Vorisek Financial Weekly Market Update for October 17, 2018

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Good morning!

Perhaps last week was the beginning of the bear market for stocks that has been widely anticipated by some equity prognosticators for more than 5 years.  But then again maybe the tumble will be just another buying opportunity for investors who have been stuck on the sidelines.  From its all-time closing high of 2931 set on 9/20/18, the S&P 500 has been down 12 of the next 16 trading days, losing 5.5% (total return).  October has rightfully earned its reputation as the most “volatile” month – 5 of the 7 worst days for the S&P 500 since 1950 have occurred during October, along with the 3 best days for the index since 1950.  This upcoming Friday (10/19/18) marks the 31st anniversary of the “Black Monday” stock market crash of 1987, a 1-day drop of 20.5%.  Remarkably, the S&P 500 still gained +5.3% for all of 1987 (source: BTN Research).                        

The “cost of living adjustment” (COLA) made to Social Security benefits is calculated based upon the year-over-year increase in prices during the 3rd quarter of subsequent years.  The +2.8% COLA that will be applied to benefits beginning in January 2019 is based on the change of prices from the 3rd quarter 2017 to the 3rd quarter 2018.  The +2.8% bump represents the largest COLA boost in 7 years and will increase the average monthly Social Security benefit to $1,461 (source: Social Security).   

As the yield on the 10-year US Treasury note climbs, so does the rate on fixed rate mortgages.  The national average rate on a 30-year fixed rate mortgage rose to 4.90% last week, its highest level since April 2011 and up 0.99 percentage points from a year earlier (source: Freddie Mac).     

Notable Numbers for the Week:

  1. CRUDE INTO FUEL - The USA has 135 operable oil refineries in 2018, 123 fewer than the 258 refineries that America had in operation in 1983 or 35 years ago (source: Energy Information Administration). 

  2. JAPAN IS OUT, CHINA IS IN - In 2008, China’s economy ($4.5 trillion) was smaller than Japan’s ($4.9 trillion).  In 2018, China’s economy ($12 trillion) is more than twice the size of Japan’s ($5 trillion) (source: BTN Research).  

  3. PLEASE LEAVE NOW - During the depths of the mortgage crisis, 1,050,500 homeowners had their homes repossessed during 2010.  Just 133,290 homes were repossessed during the first 6 months of 2018 (source: Attom Data). 

  4. DEBT FOREVER - 44% of homeowners between the ages of 60-70 who have outstanding mortgage debt anticipate still having some mortgage debt when they retire (source: American Financing)  

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If you do not want to receive further editions of this weekly newsletter, please contact Jayne Weddington at 614-431-4328 or e-mail us at info@vorfin.com.  You may also write us at 300 W. Wilson Bridge Rd., Suite 320, Worthington, OH 43085. Securities and Investment Advisory Services offered through FSC Securities Corp., a broker/dealer and registered investment advisor. Member FINRA/SIPC. Vorisek Financial Corporation is not affiliated with FSC Securities Corporation or registered as a broker dealer or investment advisor.