Market News – June 3, 2019 - Compass Ion Advisors

TRADE TENSIONS CONTINUE TO DO DAMAGE TO THE MARKETS: Late Thursday, President Trump threatened to impose escalating tariffs on Mexico beginning June 10, and markets responded by moving down 1% on Friday. This has exacerbated the trade tensions that already exist with China and which have been causing falling stock prices all month. For the month of May, major U.S. stock indices are down more than 6.5%, the worst month since December. International indices are down for May as well with the Stoxx Europe 600 down 5.7%, the Hang Seng down 9%, and the Shanghai Composite down 5.8%. U.S. economic data continue to portray a very healthy economy, but there are indications of slowing, albeit early ones. The oft-asked question is when will the U.S. slow down more substantially in light of global economic slowing, trade tensions, Brexit drama, Fed interest rate moves, and the potential waning impact of last year’s tax bill. Stay tuned. We certainly are.

U.S. CONSUMER SPENDING STILL SOLID: Personal consumption expenditures in the U.S. increased at 0.3% in April from March, and March was a strong month (strongest monthly increase in ten years). Income growth helped fuel the spending as it rose 0.5% in April from the prior month. Spending is up 4.3% from a year ago. Consumer spending accounts for more than two-thirds of total economic output in the U.S. and continues to fuel the economic expansion which, as of this month, is now ten years old. Despite the increase in spending, the U.S. personal savings rate also rose in April from 6.1% to 6.2%. That rate has hovered between 6 and 8% in recent years.

CONSUMER SENTIMENT INCREASES IN MAY, BUT…: The University of Michigan’s consumer sentiment index for May moved up to 100 from 97.2 in April. This is good news, but it moved down over the course of the last two weeks in May from an even higher figure due to tariffs and trade tension. Consumers’ optimism was dented by the fear that increased tariffs on imported goods would lead to higher consumer prices.

LIFE EXPECTANCY: I like to use the ages of 90 or 95 when assuming how long someone will live for a financial plan. I just came across a website that will run a calculation of your life expectancy based on about three minutes of questions. The site is livingto100.com. I just did it, and if it is correct, you may be getting my email for at least a few more decades. Livingto100.com is funded by ads and you have to give them an email, so if you are concerned about what they might do with the information, be aware.

MORTGAGE RATES MOVE DOWN AGAIN: Mortgage rates moved decisively lower this week. According to Mortgage News Daily, the most prevalent rates seen on Friday were:

30YR FIXED – 3.875% – 4.0%
FHA/VA – 3.75%
15 YEAR FIXED – 3.875%
5 YEAR ARMS – 3.875-4.25%

This should help with the housing industry as we continue to move into the end of spring and into the warmer months.

EXTREME POVERTY: Is it on the rise? Thankfully, the answer to that question is ‘no’. Extreme poverty is defined by the World Bank and other institutions as people who live on less than $1.90 per day. Today, 10% of the world population lives in extreme poverty. In 1990, that figure was 37%. Two hundred years ago, 89% lived in extreme poverty. It is also encouraging that the amount of people living in the three lowest classifications (below $1.90 per day, between $1.90 and $3.20 per day, and between $3.20 and $5.50 per day) have all been on the decrease over the past ten years. There is clearly much more work to be done, and there remain parts of the world (such as sub-Saharan Africa) where the proportions of poverty are much higher, but there has also been much progress for which we can be grateful.

REFERENCES:

EXTREME POVERTY: https://ourworldindata.org/poverty-at-higher-poverty-lines; https://www.worldbank.org/en/news/press-release/2018/09/19/decline-of-global-extreme-poverty-continues-but-has-slowed-world-bank
MORTGAGE RATES MOVE DOWN AGAIN: http://www.mortgagenewsdaily.com/consumer_rates/911918.aspx
CONSUMER SENTIMENT INCREASES IN MAY, BUT…: https://www.wsj.com/articles/u-s-consumer-sentiment-drops-at-end-of-may-11559313787
U.S. CONSUMER SPENDING STILL SOLID: https://www.wsj.com/articles/u-s-consumer-spending-cools-in-april-11559306010