GREAT IMAGERY: Two things happen this time of year. The weather begins to heat up, and the baseball season starts. Even for those who do not religiously follow baseball, you can’t help but catch the “hope springs eternal” attitude that warmer weather and a “new beginning” brings. All baseball teams start with a clean slate and tied for first, and with a shot of being the year’s champion (well, except maybe the Orioles). I went out and planted four new trees in our backyard yesterday with the hope that those seedlings become beautiful additions to the landscape for years to come. I hope that all the seedlings you are planting turn into the positive things you are wishing and praying for despite the challenges unpredictable future weather brings.
STRONG QUARTER: Friday marked the end of the first quarter of 2019, and what a quarter it was for the markets. U.S. stocks had their biggest quarterly gains in nearly a decade. The S&P 500 added more than 13% for the quarter, its best quarterly showing since 2009. Major indices have recovered almost all the losses from the dismal fourth quarter of 2018. The positive quarter was fueled by the U.S. Federal Reserve Bank, and other central banks around the globe, backing off their fiscal tightening and interest rate increases due to a global economic slowdown. Another reason for the rise was a general attitude by investors that the fourth quarter sell-off was overdone, and it was a buying opportunity. Now that we have had a run up, first quarter corporate earnings reports will either affirm or detract from the current, higher valuations investors have put on stocks. All the other usual suspects, China trade tensions, global growth numbers, U.S. economic growth, etc., will continue to move markets. This coming week, U.S. and Chinese trade officials will be meeting in Washington, and U.S. retail sales and manufacturing data will be released. Both will impact stock prices.
NEW HOME SALES RISE ON LOWER INTEREST RATES: Sales of new U.S. single family homes increased to an 11-month high in February. Lower mortgage interest rates seem to be lifting the housing market. Sales in February were 4.9% above January, and 0.6% above February of 2018. The rate for a 30-year, fixed-rate mortgage dropped to 4.06% last week according to Freddie Mac. Mortgage rates have been decreasing since the Fed signaled a long pause in interest rate increases.
INFLATION STAYS LOW: The U.S. Federal Reserve Bank’s preferred inflation gauge, the price index for personal consumption expenditures, fell 0.06% in January from December. It was up just 1.37% from a year earlier, the smallest gain since September 2016. The Fed targets 2.0% as the ideal inflation level. We have hit that number from time to time, but it has not sustained at that level.
FEDERAL DEFICIT: U.S. national debt crossed the $22 trillion-dollar mark, the highest ever. According to the Congressional Budget Office, this will grow by $12.2 trillion over the next decade. At present, federal interest payments on the debt, as a percentage of GDP, are at about 1.6%, which is below the long-term average of 2%, so it would seem that the day of reckoning on all of this deficit spending is not imminent, which probably explains why it continues.
DISABILITY INSURANCE: Insurance is the practice of sharing risk. There is always a cost to insurance. Since an insurance company has expenses, including profit, the amount an insurance company pays out in benefits will never equal the sum of the premiums an insurance company collects. Thus, it is likely that buying insurance will be a money-losing proposition for you. However, if you have to work for financial reasons (i.e., you are not yet financially independent), then you need disability insurance. For many people, having a bad disability event occur, even a rare one, is so terrible that is worth paying the price to avoid it. If you do not already have disability insurance (either through a group policy at work or your own policy), make a point of meeting with your financial advisor (I can recommend a good one!) to determine your exposure and your options. If you do have insurance, get your policy out and review it. Does the benefit amount still make sense? Do you have enough? Too much? If you are not sure you have the right coverage, resolve to make sure this part of your financial life is buttoned up.