Your Weekly Summary – June 11, 2018

All US Stock Indexes Push Higher

 

All Major US Stock Indexes are safely in the black for 2018 as the Dow Jones led the charge last week up 2.77%. The S&P was up 1.62%, the Russell 2000 up 1.49% and the NASDAQ up 1.21%. On the flip side, The Barclays Aggregate Bond Index fell (.22 %) leaving bonds down (2.07%) year-to-date.

 

Overseas the markets were mixed in anticipation of the G7 meetings over trade and tariff implementation leading to a trade war.

 

Interest Rates

 

The 10 year US Treasury Yield rose mostly, ending the week @ 2.94%, up from 2.87% the prior week. Many factors are influencing our rates, including how much further will our Fed raise short-term rates, how much will the Fed reduce its Bond holdings, how fast will the European Central Bank continue its Quantitative Easing and how fast will the US Economy expand and for how long?

 

We may have found a short-term bottom for interest rates. It will be important to see where the range of fluctuation takes us this year. This will likely influence performance in the 2nd half of 2018.

 

G7 – North Korea – President Trump

 

We simply cannot listen to television, the radio, read the newspaper or read on-line without these topics being front and center, and well, they should be.

 

The G7 met this weekend and one of the primary topics of discussion was around the US imposing Tariff’s on our Trading Partners and Allies. There was much saber-rattling between the US and Canada on Twitter. My guess is a lot of the tweets are positioning for negotiation. My hope is that we negotiate quickly, as I believe an escalating trade war could negate so many positives that have happened in our economy.

 

On Tuesday, President Trump will meet with North Korea’s Kim Jong Un. I have no real expectations from this meeting or any further meetings and negotiations. Even after the meeting, if the aura is positive, we’ll have to wait a see…a long time. How can we trust North Korea? It seems like yesterday, they were sending missiles over Japan attempting to antagonize us in whatever manner they intended.

 

Economic Data for the Week

 

On Wednesday, the Fed will announce their interest rate decision. It is widely expected that the Fed will increase rates. So far, the Fed has raised rates 6 times since 12/16/2015. How much higher will the Fed raise rates? A great question everyone wished we had the answer to. The talk is that 2nd Quarter US GDP may be in the mid to upper 3% range. We’ll find out in July.  This morning I read an article that stated the Fed may not desire to reduce its balance sheet, (bond holdings), as low as previously thought. Originally the Fed announced they would reduce from 4.5 Trillion down to 2.5 Trillion. We’ll see on Wednesday, if the Fed makes mention of any change.

 

Question of the Week

 

List in order, from highest to lowest the Countries with the largest populations.

 

The countries are:

 

a) Indonesia
b) United States
c) India
d) China
e) Brazil

 

Answer to Last Week’s Question of the Week!

 

The question was, “In what year did the United States impose the highest personal income tax?”

 

a) 1932 during the Great Depression
b) 1944 during World War II
c) 1918 during World War I
d) 1981 during the Inflationary period

 

Income Taxation began in 1913 with top rate at 7%. Within 2 years it shot up to 70%. After falling to, as low as 25% after World War I, the top rate shot up to 63% by 1932. From there it took over 50 years for the top rate to fall below 50% in 1987.  So the answer is:  a) 1932 during the Great Depression.