Stencil Financial

28734 Rain Creek Road

Hanover, MI 81129

851.357.2257

dan@stencil.com

Spring Overview
Market Update
(all values as of 08.31.2020)

Stock Indices:

Dow Jones 28,430
S&P 500 3,500
Nasdaq 11,775

Bond Sector Yields:

2 Yr Treasury 0.14%
10 Yr Treasury 0.72%
10 Yr Municipal 0.81%
High Yield 5.38%

YTD Market Returns:

Dow Jones -0.38%
S&P 500 8.34%
Nasdaq 31.24%
MSCI-EAFE -6.23%
MSCI-Europe -7.39%
MSCI-Pacific -4.42%
MSCI-Emg Mkt -1.18%
 
US Agg Bond 6.85%
US Corp Bond 6.94%
US Gov’t Bond 8.09%

Commodity Prices:

Gold 1,973
Silver 28.43
Oil (WTI) 42.82

Currencies:

Dollar / Euro 1.19
Dollar / Pound 1.33
Yen / Dollar 105.37
Dollar / Canadian 0.76
 

Homeownership Rates chart onlyMacro Overview Broken Euro Greece Flag copy

Inflationary pressures are beginning to reveal themselves as U.S. consumer prices recorded their biggest increase in more than three years. Demand for new homes grew as housing starts rose more than expected last month. Such positive economic growth has prompted Fed officials to consider raising rates this summer, stating “its appropriate for the Fed to gradually and cautiously increase rates in the coming months.”

Another rate increase by the Fed would put the Fed Funds Rate at 0.50%, up from its current 0.25% which was the last rate increase in December 2015. The Fed Funds Rate was essentially zero since 2008 when the Fed began its bond buying stimulus program, known as Quantitative Easing (QE). Oil’s dramatic drop from its highs nearly two years ago has inflicted fiscal hardship on Saudi Arabia. The country has issued debt to fund a drop in oil revenue and plans to sell part of its giant government owned oil company. This past month, rising tensions with other OPEC members led to the firing of the countries oil minister, raising speculation that Saudi Arabia is actively migrating away from being almost entirely dependant on oil exports. A new regulation implemented by the Labor Department in May will now allow “exempt” employees making up to $47,476 a year to earn overtime pay. Exempt employees are salaried workers who work over 40 hours per week but receive no overtime pay.

U.S. crude oil prices reached a 7-month high in May, as prices traded over $50 per barrel, the highest levels since October 2015. U.S. crude prices are represented by West Texas Intermediate (WTI), the benchmark for U.S. produced oil. The price rise came after the U.S. Energy Department released data showing that crude oil inventories had dropped in the U.S. Inventories tend to drop as the economy uses more oil and gasoline going into the summer months. The European Union and central bankers world-wide are eagerly awaiting Britain’s vote on June 23rd to either stay within the Euro Zone or exit, also known as Brexit. Such a departure could cause riffs across markets in Europe as Britain’s banking and financial system presents a vital component of Europe.

Sources: Federal Reserve, ECB, EuroStat

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Employment

More American’s Working Past 65 – Labor Market Dynamics

According to data recompiled by the U.S. Bureau of Labor Statistics, almost 20% of American’s age 65 years and older are currently working. This statistic is reported as the U.S. Employment Population Ratio 65 Years Of Age & Older. It indicates the percentage of the total US working-age population aged 65 or greater that are employed. There are various reasons behind older people working longer, all of which tend to be of demographical nature. New Housing Numbers
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The financial crisis of 2008/2009 and the technology bubble bursting in 2000 devastated many retirement plans for employees, as their 401k and retirement savings lost enough to postpone retirement for many workers. A recent report by the Government Accounting Office showed that nearly 60% of U.S. households have no 401k or retirement plan assets. The precursor to less retirement assets was the waning of traditional pension plans funded by and provided by companies for years. The onslaught of 401ks and self-funding retirement plans has help lead to massive shortfalls in retirement assets.

Various studies have found that employees with higher education such as college degrees, tend to work longer than those with less education.

With the unemployment rate currently at 5%, employers have an incentive to keep qualified workers no matter what their age. Older workers today tend to have skills that younger workers may not, thus making it desirable for companies to keep older employees employed.

Among other reasons for working past 65 include the rise in life expectancy, financial burdens, and the need to have benefits.

Sources: U.S. Bureau of Labor Statistics, GAO