Market Update
(all values as of 03.29.2024)

Stock Indices:

Dow Jones 39,807
S&P 500 5,254
Nasdaq 16,379

Bond Sector Yields:

2 Yr Treasury 4.59%
10 Yr Treasury 4.20%
10 Yr Municipal 2.52%
High Yield 7.44%

Commodity Prices:

Gold 2,254
Silver 25.10
Oil (WTI) 83.12

Currencies:

Dollar / Euro 1.08
Dollar / Pound 1.26
Yen / Dollar 151.35
Canadian /Dollar 0.73
 

Why GDP Growth Was Lackluster For 8 Years – Domestic Economy

A key component of GDP growth has been lagging for years, as a lack of incentives for companies to invest in capital has been an issue.

Many believe that economic growth since the financial crisis in 2008/2009 has been driven primarily by the monetary stimulus efforts enacted by the Federal Reserve. The Quantitative Easing programs, aka Q.E. 1 & Q.E. 2, provided tremendous liquidity for nearly eight years as the Fed bought debt and placed it on its balance sheet.

The problem is that what the Fed did was considered a form of “artificial stimulus”. Rather than investing in capital equipment for long-term economic growth, companies instead borrowed money at historically low rates via issuing debt, then bought back a portion of their stock. This in turn helped send stock prices higher without any tangible economic growth strategy in place. As this transpired, GDP growth lagged and companies basically became complacent with anemic rates of growth.

The U.S. Small-Business Optimism Index is a leading economic indicator for GDP growth.  Recently this index jumped to its highest reading since 2002.  Small companies represent 99% of all U.S. employers and they believe now is a good time to expand, increase capital expenditures, and keep hiring.  Small business owners are feeling better about taking risks and making investments which will drive GDP growth higher.

Source: BLS

 

 

What The U.S. Imports From Mexico – Trade Overview

The Trump administration has proposed a 20% tariff on imported products from Mexico in order to better balance the trade deficit with the country. Some argue that imposing such a tariff would make certain imported products more expensive for American consumers.  It would raise the price of imports (so inflationary) and give domestic manufacturers a more competitive price for their products.  The other side of the trade is U.S. exports would be exempt from any type of taxation.

The U.S. imported over $21 billion worth of vehicles from Mexico in 2016, with auto parts accounting for the single largest type of product imported from Mexico valued at over $51 billion in 2016, making the automotive industry an integral component of trade with Mexico. Interestingly enough, exports headed from the U.S. to Mexico are primarily for use in the automotive industry, with machinery, fuels, and plastics making up the largest portions.

Agricultural and food products imported from Mexico, such as tomatoes and beer, totaled over $21 billion in 2015, the most recent data available.

Sources: Dept. of Commerce, BLS 

As Trade Confrontation Looms With China….Japan Passes China As Largest Owner Of U.S. Treasuries

U.S. Treasury Department data released in December revealed that Japan has surpassed China as the largest foreign holder of U.S. Treasuries. For years, China has held more U.S. Treasury debt than any other country, making it the single largest foreign creditor. As pressure has mounted for China to allow its currency to float freely, it has gradually been selling Treasuries in order to raise liquidity and help elevate its currency.

China has been careful not to create any perceived issues with its currency since the yuan became part of the International Monetary Fund’s (IMF) special drawing rights in October 2016. This will allow the yuan to become a legitimate reserve currency along with the euro, pound, and dollar. China’s position in U.S. debt is at its lowest levels since 2010.

Sources: U.S. Treasury, IMF,Bloomberg

Market Returns: All data is indicative of total return which includes capital gain/loss and reinvested dividends for noted period. Index data sources; MSCI, DJ-UBSCI, WTI, IDC, S&P. The information provided is believed to be reliable, but its accuracy or completeness is not warranted. This material is not intended as an offer or solicitation for the purchase or sale of any stock, bond, mutual fund, or any other financial instrument. The views and strategies discussed herein may not be appropriate and/or suitable for all investors. This material is meant solely for informational purposes, and is not intended to suffice as any type of accounting, legal, tax, or estate planning advice. Any and all forecasts mentioned are for illustrative purposes only and should not be interpreted as investment recommendations.