Not perhaps as good a riddle as Golem asked Bilbo on their first meeting, but try this brain tickler:
In July 2016, there were four.
In June 2016, there were 10.
Since 2008, there have been 673!
What are they?
If you guessed central bank rate cuts, you are on the money. Financial Times reported:
“In the eight years since the collapse of Lehman Brothers, the world’s top 50 central banks have, on average, cut rates once every three trading days…Despite a modest global recovery, central banks have barely had any time to breathe since the summer of 2008 – carrying out mass asset purchases and entering into negative rate territory. Britain’s decision to leave the EU, coupled with political instability across Europe, still subdued inflation, and concerns over Chinese indebtedness, have spurred central banks back into action.”
The latest downward adjustment came last week when the Bank of Japan (BOJ) took its key interest rate into negative territory, reported CNN Money. Negative rates are intended to promote bank lending and consumer spending. They also create a surreal situation in which banks pay customers to borrow and charge customers to keep money in their accounts.
The stimulus package that accompanied the BOJ’s rate cut was more subdued than many had expected. The Wall Street Journal said the less-than-robust stimulus prompted speculation the central bank had “run up against the limits of monetary policy” and bank leaders wanted to see more robust fiscal policy introduced by Japan’s government.
The United States has been pursuing a different course of action. The Federal Reserve has been raising rates; however, it left rates unchanged last week. More rate cuts may be ahead elsewhere, though. The Bank of England is expected to cut rates next week.
The Standard & Poor’s 500 Index finished the week slightly lower after the Commerce Department reported growth of gross domestic product (GDP) – a measure of all goods and services produced – was weaker than expected during the second quarter. GDP grew at an annualized rate of 1.2 percent during the period. Economists had expected GDP to grow by 2.5 percent, according to Bloomberg. In addition, first quarter’s GDP growth was revised downward from 1.1 percent to 0.8 percent.
Household consumption, which comprises about 70 percent of GDP, was up 4.2 percent during the second quarter, according to Bloomberg. However, those gains were offset by a decline in corporate spending on equipment, structures, and intellectual property (down 2.2 percent). That was an improvement on first quarter when corporate spending fell by 3.4 percent. Government spending declined during the second quarter, as well.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
*Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* This newsletter was prepared by Peak Advisor Alliance of which DeYoe Wealth Management is a Member, and should not be construed as investment advice.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Consult your financial professional before making any investment decision.
* Stock investing involves risk including loss of principal.
* “Central Banks vs. Rates”