Brower Financial Group Articles

WEEKLY TIP

Sometimes, high earners accumulate substantial cash reserves in addition to significant retirement savings accounts. With interest rates still near historic lows and many bank accounts yielding next to nothing, some of that cash might be better off invested.

A SURGE IN CONSUMER OPTIMISM

The Conference Board’s consumer confidence index continued to climb in December. Analysts polled by MarketWatch projected a reading of 110.0 for the gauge, but it beat that forecast, rising 4.3 points to a 15-year peak of 113.7. The major factor in the gain? Growing expectations of a better economy, particularly among older Americans. The CB’s monthly expectations index reached a high unseen since December 2003.^1,2

PENDING HOME SALES SLIP

Housing contract activity declined 2.5% in November, according to the latest research from the National Association of Realtors. In October, pending sales were up by just 0.1%.¹

WEEKLY TIP

Need some business capital? Be aware that most banks and credit unions will want you to put 20% down as a condition of a loan. Lenders will probably also ask to see up to three years of your firm’s financial records.

FED RAISES RATES, PLOTS THREE 2017 HIKES

Federal Reserve policymakers unanimously chose to raise the benchmark interest rate by a quarter point last week. That was expected; less expected was the central bank’s adjustment to its 2017 dot-plot. Fed officials now see three rate hikes next year instead of two. The move to the new target range of 0.50-0.75% sent the dollar and bond yields higher Wednesday – the yield on the 2-year note quickly touched a peak unseen since August 2009. Stocks suffered only moderate losses after the announcement. Federal Open Market Committee members now forecast economic growth of 2.1% in 2017 and 2.0% in 2018.¹

WEEKLY TIP

If you use your own car or truck for business purposes, that vehicle should be insured under a business policy.

SERVICE SECTOR LOOKS VERY HEALTHY

The Institute for Supply Management’s monthly services index improved 2.4 points in November to a 57.2 reading. Analysts polled by Briefing.com had expected a small gain to 55.6. It was the PMI’s best reading since October 2015, and it marked the 82nd consecutive month of expansion for the non-manufacturing segment of the economy.¹

HOUSEHOLD SENTIMENT SOARS

Rising 4.2 points to a mark of 98.0, December’s initial University of Michigan consumer sentiment index came in just a tenth of a point below its most recent (2015) peak. This was one of the index’s three highest readings in the last 12 years. The main reason, in the words of University of Michigan economist Richard Curtin: “More consumers spontaneously mentioned the expected positive impact of new economic policies than ever before recorded in the long history of the surveys.”²

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Jointly owned assets typically avoid probate when one owner dies. With regard to asset transfer, joint ownership can result in a savings of money and time for a surviving spouse.

JOBS REPORT SHOWS UNEMPLOYMENT AT 4.6%

America’s jobless rate fell to a nine-year low in November as companies added 178,000 net new jobs. The U-6 rate (including the underemployed decreased) 0.2% to 9.3%. There were some negatives: yearly wage growth moderated to 2.5%, and the labor force participation rate ticked down to 62.7%, in part because of baby boomer retirements.¹

STRONG CONSUMER CONFIDENCE, SPENDING, GDP

As November ended, the Conference Board’s monthly consumer confidence index rose 6.3 points to a mark of 107.1. In October, personal spending increased 0.3%, according to the Census Bureau, with personal incomes up 0.6%. The Bureau of Economic Analysis revised third quarter growth upward by 0.3% to 3.2% last week. ²

WEEKLY TIP

If you are giving cash gifts to relatives this holiday season, make sure that the gifts do not force you into making financial compromises. In helping others, you should not seriously hurt your own finances.

WEEKLY TIP

Market volatility is constant and inescapable. Unlike portfolio volatility, you cannot plan to try and control it. So, embrace it, and the opportunities it may present to you.

YELLEN HINTS STRONGLY AT A RATE HIKE

Thursday, Federal Reserve chair Janet Yellen told Congress that the central bank could raise the benchmark interest rate “relatively soon,” calling current monetary policy merely “moderately accommodative.” She added that Fed officials envision “only gradual increases in the federal funds rate over time to achieve and maintain maximum employment and price stability.” Friday, the Fed Rate Monitor Tool at Investing.com put the possibility of a December rate hike at 91%.^1,2

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Given the desire to travel and live well, the first few years of retirement may be expensive ones. Before and during those years, be mindful of economic and market cycles. They could affect your portfolio, and, by extension, your plans.

BLUE CHIPS HIT ALL-TIME HIGHS

Donald Trump’s unexpected presidential election win did not rattle Wall Street. Instead, bulls saw the prospect of greater federal outlays and less business regulation in the near future. The Dow Jones Industrial Average closed at a new record Friday: 18,847.66. The Dow 30 had its finest week since 2011, gaining 5.36%. As for the S&P 500, it advanced 3.80% in five days to 2,164.45. Settling at 5,237.11 Friday, the Nasdaq Composite rose 3.78% on the week.^1,2

WEEKLY TIP

Remember that you can gift up to $14,000 to as many people as you wish in 2016. This year, gift tax only applies after lifetime gifts exceed $5.45 million.

NEW DATA SHOWS BRIGHTER JOBS PICTURE

Unemployment fell to 4.9% in October as firms added 161,000 net new workers, but that was just one positive from the Department of Labor’s latest summary of the U.S. employment situation. Year-over-year wage growth reached 2.8%, the best number seen since June 2009, as average hourly pay rose ten cents last month. The U-6 rate (underemployment + unemployment) fell 0.2% to 9.5%. In addition, hiring totals across August and September were revised higher by 44,000.¹

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If you are newly married and don’t have a will, why not create one? It is a thoughtful and very responsible move.

ECONOMY EXPANDS 2.9% in THIRD QUARTER

After just 1.4% growth in Q2, this was welcome news. Surging exports and greater inventory investment and federal spending made Q3 the best quarter for the economy in two years, according to the Department of Commerce. The federal government’s core PCE price index was up 1.7% for the quarter versus 1.8% in Q2.¹

CONSUMER CONFIDENCE INDICES DESCEND

Last week, the Conference Board’s gauge of household confidence came in at 98.6 for October, down from 103.5 in September. The University of Michigan’s final October consumer sentiment index slipped to 87.2 from its prior mark of 87.9.²    

WEEKLY TIP

If you are trying to rebuild or ramp up your retirement savings in your forties or fifties, avoid grasping at straws. Extremely speculative, high-risk investments are often hard to understand and may drastically underperform compared to their hype.