Vorisek Financial Weekly Market Update for October 10, 2018

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Good morning!

It was 10 years ago (10/16/08) that Warren Buffet wrote his “Buy America, I Am” op-ed article in the New York Times.  Buffett encouraged stock investors to “be fearful when others are greedy and be greedy when others are fearful.”  Buffett’s letter was released less than 5 months before the stock market bottomed on 3/09/09, ending a 57% decline of the S&P 500.  The index closed at 946 on 10/16/08 and has more than tripled since then to close at 2886 last Friday 10/05/18.  A decade has passed since Buffett’s op-ed appeared and the crippling bear has become a long-running bull.  The question facing investors today has no obvious or simple answer: do they stay in the market and risk going down, or do they step out of the market and risk missing out? (source: NY Times). 

When bond investors believe the global economy is on a roll, they naturally worry about the speedbumps that may exist around the next corner.  Multiple central banks have been raising short-term interest rates since late 2015, leading to the concern that they will tighten too much and ultimately restrain worldwide economic growth.  The yield on the 10-year Treasury note has climbed 0.33 percentage points in just the last month to close last week at 3.23%, its highest level since May 2011 (source: BTN Research).                

The latest round of “good” news pushing yields higher was Friday’s jobs report that measured our nation’s unemployment rate at 3.7%, the lowest rate in the USA since December 1969.  Less than 6 million Americans who are actively looking for work are jobless today, our best result since December 2000 (source: Department of Labor). 

Notable Numbers for the Week:

  1. MORE MONEY - 618 US employers surveyed in the 1st quarter 2018 anticipate offering a starting base salary of $65,000 to college graduates with a bachelor’s degree, $85,000 to workers coming “direct-from-industry” and $105,000 to MBA graduates (source: Corporate Recruiters Survey Report 2018). 

  2. A DIFFICULT CONVERSATION TO HAVE - 53% of 2,638 widows surveyed in the 3rd quarter 2018 admit that they and their deceased husbands had no financial plan in place in the event that either spouse died (source: Merrill Lynch/Age Wage). 

  3. IT JUST DEPENDS - Life expectancy at birth varies by as much as 20 years depending upon the county where you are born in the United States (source: Dwyer-Lindren et al., JAMA Internal Medicine 2017).  

  4.  NO MONTHLY PAYMENT DUE - In 2011, 1 of 3 American homeowners (34%), owned their homes free and clear of any debt, i.e., no mortgage loan or line of credit.  In 2017, 2 of 5 American homeowners (40%) owned their homes free and clear of any debt (source: 2017 American Housing Survey).

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