the week of February 26, 2018 — Vol. 16, Issue 9
OF THE WEEK..."Those are my principles, and if you don't like them... well, I have others." --Groucho Marx, American comedian, writer and stage, film, radio and television star
INFO THAT HITS US WHERE WE LIVE... Following their December decline, Existing Home Sales dipped again in January by 3.2%, to a 5.38 million annual rate. Though volatile month to month, home sales in 2017 racked up their best year since 2006 and are expected to maintain that upward trend.
An IRS bulletin explains interest on home equity loans may still be deductible. The loan must be used to "buy, build or substantially improve" a home. And to deduct interest, all loans on the home cannot exceed a $750,000 limit ($350,000 if married filing separately).
As with all tax matters, always consult a tax professional before making any tax-related decision.
BUSINESS TIP OF THE WEEK... Spend a half hour to an hour each day prospecting on the phone. Book the time on your schedule--and just do it. Why? People who consistently prospect earn more. Simple as that.
>> Review of Last Week
FED FOLLIES... A crazy week on Wall Street, thanks to the Fed. Stocks went south on Wednesday after the Fed's Minutes from its last meeting revealed most members see stronger growth in the economy and inflation. This could necessitate more rate hikes, which investors don't much like.
But Friday, the Fed's semi-annual monetary policy report also noted broad improvement in the economy and increasing inflation, but did not suggest that rising prices dictated more aggressive rate hikes. Happy with that, the market rallied to another weekly gain.
GDP averaged 2.9% the last three quarters (after averaging 2.1% since 2010), unemployment is at a 17-year low, and wages, consumer confidence and business investment are rising. A few rate hikes (which, remember, are starting from a very low level) may be a small price to pay for this progress.
The week ended with the Dow UP 0.4%, to 25310; the S&P 500 UP 0.6%, to 2747; and the Nasdaq UP 1.4%, to 7337.
Bond prices suffered from the inflation worries, but recovered a bit on Friday. The 30YR FNMA 4.0% bond we watch ended unchanged, at $102.47. National average 30-year fixed mortgage rates in Freddie Mac's latest Primary Mortgage Market Survey edged up. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
DID YOU KNOW?... Zillow reports the U.S. housing market has completely recovered its $9 trillion of value lost in the downturn. The average U.S. home is now worth $55,200 more than when prices hit bottom.
>> This Week's Forecast
NEW AND PENDING HOME SALES, THE ECONOMY, INFLATION ALL GROW... Expect to see New Home Sales up in January, along with the Pending Home Sales index of contracts signed on existing homes. The Q4 GDP-2nd Estimate should show the economy growing at a 2.5% annual rate, enough to spur additional growth in Core PCE Prices, the Fed's favorite inflation read.
>> The Week's Economic Indicator Calendar
Weaker than expected economic data tends to send
bond prices up and interest rates down, while positive data points to lower
bond prices and rising loan rates.
Economic Calendar for the Week of Feb 26 - Mar 2
|08:30||New Home Sales||Jan||645K||625K||Moderate|
|08:30||Durable Goods Orders||Jan||-2.0%||2.9%||Moderate|
|08:30||Q4 GDP - 2nd Estimate||Q4||2.5%||2.6%||HIGH|
|10:00||Pending Home Sales||Jan||0.4%||0.5%||Moderate|
|08:30||Initial Unemployment Claims||02/24||227K||222K||Moderate|
|08:30||Continuing Unemployment Claims||02/17||NA||1.875M||Moderate|
|08:30||Core PCE Prices||Jan||0.3%||0.2%||HIGH|
|10:00||U. of Michigan Consumer Sentiment - Final||Feb||99.5||99.9||Moderate|
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months... In the Fed futures market, they still see a March rate hike as a near certainty. May gets a hold, then we go up another quarter percent in June. Note: In the lower chart, an 83% probability of change is an 83% certainty
the rate will move higher.
Current Fed Funds Rate: 1.25%-1.50%
|After FOMC meeting on:||Consensus|
Probability of change from current policy:
|After FOMC meeting on:||Consensus|
|Mar 21|| 83%|
|May 2|| 22%|
|Jun 13|| 69%|