Vorisek Weekly Market Update for January 17, 2018

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Good morning!

For the first 2 weeks of 2018, the only direction the stock market has moved is north.  The S&P 500 has gone up 8 of 9 trading days YTD, setting all-time record closing highs on each of the “up” days.  After gaining +21.8% in 2017 (total return), the stock index has gained an additional +4.3% YTD.  For a longer term perspective however, since 1950 the S&P 500 index has been up 54% of 17,110 trading days, 60% of 816 months, 66% of 272 quarters and 74% of 68 years (source: BTN Research).  

Americans may be forced down the road to spend at the gas pump some of their 2018 tax savings.  The average price of a barrel of crude oil has risen each trading day this year, closing last Friday (1/12/18) at $64.30 a barrel, its highest level since December 2014.  The price of crude oil makes up 71% of the price of gasoline at the pump (source: Energy Information Administration).

19% of the $6.3 trillion of US Treasuries held by foreigners are owned by China, a total of $1.2 trillion.  When rumors surfaced last week that the Chinese had lost their appetite for American debt and were considering stopping or slowing down their bond purchases, the Treasury market shuddered.  For investors who have benefited from historically low interest rates since the end of 2008, already nervous with the Fed for reducing its holdings of US debt (through “Quantitative Shrinking”), the news of China backing away from future bond purchases was upsetting.  Even though the Chinese story was denied within 24 hours, the events demonstrated the vulnerability of the US bond market due to our nation’s $20.5 trillion of outstanding debt (source: Treasury Department).       

Notable Numbers for the Week:

1.     HUGE IMPACT - 43% of the Fortune 500 companies in 2017 (i.e., the 500 largest US companies as measured by annual revenues last year) were founded or co-founded by either an immigrant to the United States or by the child of an immigrant (source: Center for American Entrepreneurship). 

2.     LITTLE SHORTER - The life expectancy of a baby born in the United States in 2016 is 78.6 years, a decline of 0.1 year from 2015, the statistic’s second straight “year-over-year” drop after 21 consecutive years of increase (source: National Center for Health Statistics).     

3.     OFF A BIT - Americans purchased 17.2 million new cars and light trucks in 2017, down 2% from 2016’s total and breaking a streak of 6 consecutive years of increasing sales for the auto industry (source: Autodata).                       

4.     SLEEPLESS IN SEATTLE - 18 states increased their minimum hourly wage as of 1/01/18, including the state of Washington which has the highest minimum wage ($11.50 an hour) in the nation (source: Money). 

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