See this week's numbersFriday, December 30, 2016

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What a year!

As this is the last weekly economic report for the year, it seems appropriate to give a year-end wrap up in 200 words or less. 2016 will be remembered as a year that kept us on our toes. The year began with expectations for at least two, if not three rate increases, only to have those hopes doused by mid-year and Brexit. Just when most financial market watchers were about to throw in the towel, the Presidential election took the nation by storm. The cloud lifted and the financial markets became rose-colored. The Dow rose 2404 points in 2016, almost but not quite making it to 20,000; the 10-year Treasury note moved 124 basis points during the year, ending the year less than 20 basis points higher from 2015; and the Federal Reserve increased the short term lending rate by 25 basis points rather than the hinted at 75 to 100 basis points. The year ended with grand hopes for a real economic recovery in 2017, spurred by promises of lower tax rates, increased job creation and less regulatory burden. With that, I raise my glass and toast everyone for a prosperous, less volatile and healthy 2017.

Other Key Indicators this Week:

Housing – The good news for homeowners was another monthly rise in home values. The S&P CoreLogic Case-Shiller national home price index rose 0.9 percent in October, the fifth increase in a row. The price gauge surged 5.6 percent from a year earlier, the largest increase in over two years, to 185.06. This was the highest index reading since 2006.

The lack of inventory continues to put pressure on home prices. Unfortunately, more pressure may be coming from the recent rise in interest rates. Contracts to purchase existing homes fell 2.5 percent in November. This was the first decline in three months. Industry analysts cite the sudden increase in mortgage rates and a lack of supply for the reduction in activity. The Northeast was the only area with an increase in signings.

Consumer Confidence – The Trump afterglow continued as consumer confidence reached the highest level in over 15 years. The Conference Board’s December confidence index increased to 113.7 from a revised 109.4. Consumers’ expectation for the next six months rose to 105.5, the highest mark since December 2003. The survey found that consumers are upbeat about the prospects for greater job availability, rising incomes and higher stock prices. Confidence was higher among 35 to 54-year olds, but declined for those 35 and younger.

Strategically for Credit Unions:

The prospect of rising interest rates begins a new chapter for financial institutions. At task will be how to manage the rate increases without choking off loan demand, as well as knowing when to raise deposit rates. Consumers have been used to historically low rates for over eight years and will take a while to adjust. Even though the Federal Reserve anticipates three rate moves in 2017, I think they will be mindful of choking off economic growth. The rise up may be more gradual and less painful than we anticipate.

Note: Take a minute now to register for the 2017 Blueprint for Success live stream broadcast on Tuesday, January 10 at 1:00 p.m. Central Time. This interactive event will focus on interest rates, credit risk and regulatory concerns. Participants will have the opportunity to ask questions and earn one CPE credit. If you are wondering how to handle the changes on tap in 2017, you won’t want to miss this presentation.

Sarina Freedland – Senior Investment Officer

Although this information has been obtained from sources we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. All herein listed securities are subject to availability and change in price. Past performance is not indicative of future results. Changes in any assumption may have a material effect on projected results.

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