Vorisek Financial Weekly Market Update for September 27, 2017

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Good morning!

It was widely expected and now it will start.  “Quantitative Easing” will morph into “Quantitative Shrinking.”  The Federal Reserve confirmed its plan to start in October to have $10 billion of bonds mature each month without reinvesting the principal.  That amount will increase by an additional $10 billion a quarter before peaking at $50 billion per month in October 2018.  By the end of 2019, the Fed will have walked away from reinvesting in slightly more than $1 trillion of bonds.  In anticipation of the Fed reversing course with regard to its balance sheet, interest rates have been rising.  The yield on the 10-year Treasury note rose for 10 consecutive trading days (to 2.28%) through Thursday 9/21/17 before backing off on Friday to 2.25% (source: Federal Reserve).   

From the depths of the 2008 global financial crisis, the aggregate net worth of Americans fell by more than $8 trillion to bottom at $50.4 trillion as of 3/31/09.  Powered by a recovering real estate market and an 8 ½ year bull market for stocks, our aggregate net worth has rocketed to an all-time record high of $96.2 trillion as of 6/30/17, setting the stage for reaching $100 trillion by year-end 2017 (source: Federal Reserve).   

Washington lawmakers know the rules: the only way to access the fast-track strategy of “reconciliation” (which allows for a bill’s passage with just a simple majority) is to have “instructions” written into that year’s budget agreement.  For Republican lawmakers, completion of the fiscal year 2018 budget (with “reconciliation instructions” for House and Senate tax writing committees) is the gateway to tax reform, something that has not been accomplished in Washington since 1986 (source: Congress).        

Notable Numbers for the Week:

1.     IMPORTS - The USA imported an average of 51,500 shipping containers per day in 2016, an all-time record.  Each box is a 20-foot long cargo container.  The 2 busiest container ports in the USA are Los Angeles and Long Beach (source: National Retail Federation).   

2.     GONNA PARTY LIKE IT’S 1999 - After adjusting numerical data from the past for the impact of inflation, the median household income in 2016 ($59,039) is the highest ever recorded in the United States, surpassing the previous median income record high ($58,665) set in 1999 (source: Federal Reserve).  

3.     TOP ECHELON - It took $170,500 of household income to rank in the top 10% of earners in calendar year 2016 (source: Census Bureau).  

4.     BEST CITY - The # 1 city in the United States for jobs is Pittsburgh.  The study was based upon job openings, median base salary, job satisfaction and the median cost of a home (source: Glassdoor). 

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