U.S. and World News
- The Federal Reserve kept interest rates at their current levels following their April policy meeting this week. Kansas City Fed President Esther George lodged his dissent of the decision, favoring a rate increase at this meeting. The post-meeting statement was little changed from the March statement, though the portion about global economic risks was dropped, showing an improvement in developments abroad. The statement’s tone, while dovish, leaves the door open for a rate hike at the next meeting in June.
- The Bank of Japan also had a policy meeting this week but disappointed markets by holding off on increasing its already massive monetary easing program. After instituting negative interest rates on depositors, the Japanese central bank stated that they preferred to take more time to understand this policy’s effect before taking further action. Japan continues to struggle to achieve its growth and inflation targets, causing the expectation for action at this meeting.
- Saudi Arabian Prince Mohammed bin Salman unveiled what he calls “Saudi Vision 2030” this week. It is a plan to overhaul the kingdom’s economy in order to reduce its massive reliance on oil revenues, which currently make up 80% of its income. Salman, who is age 31, intends to create the world’s largest sovereign-wealth fund with over $2 trillion in assets; to be partially funded by selling 5% of state controlled Saudi Aramco in an IPO.
- Equity markets retreated this week. The S&P 500 fell 1.24% and closed at 2,065. Likewise, the Dow Jones dipped 1.28% and closed at 17,774. So far in 2016, the S&P is up 1.70% and the Dow is up 2.77%.
- Interest rates fell a bit this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.29% and 1.83%, respectively.
- The spot price of WTI Crude Oil rose 5.17% this week to close at $45.99 per barrel. WTI Crude is up 12.97% in 2016.
- The spot price of Gold gained 4.91% this week, closing at $1,293.53 per ounce. Year to date, gold prices are up 21.91%.
- Initial jobless claims came in at 257,000 which was an increase from last week’s reading of 247,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 256,000.
- The Case-Shiller home price index rose 0.7% in February, slightly below expectations of 0.8%. All of the 20 cities making up the index saw home price gains. On a year over year basis, home prices as measured by Case-Shiller have risen 5.4%.
- The headline Personal Consumption Expenditures index (PCE, measure of inflation) rose by only 0.05% in March, below expectations of 0.1%. On a year over year basis, headline PCE has increased by 0.8%.
- Core PCE (excludes food and energy and is the preferred inflation measure of the Fed) also rose only 0.05% in March, below a 0.1% forecast. Over the last 12 months, core prices have risen only 1.6%, well below the Fed’s 2% inflation target.
- Real GDP for the 1st quarter of 2016 increased by 0.5% in the initial estimate, below expectations of 0.7%. The report was mixed with consumer spending rising by 1.9% and private investment falling by -3.5%.
Fact of the Week
- According to an April 2016 Gallup poll, 37% of college graduates surveyed believe that stocks are the top “long-term investment” available to them, beating out bonds, real estate, gold or CDs. By contrast, only 17% of non-college graduates believe that stocks are the best investment.
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