Vorisek Financial Weekly Market Update for November 28, 2018

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Good morning!

This “correction” feels different, but is it because it’s the most recent tumble or have circumstances changed?  When the S&P 500 closed last Friday (11/23/18), the index had fallen 10.2% from its 9/20/18 all-time closing high, making the decline the 6th drop of at least 10% (but less than 20%) since this 9 ¾ year bull run began on 3/10/09.  Following the first 5 “corrections,” investors who had missed out on the market advance rushed in, “buying on the dip” and pushing stock prices higher.  Now stock buyers must evaluate the future impact of slowing global growth and upcoming Fed rate hikes before utilizing that strategy again (source: BTN Research).                    

Here’s what the “smart money” was forecasting for crude oil prices in 2018: the US would impose oil export sanctions on Iran’s daily production of 2 million barrels, causing oil shortages that could push $60 a barrel oil (its price from 12/31/17) to $100 a barrel.  The reality is that instead of shortages causing rising prices, an oversupply of oil has driven market prices down as reflected by last week’s closing price of $50.42 a barrel.  Oil analysts did not anticipate the technological explosion that was taking place in the industry that has allowed operation teams in the field to benefit from an increased use of information technology.  This data, used to determine “where” to drill and “how” to drill, is helping to create more oil domestically than ever in our history (source: NYMEX).             

Leaders from the United States and China will meet later this week in Buenos Aires, Argentina at the G-20 Summit.  Investors will be looking for the 2 superpowers to change course on the trade tariffs that have shaken the globe’s economic balance in 2018 (source: BTN Research).         

Notable Numbers for the Week:

  1. EDUCATION - Outstanding student loan debt in the USA was $360 billion as of 3/31/05, doubled to $720 billion as of 12/31/09 and now has doubled again to $1.44 trillion as of 9/30/18 (source: Federal Reserve). 

  2. BACKSTOP - The Pension Benefit Guaranty Corporation (PBGC) was forced to take over an average of 9 failed pension plans per month over the last 15 fiscal years, i.e., 2004-2018 (source: PBGC).   

  3. DOES NOT COVER EVERYTHING - Medicare beneficiaries are still responsible for an average of $5,503 per year of “out-of-pocket” health care spending.  That total is projected to increase to $7,877 per year by the year 2030 (source: Kaiser Family Foundation). 

  4. HIRE A VETERAN - As of October 2018, there are 19.1 million veterans of the military in the USA, of which 9.1 million have full-time jobs in the private sector (source: Department of Labor). 

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