Hurricane Katrina caused $75 billion of damages and killed more than 1,300 people, devastation that is felt a dozen years later.   Last week’s Hurricane Harvey was the first hurricane to hit Texas since 2008 and the first Category 4 hurricane to strike the Lone Star State in 56 years.  Harvey hit northeast of Corpus Christi last Friday night (8/25/17) and continued inland at a snail pace of 2 mph.  Houston is projected to receive as much as 50 inches of rain from the storm, equal to its average annual rainfall.  Harvey moved the average national price of gasoline by 3 cents during the week as oil producers evaluate pipeline disruption (source: BTN Research).          

Attendees of the annual Jackson Hole conference were seeking guidance from Janet Yellen as to the direction of interest rates.  A rate hike would be the Fed’s 4th in the last 12 months, having previously raised rates in December, in March and in June.  As of last Friday’s close, the Fed funds futures market was priced to reflect a 42% chance of a rate hike at the Fed’s final meeting of 2017 (set for 12/13/17).  Not surprisingly, Yellen steered clear of any comments regarding monetary policy action and instead delivered an academic discussion on the need to “adjust but not remove” the banking reforms that Congress passed following the 2008 global real estate crisis (source: Federal Reserve).            

The national average interest rate on a 30-year fixed rate mortgage fell to 3.86% last week, the lowest average recorded so far during calendar year 2017.  That rate is within ½ of 1% of the record low average reached in November 2012 (source: Freddie Mac).          

Notable Numbers for the Week:

1.     LAST QUARTER - The 3 months of October-November-December rank 2-3-5 in terms of average monthly performance for the S&P 500.  The 3 months have gained + 4.9% per year (total return) over the last 25 years (1992-2016) or 54% of the index’s total return over the entire 25-year period (source: BTN Research).   

2.     FALLS - In the last 50 years (i.e., September 1967-August 2017), the S&P 500 has suffered 25 tumbles of at least 10% (i.e., the total of 19 separate 10% corrections and 6 separate 20% bears), or 1 every 24 months.  The last of the 25 drops ended on 2/11/16 or 18 ½ months ago (source: BTN Research).   

3.     PACIFIC NORTHWEST - Between 6/30/16 and 6/30/17, average home prices increased in 48 of 50 US states.  Washington’s +12.4% average home price gain led the nation (source: FHFA).

4.     A LOT OF FOLKS - The population of the United States is projected to increase by +2 million people per year over each of the next 30 years, reaching 390 million as of the year 2047 (source: CBO). 

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