Government Shutdown, the Fed, China, Earnings and the Markets
As of today, the partial Government Shutdown is 24 days old, the longest on record. Appears to be a total standstill as President Trump is insisting on funds to build a Wall to protect our border and House Democrats say they will not allocate $1 for the Wall. So far, this has not impacted our Markets; however a continuation will eventually have negative implications.
The Fed has indicated they will be patient with future rate hikes, taking the economic situation into consideration. This is a complete turn-around from prior statements. Over the last week I listened to many opinions. One in particular suggested the Fed will be on hold until the Equity Market recovers from the correction and then may continue course to raise rates as previously suggested.
For the time being, the Federal Reserve gave the Markets what it needed to hear. Is that for the best?
China Meeting Concluded
Last week the United States and China met for 3 days. The news is that there is now a greater understanding of the situation which should lead to an equitable deal for both countries. Can we get a deal prior to the next set increase in Tariffs? If so, will the deal be truly constructive and beneficial or will it be a band-aide where this issue will continue to linger for a much longer period of time? Guarding our Intellectual Capital and the Tariff Tax issue are not easy issues to conclude without consequences.
4th Quarter Earnings
This week kicks off 4th Quarter Corporate Earnings with 3 major banks announcing results and more importantly, providing guidance. As the earnings season moves forward, we’ll be listening to hear how Tariffs are impacting Corporate America so far and what CEO’s are thinking about doing with their money in the face of uncertainty. It looks like earnings will have increased in 2018 approximately 20%, which is incredible. The magic figure everyone is waiting for, is to see what earnings guidance will now be in 2019. Prior to the 4th quarter 2018 Stock Market correction, earnings expectations for 2019 were 10%. This number will be key for the Markets going forward.
Last week made it 3 in a row the Markets finished north. The Dow Jones Industrial Average was up 2.42%, the S&P500 increased 2.58%. The NASDAQ Composite rose 3.45 with the Small Cap Russell 2000 leading the way, finishing the week up 4.83%.
Over the Pond, not to be outdone, the MSCI EAFE International Index rose 2.89% with the MSCI Emerging Market Index up 3.77%.
The Barclays Aggregate Bond Index decreased (.04) %. Keep a watch on the price of WTI Oil as the price closed last week @ $51.59/barrel, up from 45.41 on 12/31/2018.
Interest Rates: The 10 year US Treasury started and ended 2017 @ 2.41%. In 2018, the 10 year Treasury ended 2018 @ 2.69%. Last Friday, the 10 year closed @ 2.70%. Perhaps the Bond Market does not believe rates deserve to go much higher?
Sears: The department store is looking for a last breath at this moment. It will be a shame to say good bye to a department store that begin operations in Chicago Illinois in 1893.
The Eagles: Many sad faces today as our local icons, the Philadelphia Eagles are now sidelined until next July (training camp). I don’t know if there is a more passionate area in America for its football team.
Question of the Week (Medicare)
The Initial Enrollment Period for Medicare lasts a total of how many months?
a) 1 month
b) 3 months
c) 6 months
d) 7 months
For information on our upcoming Medicare workshop, please click here Medicare Workshop.
Answer to Last Week’s Question
IRA’s were established in 1974 and became available in 1975. In 1975, what was the maximum amount an individual could contribute to an IRA?
Answer is –