Interest Rates Continue to Defy!
Why are bond yields rising if inflation continues to moderate and everyone expects the Fed to lower rates this year?
Seems counter intuitive, however it’s basic supply and demand. The US Treasury department needs to issue a ton of new debt so our government can pay our bills.
Tax and other sources of revenue continue to fall significantly short.
When new debt is issued without an abundance of buyers, rates climb to make more people interested in purchasing. Unfortunately, this has kept rates from falling and mortgage rates rising again, over 7%.
Investors are now estimating the Fed will cut rates in June, not March or May as of only a couple weeks ago. Currently the market is placing a 55% chance the Fed cuts rates at its June meeting.
When will the Fed cut? Going into this year, my thoughts were 2 to 3 cuts. None in March or May.
This week’s Personal Consumption Expenditure (PCE) index will be released. This is on the heels of the hotter than expected recent CPI and PPI readings. Experts estimate a rise of 2.8%. They missed on both the CPI and PPI. Let’s hope inflation does not begin a trend higher and the recent CPI and PPI are a one off.
Markets
Stocks raced higher last week on the heels of Nvidia’s smashing profit report.
For the week, the Dow rose 1.36%, the S&P 500 1.73%, the Nasdaq Composite 1.34% and the Russell 2000 1.35%.
Over the pond, indexes followed in lockstep as foreign stocks climbed 1.76% and emerging markets up 1.24%.
All 11 sectors of the S&P 500 were higher, led by Communication Services, Technology and Healthcare.
The price of oil retreated (3.17%) however is still up 7% for 2024.
On the flip side interest rates continue to nudge higher as the Bloomberg US Aggregate Bond Index dropped (.13%) and is now down (2.14%) for 2024.
Week Ahead
Housing data will be front and center this week as we’ll here reports on Building Permits, Home Sales, Pending Home Sales and Home Price Indexes.
The major report as mentioned earlier is the Fed’s favorite inflation index the PCE, Personal Consumption Index to be released on Thursday. Profit reports continue as we’ll hear from HP, Best Buy, Lowes, TJX, Salesforce and more.
Time to check beneficiaries?
I recommend you discuss your estate plan and review your beneficiaries yearly.
Think clearly of your desires and the impact of your decisions. Many younger adults may have a challenging time managing the amounts of money they will receive, as Baby Boomers control over half of the nation’s wealth that will be passed down over the next 25 years.
Keep in mind beneficiaries listed on your retirement accounts will supersede what is stated in your last will and testament.
Has anything changed in your family unit? A birth of a grandchild, death of a current beneficiary? Has an heir become more responsible or perhaps less responsible. Is it a possibility your child may get divorced at some point?
Also think thru whom is the best person to be your personal representative (executor or executrix). The job of a personal representative can be trying as they must deal with your will, the law, other heirs receiving inheritances and heirs not receiving or receiving smaller amounts.
We discuss estate planning once per year with clients as part of our review process. If you not yet a client and would like to discuss your estate situation, please feel free to reach out for a complimentary discussion.
