Vorisek Financial Weekly Market Update for February 28, 2018

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Good morning!

It will take a bounce back in stock prices, but the S&P 500 has a chance to set a record for consecutive “up” months if it can stage a comeback early this week.  The widely followed stock index, devised in 1957, has strung together 15 consecutive months of total return gains (i.e., November 2016 through January 2018), gaining +36.2% in the process.  But with just 3 trading days remaining in February 2018, the S&P 500 finds itself down 2.5% “month-to-date” and will need to rally to complete yet another monthly gain.  The 15-month record was achieved only one other time – March 1958 through May 1959 – during the 2nd term of the Eisenhower administration (source: BTN Research).      

The month of February has historically been the worst month for “outlays” and “receipts” of the US government.  For the last 15 fiscal years (2003-2017), the deficit in February (i.e., spending “outlays” in excess of tax “receipts”) has been the largest monthly deficit recorded each year.  Not surprising, the worst deficit month ever recorded in US history (a deficit of $232 billion) occurred just 6 years ago in February 2012 (source: Treasury Department). 

Federal Reserve Chairman Jerome Powell, on the job only 3 weeks as of today, will deliver the chairperson’s traditional semiannual monetary policy testimony to separate House and Senate committees this week.  Powell will be questioned by lawmakers on the strengthening US economy (now in its 104th month, the 3rd longest in US history) and the implications for Fed rate-hike action in 2018.  The yield on the 10-year Treasury note reached 2.94% last week.  The last time the 10-year note yield was at least 3% was on 1/03/14 or more than 4 years ago (source: National Bureau of Economic Research).     

Notable Numbers for the Week:

  1. U.S. DEBT HOLDERS - The Federal Reserve owned more Treasury securities at the end of 2017 ($2.45 trillion) than Japan ($1.06 trillion) and China ($1.18 trillion) combined (source: Treasury Department).

  2. BORROW TO LIVE - Aggregate household debt in the United States reached $13.15 trillion as of 12/31/17, the highest level ever recorded.  Household debt has now increased for 14 consecutive quarters (source: Federal Reserve).

  3. LONG LIFE - Life expectancy at birth in the USA was 51.7 years in 1916.  Life expectancy at birth was 78.6 years in 2016.  Thus, life expectancy has increased by 10 years every 37 years (source: CDC). 

  4. LOYALTY? - 2 out of 3 Millennials (66%) expect to change jobs within the next 5 years.  Millennials were born between 1981-97 and are age 21-37 in 2018 (source: 2016 Deloitte Millennial Survey).       

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