Every Friday I recap “news you can use” from the week: a handful of quotes from major (and often expensive) news sources, so you can stay up to date on the news that affects your money without spending a dime and in less than a minute.
Here’s an overview of what happened this week.
The Classic 60-40 Investment Strategy Falls Apart. ‘There’s No Place to Hide.’ (November 13, Wall Street Journal) It was one of the most basic, dependable ways of investing, used by millions of Americans. This year it stopped working.
A portfolio with 60% of its money invested in U.S. stocks and 40% invested in the 10-year U.S. Treasury note has lost 15% this year. That puts the 60-40 investment mix on track for its worst year since 1937.
Soaring US Mortgage Rates Are Discouraging Americans From Moving (November 14, Bloomberg) Federal Reserve Bank of New York survey data on Monday showed respondents put a 14.4% probability of changing their primary residence, the lowest in data back to 2013. The decline risks keeping a lid on much-needed inventory and spells bad news for prospective buyers hoping for a significant drop in prices.
Wholesale prices rose 0.2% in October, less than expected, as inflation eases (November 15, CNBC) The produce price index, a measure of the prices that companies get for finished goods in the marketplace, rose 0.2% for the month, against the Dow Jones estimates for a 0.4% increase.
Stock futures tied to the Dow Jones Industrial Average were up more than 400 points shortly after the release, reflecting market anticipation that cost of living increases not seen since the early 1980s were easing if not receding.
Mortgage Rates Could Tank Home Prices by 20%, Fed Study Finds (November 15, Bloomberg) House prices, adjusted for inflation, soared during the pandemic by the most since the 1970s, analysis by Dallas Fed economist Enrique Martinez-Garcia showed. A “pessimistic” scenario where prices now retreat by 15% to 20% could subtract 0.5% to 0.7% from inflation-adjusted consumer spending, he wrote in a blog post Tuesday.
Vast Majority of Retail Investors in Bitcoin Lost Money, BIS Says (November 15, Bloomberg) Data spanning 95 countries from 2015 to 2022 indicates the vast majority of app downloads occurred when Bitcoin’s price was above $20,000, the working paper from the Basel, Switzerland-based BIS says.
The analysis says if we assume each new user bought $100 of Bitcoin in the month they installed the app and each month thereafter, 81% would have lost money.
Sharp drop in mortgage rates does little to boost demand (November 16, CNBC) On a weekly average, the rate on the 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 6.9% from 7.14%…
Mortgage application volume rose 2.7% last week compared with the previous week.
U.S. Consumers Show Strength With Jump in Retail Sales (November 16, Wall Street Journal) U.S. retail sales rose sharply in October as consumers spent more on everyday staples and big-ticket items such as autos and furniture.
Don’t Abandon the 60/40 Investing Strategy Yet. You’ll Miss Out on Gains. (November 17, Barron’s) The 60/40 model has worked over time, this year’s poor performance aside.
A portfolio consisting of 60% U.S. stocks and 40% U.S. bonds had an annual return of 8.8% from Jan. 1, 1926, through Dec. 31 of last year, according to Vanguard.
Home sales fell for the ninth straight month in October, as higher mortgage rates scared off potential buyers (November 18, CNBC) Even as sales slow, supply is still stubbornly low. There were 1.22 million homes for sale at the end of October, a decrease of just under 1% both month-to-month and year-over-year. That’s a 3.3-month supply at the current sales pace. Historically, a balanced market is considered to be a six-month supply.
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I founded Money Talks News in 1991. I’m a CPA, and I have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.