Tag Archives: Fed Funds Rate

November 2018 Podcast Video, Financial Planning and Capital Market Update – By John Kvale

Hello and Welcome to our November 2018 Financial Planning and Capital Market Update!

If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast format as well as Video!

Newbies – We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets and current events!

November – 2018 Video

Financial Planning Tip (s) –

Clump – Maximizing the new standard deduction

With a $12k individual standard deduction and double that for joint filers it takes work to maximize the standard deduction threshold… Add the fact that SALT State and Local Tax deductions are now limited to $10k annually, clumping expenses into one year as mentioned here in our post and visually below may be the only way to get above the standard deductions for many …

Clumping Taxes

Capital Market Comments –

Powell Signals a Slower Rate Increase

Current FOMC (Federal Open Market Committee) chairman Jerome Powell signaled the rate increases may be closer to over than just was stated just a month earlier… where a December increase, which is still almost certain, but three additional increases were promised in 2019 – not any more.

Given the long/lower rates of the last decade, it is not a surprise that the new normal may be lower –

Market Participants cheered this statement!

10-31-18 Fed Funds Rate

Have a Great Day – Talk to you at the end of December!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
street-cents

Higher Rates Soon … Told Ya

Frequently a reporter is picked to “leak” information as needed to quietly deliver information to the public. Janet Yellen and the other FOMC members have anointed Jon Hilsenrath, a reporter for the Wall Street Journal.

When Jon writes, people listen!

Hilsenrath Report Fed on Track to Raise RatesJon Hilsenrath

As mentioned here and here, we believe Yellen and crew at the FOMC want to raise rates as soon as possible. Hilsenrath, the chosen “leaked” reporter confirmed the FOMC is on track to raise rates this year most likely mid-year.

A major shock of some type could alter this. Our belief, lower rates may actually be holding the economy back through too much artificial means.

Recall our Newsletter study finding fed fund average rates of 5.1% since data recorded.  First goal, get to 1% …. then what if we only get to half of our average, or 2% … Wow! This time it’s different, maybe, but doubtful.

What if raising the short-term rates actually spurred our economy, not inhibited it?

Have a great Day!

John A. Kvale CFA, CFP

http://www.jkfinancialinc.com
http://www.street-cents.com
8222 Douglas Ave # 590
Dallas, TX 75225

 

Higher Rates (Short Term) are in the Cards … Maybe even sooner

Barring a meltdown of some type, the recent Gross Domestic Product (GDP) final revision for the most recent quarter of 5% gives Janet Yellen and Federal Open Market Committee (FOMC) gang a green light.

Mentioned earlier here in our post and a prominent portion of our coming Newsletter, we think higher short-term rates are in the cards. With a long-term average of 5.10% (backed by research in our coming Newsletter) rates may begin to get back to normal … Finally!

From the Bureau of Economic Analysis Release (BEA):

12-24-14 Q 3 2014 Final GDP Estimate

We acknowledge the argument this is backward looking and with tumbling (more like falling lead balloon) energy prices, future GDP prints will be weaker initially. We think higher rates MAY have moved to an earlier point on the calendar for the deciding FOMC gang. Much welcomed by us !

Lucky timing for an expanded article on this the next Newsletter.

Have a Happy Holiday Friday!

John Kvale CFA, CFP

PS REMINDER … only crickets at the office today!

http://www.jkfinancialinc.com
http://www.street-cents.com
8222 Douglas Ave # 590
Dallas, TX 75225

 

Fed Mandates and Economic Cause and Effects

The last few posts have been light on deep technical stuff, given the weather, holiday party, and time of year. Well we just couldn’t handle it any more, as such, here is a little deeper look at some of the Economic releases lately that have put a bid in the capital markets, as mentioned last week “Markets get Jiggy.”

Nonfarm Payroll Report

One of the top most watched reports as of late is the payroll report. In part due to the fact that the FOMC has stated they are closely watching, and with a FED mandate of  “Maximum employment” look not further than the Nonfarm Payrolls Report.

Two hundred thousand new jobs monthly has been noted as the line in the economic sands that put just enough wind in the sails to allow the FOMC to begin letting off the QE (Quantitative Easing) pedal. Several consecutive months of  a strong jobs gain should give the FOMC enough confidence the economy is moving fast enough to go it on its own.

12-10-13 Non Farm Payroll Econoday

Unemployment Rate

6.5% is the key number drawn in the sand, this time by the FOMC themselves. Ben Bernanke, desiring a more transparent FOMC during his tenure, literally has directed investor attention to a 6.5% threshold in this rate for his easing of help via QE.

This number however has a second component that can cause it to be skewed, the participation rate. The participation rate are those who are attempting to find a job. If the participation rate falls (less are looking) which it has over the last year, the unemployment rate can/may look artificially lower than reality. Not to worry, the FOMC also knows this and as such have given signals they may include other factors.   Participation skewed or not, it is certainly very nice to see this trending down from the double-digit rates we saw during the 07-09 recession.

12-10-13 Unemployement Rate Econoday

So What Does it all Mean?

IF these Economic numbers and a few others align, and stay on track, the FOMC would be able to slow the asset purchases (QE) that are artificially lowering interest rates, allowing rates to rise.

Two important items:

  1. Another Fed mandate is “Moderate Long Term Interest Rates“.   Most including ourselves, expect them to attempt to allow longer term rates to gently float upward. This is of course not the way it always works in capital markets, but time will tell.
  2. Unfortunately, longer term rates have little effect on the money we earn in our money market, checking and other SHORT TERM rates as this is known as the Fed Funds Rates. Short term, Fed Funds Rates are expected to remain low until the economy gets a stronger head of steam. Most professional investors are modeling an increase in late 2015 or 2016, but ANYTHING can happen over such a long economic time period.

Apologies for the length of this post, we did not intend to get so long-winded, but again as mentioned last week, we wanted to follow-up on a couple of Economic reports that had garnered much attention.

Have a Great Day!

John Kvale CFA, CFP

http://www.jkfinancialinc.com
http://www.street-cents.com
8222 Douglas Ave # 590
Dallas, TX 75225