Could this be the calm before the storm?
Stocks rose slightly after chopping around earlier in the week, while Treasury bonds moved sideways. Volatility is down across the board.
Central bankers around the world gathered in Jackson Hole, Wyoming, and I doubt if we’ll hear anything different from our Fed officials. They’re still telling us another rate hike is likely in the face of falling inflation and that they’ll begin reducing their massive balance sheet.
Since they’ve never had to undo quantitative easing, they’re not sure what’ll happen. That’s not a very comforting thought! Especially if history repeats itself.
What can we learn from history that might be helpful in planning ahead? First, Thanks to sahistory.org we see that “American’s ‘Great Depression’ began with the dramatic crash of the stock market on ‘Black Thursday’, October 24, 1929 when 16 million shares of stock were quickly sold by panicking investors who had lost faith in the American economy.” By the end of summer 1932, the DOW suffered a loss of 89% from October 29, 1929.
Second, “This chart shows how badly the financial crisis of 2008 hit the Dow Jones. Four of the top five biggest losses happened between September and December 2008,” wrote Kyle Anderson, Money Morning, August 25, 2015. Third, it was the month of October, 2008 that the stock market lost 25% in that month, according to Yahoo Finance. Finally, my point is in the event this October becomes the start of another serious market decline, as we watch Hurricane Harvey bear down on Texas, now is the time to review your portfolio to see if the current strategy is still aligns with your investment objectives.
Thanks to Dent Research, provided here is our weekly information roundup ending the week of August 25, 2017. We start each subject with what you hear in the news and finish with what that information means to you. We hope this information will help you separate the noise from the news.
World Central Bankers Meet at Jackson Hole, WY… So far, nothing of note has come from the annual symposium, but Fed Chair
Yellen and ECB President Draghi have yet to speak.
What it means – For several days people have speculated that Yellen will use Jackson Hole as a platform to highlight the nation’s economic progress under her watch. Maybe it will be her swan song, or perhaps her job interview, since her tenure expires soon. Meanwhile, observers expected Draghi at first to outline how the ECB will slow its bond-buying program, but now he is expected to say just about nothing. As for my expectations, this meeting will be a yawner.
Durable Goods Orders Down 6.8% in July, Up 0.5% Excluding Transportation…Aircraft orders sent durable goods up 6.5% last month, and brought the
measure crashing to the ground this month. Without that volatile sector,
orders have steadily increased, rising 5.6% over last year.
What it means – Orders are gradually increasing, with core capital goods up 0.4% last month and 3.5% ahead of the same time last year. That’s good news, but not great. We still can’t find the path to robust growth. Most sectors enjoyed gains, but orders for motor vehicles fell for the second straight month, down 1.2%.
I’m waiting for falling vehicle sales to show up in the employment numbers. We’ll get a report on that next Friday.
New Home Sales Dip 9.4%... The numbers were well below expectations, but were partially offset by
upward revisions for both May and June.
What it means – There’s No Country For Old Men, and then there’s No Homes For Young Buyers. Slower new home sales were coupled with higher prices. The median new home sold for $313,700 last month, up more than 6% over last year.
It’s tempting to say that if builders lowered their prices, they’d sell more units. Maybe. I think it’s more likely that they can’t build cheap enough to attract first-time home buyers in markets where they want to live. Instead, they simply build for buyers further up the food chain. This keeps sales lower than they would otherwise be, and effectively prices new buyers out of the market.
Existing Home Sales Down 1.3%… Multifamily unit sales dropped 4.8%, while single-family unit sales dipped 0.8%.
What it means – Overall, sales remain 2.1% higher than last year. The median sale price was $258,300 last month, which is down 1.9% from June but still 6.2% higher than last year. These numbers echo new home sales, and for many of the same reasons. High prices crowd out new homebuyers, which limits the number of transactions that are possible.
With sales in both categories slowing down, it brings up the question of price sustainability. With inventory at less than six months for new homes and less than five months for existing homes, there’s no reason to think that prices will roll over anytime soon. We’d expect to see inventory building up before prices drop dramatically.
Three Square Market Employees Agree To Be Chipped… 50 of the 80 workers at the Wisconsin technology company agreed to have
a small RFID device implanted in their hands.
What it means – Have you ever lost your company ID and been locked out of the building, or forgot to bring your wallet to the cafeteria? Well, worry no more! Three Square has solved these issues. With the RFID device the size of a grain of rice implanted between their thumbs and index fingers, employees can simply swipe their hands to enter the building and pay for food. The device emits a low-level signal that can be read when placed within six inches of a scanner.
What could go wrong? Hmm. Maybe scanners get better in the future and can detect the RFID, and therefore the employee, at a greater distance. This would allow the company to track the employee throughout the day. Want to take a little longer at the water cooler? Not anymore. And you’d better cut down on trips to the bathroom as well.
Employees note that the devices are removable, so there shouldn’t be a problem, but that implies that the company informs employees of how much data they can track. And we all completely trust our employers… right?
Japanese Scientists Develop Ice Cream That Doesn’t Melt...When the scientists mixed polyphenol liquid extracted from strawberries
with dairy cream, it solidifies instantly. This allows ice cream to keep
its shape for hours, and remain cool to the touch and taste.
What it means – Polyphenol makes it difficult for oil and water to separate, which is what holds the ice cream together. This makes for a fun story, and hopefully less messy kids in the backseat on the ride home from the beach.
But, more importantly, we could eventually see cold packs that hold lower temperatures for longer, which would have huge implications for hard-to-reach locales that need refrigerated medical supplies, and even on the battlefield.
Next Week – As August comes to a close, we’ll get reports on the S&P CoreLogic Case-Shiller Home Price Index, the second estimate of U.S. second-quarter GDP, motor vehicle sales, and the employment situation.
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