There was a series of bad news in the past couple weeks, which have driven markets lower over the past seven days. The pounding may not be over. Some of the economic news that challenges the markets are as follows:
Internationally the dollar has remained strong and the best option of all the poor options. So the US debt is a problem, but it is perceived to be less of a problem than the debt of other countries, making the US the best option.
Sales of new homes in June came in below expectations, and the median new home price fell from a year ago. That news was a U-turn from recent data indicating strength in the housing market.
Two major economic indicators are air freight and shipping, both have been down this year. Air freight has dropped to levels not seen since 2009 and the number of idle ships (ships sitting in harbors with no shipping containers to move) has increased 31% from 82 to 108 ships. The transportation sector is a very key indicator, as it is responsible for moving raw material and goods to market. If no one is ordering commodities/materials or finished products then shipping slows, on sea, land, and air.
China’s wild ride continues as the country deals with its own economic problems. This week it was announced that the Chinese economy has grown to become the largest economy in the world making it larger than the US economy. The Purchasing Managers’ Index, a private measure of Chinese manufacturing, came in below expectations at 48.2, according to BloombergBusiness. Results below 50 indicate the sector is contracting. That doesn’t bode well for growth in China, which is the biggest global consumer of metals, grains, and energy, or the rest of the world.
With this week’s jobs report and employment holding steady, it is more likely that the Fed will raise interest rates next month. When interest rates are 0%-.25% basis points any movement is likely to result in as much as a 100% increase over the current the rates, a .35% rate would be 100% or more of any rates below .175% and a 40% rise over the top end of .25%. That is still a big move, which will be costly to businesses who need to borrow. But hey, we all knew the day would come when rates would start heading back up, Right?
Experts cited by Barron’s cautioned, “…it’s not the first rate hike that’s important. It is what comes after that.” Stay tuned.
A Few Good Tips:
1. Make sure you update your estate plan regularly – if you don’t have one, GET ONE NOW! The problems you leave behind can be as devastating as your passing.
2. Successful investing is found by focusing on sound investment strategies and goals, not focusing on the markets.
3. Review risk management and levels of insurance, have adequate life, disability and property & casualty coverage; someday you may end up being the “other guy” that something happens to.
4. Stay out of debt – get your debts paid off ASAP. This is the ball and chain to your financial success.
To Remember:“The best way to predict the future is to create it.” Abraham Lincoln