Vorisek Financial Weekly Market Update for October 18, 2017

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Good morning!

Over the 4 years from 2013-2016, the measurement of American inflation (using the CPI) on a year-over-year basis reached the Federal Reserve’s stated target of +2% at the end of just 3 months, i.e., 3 out of 48 months.  These results have provided ample fuel for the group of Fed officials who have consistently voted to refrain from additional rate hikes, suggesting that no tightening was needed to fight an inflation battle that doesn’t exist.  But following the release just last week of +2.2% annual inflation (through 9/30/17), the +2% target threshold has now been achieved at the end of 5 of 9 months YTD in 2017.  Fed minutes from their September meeting indicate that the recent results coupled with our nation’s 4.2% unemployment rate has other officials concerned that inflation could surge, making a December 2017 rate hike a possibility (source: Federal Reserve).    

Retail sales in the United States reached a record $484 billion in September 2017, gaining a healthy +3.6% annually over the last 5 years.  A key factor behind the record total of retail sales: we’re spending a lot less at the gas pumps, freeing up billions for shopping sprees that had been put on hold.  E.g., Americans spent $47 billion at gasoline stations in September 2012, a total that has dropped by $8 billion to $39 billion in September 2017 (source: Census Bureau).        

It was 30 years ago this week (10/19/87) that the S&P 500 nosedived, losing an astonishing 20.5% in a single trading day.  Remarkably, the stock index bounced back quickly, posting a +5.3% gain (total return) for all of 1987 (source: BTN Research).       

Notable Numbers for the Week:

1.     BE REAL CAREFUL - 54% of 1,006 adults surveyed in early August 2017 believe that the American stock market will suffer a correction of at least 10% before the end of 2017 (source: Gallup).  

2.     CRUDE INTO FUEL - The United States has 141 operable oil refineries in 2017, 78 fewer than the 219 refineries that America had in operation in 1987 or 30 years ago (source: Energy Information Administration). 

3.     UP AND DOWN - Congress has raised the top individual marginal tax rate 4 times since 1950, most recently in 2013 when they raised the top rate from 35% to 39.6%.  Congress has lowered the top individual marginal tax rate 9 times since 1950, most recently in 2003 when they dropped the top rate from 38.6% to 35% (source: IRS).    

4.     SENIORS - 15% of the US population is at least age 65, ranging from 19% of Florida’s citizens to just 11% of Utah’s residents (source: Census Bureau). 

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