Vorisek Financial Weekly Market Update for June 14th, 2017

 

Good morning!

When the Federal Reserve raised short-term interest rates on 12/16/15, it was their first rate hike in 9 ½ years.  It also ended 7 years of near zero interest rates that had been maintained by the nation’s central bank, a stretch that was necessitated by the real estate crisis that exploded globally in September 2008.  That initial rate hike 18 months ago has been followed by 2 more increases (of ¼ of 1% each), the latest coming on 3/15/17.  This week’s 2-day Fed meeting is widely expected to produce another rate hike, as evidenced by the 99.6% probability shown by the Fed funds future market at the close of trading last Friday 6/09/17 (source: Federal Reserve).      

Long-time Washington observers know the numbers: the last major tax reform was enacted 31 years ago.  Since then, a plethora of deductions, exemptions and credits have worked their way back into the US tax code.  The Trump White House is working behind the scenes in drafting its version of tax reform, targeting an early September 2017 release date to deliver a plan to Congress.  The administration’s game plan is to pay for tax cuts by eliminating deductions and creating economic growth through a lower corporate tax rate (source: White House). 

Treasury Secretary Steven Mnuchin has urged Washington lawmakers to increase the nation’s debt ceiling limit, frozen at $19.846 trillion since mid-March 2017, before they recess for 5 weeks on 7/29/17.  The White House had forecasted in late May that our national debt will reach $24.7 trillion by 9/30/27 (source: White House).   

 

Notable Numbers for the Week:

1.    WHAT DO THEY KNOW? - The S&P 500 may be up +9.6% YTD (total return) through Friday 6/09/17, but only 35% of stock investors are currently bullish on US equities for the upcoming 6 months.  Ironically only 19% of individual investors were “bullish” on US stocks just 5 days before a bull market began in March 2009 that has now lasted 99 months up to the current day (source: AAII).   

2.    FALLING OIL PRICES - The 13-nations that make up OPEC earned $433 billion in net oil export revenues in 2016, its lowest earnings total since 2004 (source: Department of Energy). 

3.    IT’S VERY IMPORTANT - 58% of American retirees consider their monthly Social Security benefit to be a “major source of retirement income” (source: Gallup).

4.    THANK YOU FOR YOUR SERVICE - Retired military personnel are responsible for just a $150 per person annual deductible for TRICARE health insurance coverage (source: TRICARE).       

 

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