Your Weekly Update for Tuesday, January 3, 2023.
Beacon Rock Wealth Advisors is a dba of BR Capital, Inc. a financial planning and registered investment advisory firm in Camas, Washington. We are always available to answer your finance questions. Give us a call at (800) 562-7096 or send an email to [email protected].
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Have a great week!
Mike Elerath
CERTIFIED FINANCIAL PLANNERTM
CERTIFIED IN LONG-TERM CARE
[email protected]
Bill Roller
NMLS #107972
CHARTERED FINANCIAL ANALYST
CERTIFIED FINANCIAL PLANNERTM
CHARTERED MARKET TECHNICIAN
[email protected]
For more information about Beacon Rock Wealth Advisors, check out our brochure here:Ā https://beaconrwa.com/wp-content/uploads/2020/04/BeaconRockBrochure.pdf
Happy New Year.Ā May 2023 be fun and prosperous for you!
Click on the image below to go to https://vimeo.com/785603922 to see this weekās video in which Mike Elerath, Bill Roller, and Keller Williams Realtor Michael Harding discuss the financial markets and real estate.
Summary
It was a flat to slightly down holiday week on Wall Street last week. The Dow Jones Industrial Average fell 0.17% to 33147.25 while the S&P500 ended down 0.14% to 3,839.40. The Nasdaq Composite fell 0.30% to 10,466.48. The annual yield on the 30-year Treasury rose 14.8 basis point(s) to 3.+75.
Economic data for the week included housing prices that continued a decline from peak levels, as well as a drop in pending home sales. Some regional PMI data improved, while jobless claims remained at a steady low level.
Global equities were flat to down last week to close out 2022. Fixed income also fell back as interest rates ticked higher. Commodities gained ground last week, led by crude oil prices.
Economic Notes
(0/+) The December Chicago PMI survey (technically known as the ISM Chicago Business Survey) rose 7.7 points to 44.9, above the consensus estimate of 40. While this broke a streak of declining reports, the measure has remained in contraction since Sept., with the Nov. reading being the lowest since the financial crisis. Under the hood, new orders and order backlogs rose, while employment and inventories fell, still showing some underlying weakness.
(-) The S&P/Case-Shiller home price index for October fell back by -0.8%, with every city showing a decline for the month. Year-over-year, the 20-city index still showed a gain of 8.6%, which has decelerated by nearly -2% from the prior monthās pace, and down -5% from the June peak 12-month rate. Year-over-year gains by city were dominated by the Southeast, with Miami and Tampa each up over 20%, followed by Charlotte and Atlanta. The weakest cities were San Francisco and Seattle, with minimal gains on the year, and down -10% from peak levels mid-year.
(0) The FHFA house price index was unchanged for October, a bit down from the prior month, and continuing a trend of flattish results. By census division, a gain in New England was offset by a decline in the Pacific states. On a trailing 12-month basis, national home prices remained up 9.8% (down from 11% for the Sept. month-end). This survey features a broader swath of geography compared to the more urban-focused S&P/Case-Shiller, and captures a high percentage of housing transactions through repeat sales. Per the FHFA, higher mortgage rates were again noted as a key factor in the downward pull in home prices as of late, with a mention that this was the first sub-10% annual gain in over two years. (Historically, home prices running that hot has been abnormal, so the eventual decline has been anticipated to some extent.)
(-) Pending home sales for November fell by -4.0% to the second-lowest reading in 20 years, per the NAR. Data fell in all four national regions for the month, with the sharpest drop in the Northeast. The national year-over-year figure fell by -38%. Rising interest rates were naturally blamed as the cause of the drop; however, rates falling back a bit in December raised hopes for a potential rebound in activity in coming months. Pending sales are considered a leading indicator, in that they lead āactualā existing home sales reports by a month or two. The housing sector is a continued area of heightened focus moving into 2023. While housing transactions are not a huge component of U.S. economic growth directly, weaker conditions can begin to take a toll on a wider level, through homebuilding, of course, as well as related industries such as building materials, furniture/home furnishings, appliances, carpeting, landscape services, etc.
(0/-) Initial jobless claims for the Dec. 24 ending week rose by 9k to 225k, above the 220k forecast. Continuing claims for the Dec. 17 week rose 41k to 1.710 mil, above the 1.686 mil. consensus expectation. The largest initial claim increases were in MO, KY, and NY, while CA, GA, and TX saw declines. In reviewing the insured unemployment rate the DOL publishes, the 1.2% reading from last week was well within the 1.0-1.3% range from over the past year. After spiking at 15.8% in May 2020, the insured proportion has been on a steady downward slide since with little sign of reversion back upward. Since the series in 1970, the insured rate has averaged 2.8%, hiding some extreme values along the way, but rarely falling and staying below 1.5%āeven in the best of times.
Market Notes
| Period ending 12/30/2022 | 1 Week % | YTD % |
| DJIA | -0.17 | -6.86 |
| S&P 500 | -0.11 | -18.11 |
| NASDAQ | -0.28 | -32.54 |
| Russell 2000 | 0.08 | -20.44 |
| MSCI-EAFE | 0.06 | -14.45 |
| MSCI-EM | 0.30 | -20.09 |
| Bloomberg U.S. Aggregate | -0.65 | -13.01 |
| U.S. Treasury Yields | 3 Mo. | 2 Yr. | 5 Yr. | 10 Yr. | 30 Yr. |
| 12/31/2021 | 0.06 | 0.73 | 1.26 | 1.52 | 1.90 |
| 12/23/2022 | 4.34 | 4.31 | 3.86 | 3.75 | 3.82 |
| 12/30/2022 | 4.42 | 4.41 | 3.99 | 3.88 | 3.97 |
U.S. stocks ended flattish on net, in a typical low-volume holiday trading week, despite a few days of heightened volatility. Sector results were mixed, with gains in financials and energy; decliners were led by materials and consumer staples. Real estate also fell back with higher interest rates. For 2022, in keeping with corporate earnings results, the only positive returns originated from the energy sector (up over 60%). As expected in a negative year, defensive groups consumer staples, health care, and utilities outperformed with flattish results, while āvalueā generally outperformed āgrowthā by a substantial degree, with minimal losses for the former and a substantial bear market in the latter. Real estate also declined beyond the S&P 500, punished by higher interest rates.
Foreign stocks were mixed during the last week of the year, with developed markets down and emerging markets earnings positive returns, led by gains in China, as investors continued to optimistically view the recent easing of Covid restrictions and cheer the recent removal of quarantine requirements. Economic data there has also started to improve. While it was not largely publicized, foreign stocks outperformed U.S. for the quarter by about 10%, led by a recovery in Europe. While economic growth and inflation conditions certainly remain more challenged abroad, sentiment may have bottomed, with conditions moving from the ābadā to āless badāāhistorically, this has been a sweet spot for positive returns. For all of 2022, developed market foreign stocks fared slightly better than U.S. equities (even better in local terms, subtracting the negative impact of the strong U.S. dollar). Many might be surprised that returns in the U.K. led all other regions, despite the political and economic volatility there this year.
Bonds fell back last week as interest rates rose to end the year, and the 10-year treasury reaching its highest level in over a month as economic data and hopes for China have kept growth sentiment optimistic. U.S. treasuries lost slightly less ground, although all groups fell back. Despite a weaker dollar, foreign bonds declined to a lesser degree on the week. While a cruel reminder to investors, 2022 was a terrible year for traditional bonds, with the Bloomberg U.S. Aggregate Index down -13% (the worst calendar year in its nearly 50-year history). Areas such as floating rate bank loans fared better, with minimal declines. On the bright side, U.S. bonds fared better than foreign debt, which suffered from rising interest rates and a strong dollar (up 7% for the year), acting as a headwind on foreign returns, although it fell back by -8% in Q4 from even higher levels.
Commodities fared positively on the week, with minor gains in all segments. Crude oil rose almost a percent last week to $80/barrel; however, natural gas prices corrected by -10% on the week, as weather forecasts turned warmer. The winning streak for commodities continued in 2022, with gains of over 20% for the S&P GSCI Index. This was led by price gains in the energy sector (crude oil up 7%, but more so by distillates and natural gas), which offset price declines in more economically-sensitive industrial metals like copper.
Mortgage Rates
āThe housing market remains in the doldrums with declining sales, inventory and prices,ā said Sam Khater, Freddie Macās Chief Economist. āThe declines in sales and deceleration in home prices began swiftly earlier in 2022 but have moderated more recently. While the intensity of weakness is moderating, the market continues to decline and forward leading indicators suggest housing will remain weak throughout the winter.ā
The 30-year fixed-rate mortgageĀ averaged 6.42% as of December 29, 2022, up from last week when it averaged 6.27%. A year ago at this time, the 30-year FRM averaged 3.11%.
The 15-year fixed-rate mortgageĀ averaged 5.68%, down from last week when it averaged 5.69%. A year ago at this time, the 15-year FRM averaged 2.33%.
Freddie Mac made a number of enhancements to the Primary Mortgage Market SurveyĀ®Ā to improve the collection, quality and diversity of data used. Instead of surveying lenders, the weekly results are now based on thousands of applications received from lenders across the country that are submitted to Freddie Mac when a borrower applies for a mortgage. Additionally, the PMMSĀ®Ā will no longer publish fees/points or adjustable rates.
Freddie Macās Primary Mortgage Market SurveyĀ® is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit. Average commitment rates should be reported along with average fees and
points to reflect the total upfront cost of obtaining the mortgage. Borrowers may still pay closing costs which are not included in the survey.
Through our relationship with Prestige Mortgage Services Inc. dba Prestige Home Mortgage (NMLS#14216) in Vancouver, Washington we originate residential and reverse mortgages.
Selected Cryptocurrencies
| Symbol | Name | Price | 24h % | 7d % | Market Cap |
| BTC | Bitcoin | 16729.81 | 0.01% | -0.61% | $322,077,192,570 |
| ETH | Ethereum | 1216.26 | -0.07% | -0.14% | $148,842,309,595 |
| BNB | BNB | 245.44 | -0.72% | 0.77% | $39,263,073,039 |
| XRP | XRP | 0.3458 | 0.69% | -6.23% | $17,407,484,019 |
| DOGE | Dogecoin | 0.07146 | -0.75% | -4.45% | $9,480,049,860 |
| ADA | Cardano | 0.254 | -0.06% | -3.02% | $8,766,173,680 |
| MATIC | Polygon | 0.7817 | 0.36% | -3.73% | $6,827,800,322 |
| LTC | Litecoin | 75.25 | -0.10% | 7.58% | $5,415,859,859 |
| DOT | Polkadot | 4.53 | 0.88% | -0.08% | $5,215,210,209 |
| TRX | TRON | 0.05534 | 0.12% | 2.18% | $5,089,153,992 |
| SHIB | Shiba Inu | 0.000008161 | -0.55% | -1.64% | $4,481,135,709 |
| SOL | Solana | 11.86 | 6.77% | 6.97% | $4,363,251,998 |
| UNI | Uniswap | 5.38 | 1.14% | 2.49% | $4,100,280,579 |
| AVAX | Avalanche | 11.33 | 1.52% | -3.32% | $3,530,087,071 |
| LEO | UNUS SED LEO | 3.53 | 1.23% | -0.90% | $3,367,527,185 |
| WBTC | Wrapped Bitcoin | 16697.18 | 0.03% | -0.54% | $3,058,057,950 |
Information current as of 5:1\20 AM PST, Tuesday, January 3, 2022. Source: https://coinmarketcap.com/
Check us out at https://beaconrwa.com and our affiliated websites atĀ https://reverse-mortgages.us and https://socialsecurityquestionsanswered4u.com.
Sources: Ryan Long, CFA, FocusPoint Solutions, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Citigroup, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Marketfield Asset Management, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, PIMCO, Standard & Poorās, StockCharts.com, The Conference Board, Thomson Reuters, T. Rowe Price, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wall Street Journal, The Washington Post. Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product. FocusPoint Solutions, Inc. is a registered investment advisor.
Notes key: (+) positive/encouraging development, (0) neutral/inconclusive/no net effect, (-) negative/discouraging development.