At least in the short-run, equity investors have not been scared off from buying stocks following the S&P 500’s 10.2% correction that ended on 2/08/18. The 6 trading days since then have all been “up” with the index posting a +6.0% gain (total return), leaving the S&P 500 up +2.5% YTD. In the aftermath of the S&P 500’s next most recent correction (a 13.3% drop that ended on 2/11/16), the stock index gained +20.8% over the subsequent 6 months. Market drops are a reminder that bull markets do not last forever. The current bull will reach 9 years in length in just 17 days (source: BTN Research).
The United States has an entire generation of citizens who have never lived through annual inflation greater than +5%. Since prices increased +6.1% in 1990 (using the “Consumer Price Index”), inflation has averaged just +2.3% per year through 2017. But signs of wage inflation have prompted a continued selling of bonds, moving the yield on the 10-year Treasury note from 2.41% to 2.87% YTD. If given the dual choice between dealing with rising inflation (causing them to raise interest rates) or a struggling domestic stock market (encouraging them to lower interest rates), the current members of the Federal Reserve may lean towards the former and not the latter (source: BTN Research).
The fiscal year 2019 budget plan (i.e., the 12 months ending 9/30/19) released last week by the White House calls for $3.422 trillion of tax revenue and $4.407 trillion of outlays, resulting in a forecasted deficit of $984.4 billion. Our country’s actual deficit for the recently completed 2017 fiscal year was $665.4 billion (source: OMB).
Notable Numbers for the Week:
FEWER CHOICES - There were 1.48 million existing homes for sale in the United States as of 12/31/17, a drop of 460,000 in the last 6 months. The 1.48 million “for sales” is the lowest level reported in history for a statistic that has been tracked since 1999 (source: National Association of Realtors).
HOARDING MONEY – The $2.08 trillion of excess reserves held by US banks at the 12 regional Federal Reserve banks as of 1/31/18 is up $104 billion in the last 12 months. Excess reserves are funds held that are above and beyond the federally mandated reserve requirement amounts (source: Federal Reserve).
THIRTY TRILLION - The White House released on Monday 2/12/18 a 10-year projection for our nation’s outstanding debt. Our national debt, $20.7 trillion as of 2/12/18, is forecasted to reach $29.97 trillion in 2028. Our national debt hit $10 trillion on 9/30/08 (source: White House).
SAME INCOME, DIFFERENT YEARS - To rank in the top 1% of taxpayers in 1980 took $80,580 of adjusted gross income (AGI). To rank in the top 25% of taxpayers in 2015 took $79,655 of AGI (source: IRS).
This message and any attachments contain information, which may be confidential and/or privileged, and is intended for use only by the addressee(s) named on this transmission. If you are not the intended recipient, or the employee or agent responsible for delivering the message to the intended recipient, you are notified that any review, copying, distribution or use of this transmission is strictly prohibited. If you have received this transmission in error, please (i) notify the sender immediately by email or by telephone and (ii) destroy all copies of this message. If you do not wish to receive marketing e-mails from this sender, please reply to this email with the word REMOVE in the subject line. By industry regulation, we cannot accept time-sensitive information via e-mail. If you would like to execute a trade or if you have time sensitive information for me, please call my office. We cannot guarantee receipt of, nor the timing of placement, for investment orders received via e-mail.
If you do not want to receive further editions of this weekly newsletter, please contact me at 614-431-4328 or e-mail me at email@example.com or write me 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.