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“Another rate increase from the FOMC [the Federal Reserve] next week is now extremely likely.”  The Fed meets this coming week.


Stocks shrugged off all sorts of potential market movers such as the U.K. election, testimony by James Comey, and a continued oil price plunge.  It looked like another mildly positive week until late in the day Friday when some tech giants sold off rather briskly.  Tech stocks have played an outsized roll in the rise of the S&P 500 and other indices.  This concentration in the gains finally caught up with investors who, possibly feeling nervous at the new heights in stock values, took their profits.  Apple and Microsoft each dropped 3.3% on Friday while Facebook and Google’s parent company dropped 3%.  Another tech darling, Amazon, dropped 2.6%.  Netflix dropped 4.8%.  For the week, the S&P 500* slightly decreased 0.30% (up 8.62% for the year).  The MSCI All Country X US* decreased 1.14% (up 14.33% for the year).  The Barclays Global Aggregate Bond Index* decreased by 0.03% (up 4.63% for the year).  The HFRX Global Hedge Fund Index* decreased 0.24% (up 2.61% for the year).


Oil prices have declined nearly 9% in the past three weeks.  Prior to this drop, confidence that cutbacks from global exporters would support higher prices kept oil in the $50 to $55 per barrel range.  That theory held up early in the year, but prices have fallen by about 15% since as U.S. oil producers rushed to fill the gap left by OPEC.  Prices dropped 3.8% just this past week after government data showed that U.S. storage tanks increased for the first time in nine weeks.  Energy companies are the S&P 500’s worst performers this year so far.


The average nationwide gasoline price on Friday was the lowest for this point in the year since 2005, at $2.35 per gallon.  That is two cents lower than a year ago at this time.  Seasonal demand tends to move prices up this time of year, so expect some movement up even if there are no specific catalysts for increases.


As you can see in the graph below, the percent of equity homeowners hold in their homes had been steadily decreasing and then dropped off a cliff during the housing bubble.  It has been recovering since.  In the first quarter of this year, household percent equity increased to 58.3%, the highest since 2006.  Note that approximately 30% of owner occupied homes have no mortgage.  This means that the remaining 50 plus million homeowners with a mortgage balance have much less than 58.3% equity, and about 3 million still have negative equity.


After a decline in GDP, the rate of growth in GDP for the next seven years after 1976 was 2.7%.  After another decline, the recovery beginning in 1983 for the next seven years averaged 4.4% growth.  After the recovery that began in 1934, GDP growth averaged 7.2% per year for the next seven years.  After the most recent recession ended, the average rate of growth for the last seven years has been 2.0%.



TECH GIANTS STUMBLE: http://www.cnbc.com/2017/06/09/big-five-tech-stocks-sell-off-facebook-apple-amazon-microsoft-alphabet.html
SO SAYS GOLDMAN SACHS: http://www.calculatedriskblog.com/2017/06/goldman-fomc-preview.html
LONG AND WINDING ROAD TO HOME EQUITY:  http://www.calculatedriskblog.com/2017/06/feds-flow-of-funds-household-net-worth.html

SLOW RECOVERY:  https://horsesmouth.com/this-bull-may-still-have-room-to-run

OIL PRICES FALL AGAIN: https://www.wsj.com/articles/for-oil-investors-early-faith-in-a-rally-begins-to-wane-1497048280

AND SO DO GAS PRICES:  https://www.nytimes.com/2017/06/09/business/energy-environment/oil-gas-prices-drivers.html?_r=0