Your Weekly Update for Monday, June 26, 2023.
Beacon Rock Wealth Advisors is a dba of BR Capital, Inc. is 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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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]
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Summary
Markets were down last week. The Dow Jones Industrial Average fell 1.67% to 33,727.43 while the S&P500 ended down 1.39% to 4,348.33. The Nasdaq Composite fell 1.01% to 13,492/52.. The annual yield on the 30-year Treasury fell 3.4 basis point(s) to 3.821%.
On a holiday-shortened week, economic data included the index of leading economic indicators continuing to show decline, while housing data came in stronger.
Equities fell back globally last week, along with higher interest rate expectations and further recession fears, following several weeks of technical strength. Bonds, however, were little change, along with minimal changes in U.S. yields. Commodities fell back with similar negative sentiment.
Economic Notes
(-) The Conference Board Index of Leading Economic Indicators declined -0.7% in May, continuing a stretch of 14 straight monthly declines. The May result was led by weaker inputs from consumer expectations, ISM new orders, the ongoing inverted yield spread, and weaker credit. The positive influences were stock prices and building permits. Over the past six months, the LEI is down -4.3%, which surpasses the -3.8% drop of the six month stretch before that (May to Nov. 2022). The Conference Board did raise their Q2 GDP estimate back to showing minor growth, but continues to expect a contraction from Q3-2023 through Q1-2024. This is reiterated by the negative 6-month growth rate, which has been lower than todayās value only during the start of the three recessions since 2000 (2001, 2008, and 2020).
(0) Existing home sales in May rose by 0.2% to a seasonally-adjusted annualized rate of 4.30 mil. units, in contrast to the expected decline of -0.7%. Total home sales were down -20% on a trailing 12-month basis, which was a slight improvement from the April figure. While single-family sales declined slightly, sales of condos/co-ops rose by 5% on the month, with regional declines in the Midwest and Northeast offsetting gains in the West and South. The median sales price came in at $396,100, which was a year-over-year drop of -3%, and a similar drop from the peak prices last year. Mortgage rates remaining near 7% obviously affect affordability to the negative. As a byproduct, the low rates many homeowners are currently locked in to paying is creating a strong reluctance of current homeowners to sellākeeping inventory down from where it might otherwise be in the peak summer selling season. The key measure of this, monthsā supply, remains down at 3.0 for the month, about half that of normal single-family market levels.
(+) Housing starts in May sharply rose by 21.7% to a seasonally-adjusted annualized rate of 1.631 mil. units, exceeding expectations for a -0.1% decline, accompanied by downward revisions for the prior month. Gains were seen in single-family (19%) and multi-family (27%) for the month, with the latter rising to the highest starts level since the mid-1980ās. Regional gains were led by the Midwest and South, while the Northeast experienced nearly a -20% decline. Building permits rose 5.2% for the month to 1.491 mil. seasonally-adjusted annualized units, well above the 0.6% increase expected. Both single-family and multi-family gained at similar rates, with the Northeast leading by region. Overall, housing starts are up 6% from last year, led by a 33% rise in multi-family, while permits are down -13%. The starts numbers donāt point to weakness in the homebuilding sector, largely as the building work is needed to get enough inventory on board to satisfy demographic demand, as opposed to falling off a cliff as often occurs in conjunction with historical economic recessions. Multi-family building is running at a pace not seen since the early 1970ās, with fears in some quarters about overheating.
(0) Initial jobless claims for the Jun. 17 ending week were unchanged at 264k, just above the 259k median forecast. Continuing claims for the Jun. 10 week declined by -13k to 1.759 mil., well below the 1.785 mil. level expected by consensus. Initial claims readings were focused on OH and MN, each of which had one-off issues that distorted the data to some extent. That aside, the national data was little changed.
Market Notes
| Ā Period ending 6/23/2023Ā | 1 Week %Ā | YTD %Ā |
| DJIA | -1.67 | 2.86 |
| S&P 500 | -1.37 | 14.19 |
| NASDAQ | -1.43 | 29.47 |
| Russell 2000 | -2.86 | 4.18 |
| MSCI-EAFE | -3.35 | 9.84 |
| MSCI-EM | -3.60 | 4.93 |
| Bloomberg U.S. Aggregate | 0.14 | 2.36 |
| U.S. Treasury YieldsĀ | 3 Mo.Ā | 2 Yr.Ā | 5 Yr.Ā | 10 Yr.Ā | 30 Yr.Ā |
| 12/31/2022 | 4.42 | 4.41 | 3.99 | 3.88 | 3.97 |
| 6/16/2023 | 5.34 | 4.70 | 3.99 | 3.77 | 3.86 |
| 6/23/2023 | 5.41 | 4.71 | 3.99 | 3.74 | 3.82 |
U.S. stocks experienced the first negative week a month and a half, with Fed Chair Powellās semi-annual testimony to Congress ending up more hawkish than initially thought by markets. Specifically, he noted that most members of the FOMC agreed that raising rates āsomewhat furtherā by the end of the year would be appropriate to bring down persistent inflation. S&Pās Global PMI measure also fell further into contraction, which again raised recession concerns.
By sector, health care was the only positive contributor last week, eking out a small gain; the largest laggards included energy, technology, and materials. Real estate also declined nearly -4% as markets digested higher interest rates for longer. In the tech sector, Canadian authorities have proceeded with plans requiring digital companies to pay domestic media firms for their content, which has caused some backlash and possible shutting down of some news availability on Facebook and others. A similar saw was passed in Australia a few years ago before a compromise was found. Whether this trend continues over to the U.S. remains to be determined, but continues to add some side pressure to these monopoly-like firms. Additionally, Tesla stock was downgraded by several analysts, which raised concerns over valuations and prospects in the segment.
Foreign stocks performed negatively as well, with the added headwind of a stronger dollar. Developed markets fared a bit better than emerging markets, although regional returns showed little difference. The Bank of England surprised markets by raising rates by 0.50%, as opposed to the expected 0.25%, based on continued persistent inflation pressures. Norway raise rates by the same amount, while Switzerland moved a quarter-percent. This trend has continued to raise concerns over a central bank-induced recession globally. In emerging markets, Chinese stocks fell back by -7%, to lead markets on the downside, as weaker-than-expected economic data has been coupled with a lighter-than-expected stimulus response from the government so far.
Bonds were little changed for the most part, with corresponding little change in treasury yields. However, the 3m-10y spread saw further inversion along with evolving higher expectations for short-term rates, through the comments of Powell and other Fed members. Only high yield fell back a percent along with weaker sentiment for equities, which these tend to have a higher correlation to. Foreign bonds fell back upon higher rates, especially with the Bank of England surprise, even though the U.S. strengthened on the week. A unique recent dynamic in the U.S. municipal market has been the FDIC unloading their āinheritedā portfolio (assets confiscated from failed banks, like Silicon Valley), raising supply in that market relative to normal, although demand for higher-quality muni bonds appears to be ample.
Commodities fell back across the board last week, along with rising recession fears, especially in the energy patch. Crude oil specifically was down -4% on the week to $69/barrel. Interestingly, though, and contrary to media discussion of oil prices, demand has only fallen minimally over the past year, while supplies have dropped far more sharply, in keeping with the OPEC+ cut narrativeāthe combination of forces has only served to keep the oil price drop from being worse as of late. On the other hand, natural gas prices spiked again by nearly 5% on the week with a heat wave in the southern plains and Texas raising cooling demand as summer officially begins.
Mortgage Rates
āMortgage rates slid down again this week but remain elevated compared to this time last year,ā said Sam Khater, Freddie Macās Chief Economist. āPotential homebuyers have been watching rates closely and are waiting to come off the sidelines. However, inventory challenges persist as the number of existing homes for sale remains very low. Though, a recent rebound in single-family housing starts is an encouraging development that will hopefully extend through the summer.ā
The 30-year fixed-rate mortgageĀ averaged 6.67 percent as of June 22, 2023, down from last week when it averaged 6.69 percent. A year ago at this time, the 30-year FRM averaged 5.81 percent.
The 15-year fixed-rate mortgageĀ averaged 6.03 percent, down from last week when it averaged 6.10 percent. A year ago at this time, the 15-year FRM averaged 4.92 percent.
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 | Volume(24h) |
| BTC | Bitcoin | 30308.66 | -1.00% | 14.88% | $588,463,698,802 | $13,875,047,935 |
| ETH | Ethereum | 1879.88 | -1.76% | 9.20% | $225,981,277,798 | $6,833,808,592 |
| BNB | BNB | 237.51 | -0.73% | -1.91% | $37,015,887,323 | $391,828,892 |
| XRP | XRP | 0.4812 | -2.40% | -1.30% | $25,146,388,958 | $829,346,892 |
| ADA | Cardano | 0.2884 | -3.02% | 11.27% | $10,075,034,299 | $189,091,955 |
| DOGE | Dogecoin | 0.06588 | -2.41% | 6.52% | $9,218,025,764 | $208,444,630 |
| SOL | Solana | 16.88 | -1.38% | 8.99% | $6,756,101,281 | $235,322,621 |
| TRX | TRON | 0.07369 | 0.46% | 5.58% | $6,631,942,765 | $150,107,177 |
| LTC | Litecoin | 88.01 | -0.68% | 14.14% | $6,444,958,098 | $445,318,748 |
| DOT | Polkadot | 5.2 | 0.37% | 15.03% | $6,231,795,926 | $150,192,544 |
| MATIC | Polygon | 0.6607 | -1.49% | 10.66% | $6,137,242,050 | $249,878,336 |
| TON | Toncoin | 1.44 | -2.30% | 3.14% | $4,956,784,553 | $11,855,633 |
| WBTC | Wrapped Bitcoin | 30291.99 | -1.10% | 14.83% | $4,768,761,115 | $151,561,036 |
| AVAX | Avalanche | 13.5 | 0.25% | 19.47% | $4,661,385,399 | $133,983,228 |
| SHIB | Shiba Inu | $0.0…00772 | -2.70% | 7.51% | $4,549,613,831 | $105,576,963 |
| BCH | Bitcoin Cash | 194.11 | -3.33% | 82.71% | $3,771,873,429 | $765,961,857 |
Information current as of 4:05 AM PDT, Monday, June 26, 2023. Source: https://coinmarketcap.com
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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.