Barbara Shapiro 333 Elm Street Suite 210 Dedham,MA 02026 [email protected] 781-251-2655 Welcome to HMS Financial Group We are a full-service financial planning and investment firm located in Dedham, Massachusetts. Life brings many opportunities and challenges and we are here to help our clients navigate through both the positive and negative times. HMS Financial Group works closely with our clients to create a personalized plan to fit their current and future needs. Our willingness to listen, educate and empathize with our clients sets us apart from other firms. Barbara Shapiro, President EdM2 MSF CFP® CFS CMC CDFA CeFT®

February 4, 2020

Impeachment and Viruses and the Fed

Just when we think we have enough factors to consider when analyzing the direction of the markets, we add just one more. At the end of January, we had the meeting of the Fed Reserve, a release of the measure of growth for the fourth quarter, and an Impeachment trial. Then we added a virus scare from China. We thought we would be importing and exporting more from China after the first leg of the trade deal was signed, but we don't think we wanted viruses to be part of the package.

And just to make it a bit more interesting, this week we will have the first 2020 data in the form of the January jobs report. This could be information overload for the markets, or the markets may ignore it all and go along its merry way. After all, the markets have been very resilient over the past decade. Why not just go with the flow? Continued strong stock markets and low interest rates could keep the economy humming even as it slows.

As to the data, the GDP indicated that economic growth came in at 2.1% for the fourth quarter, which was right at expectations. This number will be subject to two revisions. The Fed did not surprise anyone by keeping rates the same and the markets would not be surprised if rates held steady all year--barring a change in the direction of the economy. Of course, we will get a glimpse of a possible change with the jobs report coming out on Friday. Let's hope for no surprises.

The stock market jitters attributed to the corona virus grew as the virus has grown. By the end of the week, the slide intensified. Gold prices rose, while oil prices and interest rates continued to follow stocks lower.  New home sales came in lower than predicted but still higher year-to-year. Orders for durable goods were higher, but flat without the transportation component. The 4th quarter GDP met expectations at 2.1%, and the Fed decision to hold rates steady was expected as well. Personal income and spending also came in close to predictions. This week we will see data covering construction spending, factory orders, ISM PMI manufacturing and non-manufacturing indices and the jobs report. Next week we will see reports on consumer inflation, retail sales and industrial production. 

Current Financial Indices
Updated January 31, 2020

 The Federal Reserve this past Wednesday held interest rates steady despite renewed pressure from the Administration to make deeper cuts. Policymakers unanimously agreed to maintain rates hovering between 1.5% and 1.75% as they pointed to continued signs of a strong economy. Citing solid job gains and household spending that continues to rise moderately, Fed officials deemed plans to hold rates as "appropriate" following a two-day meeting in Washington. They added that they would continue to monitor sluggish inflation, which has stubbornly remained below the Fed's target of 2%, as well as geopolitical risks -- like the coronavirus outbreak -- that could impact the US economy.  Source: CNN/Money

Reis reported that the office vacancy rate was at 16.8% in Q4, unchanged from 16.8% in Q3 2019. This is up from 16.7% in Q4 2018 and 16.7% from the end of 2017, but down from the cycle peak of 17.6%. Both the national average asking rent and effective rent, which nets out landlord concessions, increased 0.5% in the fourth quarter. The average rents have increased 2.6% and 2.7%, respectively, from the fourth quarter of 2018, close to the 2.7% growth rate in 2018 and above the 1.8% growth rate in 2017. The 2019 results extend the protracted expansion to nine years – a near decade that has been dogged by sluggish growth relative to both the apartment sector and historical expansions. The 16.8% vacancy rate is one-third higher than the low vacancy of 12.6% in 2007 and more than twice the rate (8.3%) in 2000. Source: Reis

The U.S. fiscal deficit topped $1 trillion in 2019, the first time it has passed that level in a calendar year since 2012, according to Treasury Department figures released. The budget shortfall hit $1.02 trillion for the January-to-December period, a 17.1% increase from 2018, which itself had seen a 28.2% jump from the previous year. Rising corporate tax revenue helped lower the pace of increase in the spending gap. For the fiscal year, which began in October, the shortfall is already at $356.6 billion, an 11.7% increase from a year ago. If that pace continues it would also lead to a fiscal deficit for 2019-20 of more than $1 trillion. Through December, receipts have totaled $806.5 billion while outlays have come to $1.16 trillion. Source: CNBC 

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