Above the Fold

Rate Outlook for 2020

With China trade, Hong Kong unrest and the ongoing impeachment proceedings in Washington taking up the headlines, interest rates have taken a back seat for many media outlets — and that might not be a bad thing. The ominous yield curve inversion has not only reversed itself, but resumed a more normal curvature for the first time in nearly half a year. When observed in a vacuum, this indicates a less concerned consumer and lower risk for recession in 2020 (good news).

The majority of investors also see a high probability of a federal funds rate cut early next year, with the FOMC adopting a less aggressive action plan as the year progresses. That said, many experts see yields on the 10-year Treasury note remaining below 2% and mortgage rates on the 30-year fixed remaining below the 3.625% to 3.7% area. 

The trajectory of rates is obviously predicated by the effects of the ongoing trade war, global economic pressures and inflation. The first two are certainly wild cards as “trade deal 1.0” has yet to be inked and no one knows exactly how (and when) Brexit shakes out, more than 3 years after it was voted “yes” by Britain. The new date is set for January 2020, but we all know how well deadlines have worked thus far.

The last major rate influencer will be inflation, which may see a jump at the top line with the recent rise in food and energy costs, but that is expected to stabilize at around 2% in 2020. The core rate is likely to be pushed above the Federal Reserve’s target rate of 2% by soaring health care costs, driven mainly by insurers and hospitals. So look for a rate cut in the first quarter, but don’t bet on deeper cuts unless there are material weaknesses in the economic outlook.

Three Things

1. Dealing With the New Black Friday – Consumers’ shopping behaviors are changing and retailers are evolving to meet and capitalize on those shifts. Foot traffic fell 6.2% on Black Friday compared to 2018, but online sales were up 19.4% to $7.4 billion for the same period. Brick and mortar giants like Target are adapting by sourcing the lion’s share of stock not from the warehouse, but direct from its stores, to best serve its growing online shoppers. 
2. Tips for Safe Online Holiday Shopping – As criminals ramp up their scams for the holiday season, consumer protection agencies are firing back with some common-sense tips that might just save your identity. Be wary of “too good to be true” deals, as scammers use these offerings to gather information even if the item never ships. The Department of Homeland Security recommends sticking to retailers you’re familiar with and never email any personal details or credit card numbers, as all purchases should be completed through a secure portal without human interaction.
3. Free Admission to Disneyland Hong Kong! – Well, it’s not really free, but maybe it should be. The ongoing protests and ensuing recession in Hong Kong have left the “Happiest Place on Earth” nearly empty. Weekday traffic to the resort has fallen more than 90%, according to employee estimates, and operating income for the resort has plummeted $55 million in the most recent quarter. The good news is that just about every visitor has little or no wait time for rides.

Did You Know?

Gearing up for the Holiday Season

Throughout the month of December, we will share some interesting facts around the different holidays celebrated during this month, including Christmas, Hanukkah and Kwanzaa and even Ōmisoka (a Japanese celebration that ushers in the new year).

And since we just wrapped up turkey day, you might find it interesting that “Jingle Bells,” composed in 1857 by James Lord Pierpont, was meant to be sung on Thanksgiving, not Christmas. The original title of the song was “One Horse Open Sleigh,” and it also happens to be the first song heard from space when Astronauts Wally Schirra and Thomas Stafford, orbiting Earth on Gemini 6, played it on Dec. 6, 1965.