Vorisek Financial Weekly Market Update for March 28, 2018

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Good morning!

The fear of an all-out trade war gripped Wall Street last week, driving stock prices down to near calendar year lows.  With just 4 trading days remaining in the first quarter 2018 (the markets are closed this next Friday), the S&P 500 is down 2.8% YTD (total return).  A negative quarter would break the index’s streak of 9 straight positive quarters and would be just its 2nd down quarter in the last 5 years.  The S&P 500 has had 20 trading days YTD that have resulted in at least a 1% gain or loss, more than double the 9 such trading days that the index experienced in all of 2017 (source: BTN Research).    

Ironically, by the time the contentious steel and aluminum tariffs became effective last Friday (3/23/18), 32 additional countries had been added to the exception list from the original 2 exempted nations – Canada and Mexico.  All 28 European Union (EU) countries plus Argentina, Australia, Brazil and South Korea, received last minute suspensions from the 25% steel and the 10% aluminum tariffs.  Further exemptions are expected over the next 5 weeks (source: White House).

The US government came within 11 hours of its 3rd government shutdown this year, but ultimately Congress and the White House agreed on federal spending levels for the fiscal year which will be half over later this week.  Legislation signed by President Trump funds the federal government through 9/30/18 and allowed both parties to claim victory – Republicans increased military spending by $66 billion over its 2017 level and Democrats added $52 billion to domestic programs.  “Fiscal discipline” is simply not a popular concept held by many current Washington lawmakers (source: BTN Research).            

Notable Numbers for the Week:

  1. HALF OF ONE PERCENT - The Federal Reserve began a rate-tightening cycle on 12/16/15.  In the 27 months since then (through Friday 3/23/18), the yield on the 10-year Treasury note has increased 0.52 percentage points from 2.30% to 2.82% (source: Treasury Department).  

  2. ENERGY INDEPENDENCE? - American oil producers have pumped at least 10 million barrels a day of crude oil for the last 7 weeks, hitting 10.407 million barrels per day for the week ending Friday 3/16/18.  The last time US oil producers hit 10 million barrels a day of crude oil was in 1970 (source: EIA).   

  3. ONE MONTH - The US government ran a $215 billion budget deficit in February 2018.  Until 1986, the government had not recorded an annual deficit as high as $215 billion (source: Treasury Department). 

  4. DEMOGRAPHIC SHIFT - By the year 2035, the projected number of Americans seniors aged 65 and up (78.0 million) will exceed the number of American children under the age of 18 (76.4 million), the first time in US history that will have occurred (source: Census Bureau). 

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