Economic update for the week ending September 1, 2018

Stocks hit record highs this week – Stocks rallied at the beginning of the week after a televised phone call with President Trump and Mexican President Enrique Peña Nieto, where they announced that they are close to a trade deal to replace NAFTA. There was optimism that a deal was in the works with Canada, which seemed to stall by week’s end. While trade issues have been a drag on stocks, they have risen to historic highs because of extremely strong economic conditions. In the past two quarters, corporate profits have averaged 20% above the same quarters last year (about 14% of that is tax savings, as the corporate tax rate has been reduced to 21% from 35% last year). The Consumer Confidence Index hit its highest level since 2000 this week. The unemployment rate is at a 20 year low. The second quarter GDP was revised up to 4.2% this week. Interest rates are still at historically low levels, and tame inflation has reduced the risk of rates rising as high or as quickly as investors feared at the beginning of the year when inflation appeared to be picking up. The only drags are fears of a trade war and wage growth, which has been stubbornly stagnant, which is unexpected with such low unemployment. The Dow Jones Industrial Average closed the week at 25,964.82, up from 25,790.35 last week. It is up 5% year-to-date. The S&P 500 closed the week at 2,901.52, up from 2,884.69 last week. It’s up 8.5% year-to-date. The NASDAQ closed the week at 8,109.54, up from 7,945.98 last week. It’s up 17.5% year-to-date.

Treasury Bond Yields slightly higher – The 10-year treasury bond closed the week yielding 2.86%, up from 2.82% last week. The 30-year treasury bond yield ended the week at 3.02%, up from 2.97% last week.

Mortgage rates almost unchanged this week – The August 30, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.52%, almost unchanged from 4.51% last week. The 15-year fixed was 3.97%, down from 3.98% last week. The 5-year ARM was 3.85%, up slightly from 3.82% last week.

Have a great Labor Day weekend!
Syd