Vorisek Financial Weekly Market Update for March 7, 2018

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Good morning!

President Donald Trump announced plans last Thursday (3/01/18) to impose tariffs of 25% on steel imports and tariffs of 10% on aluminum imports for an undefined period.  The order, described by the White House as necessary action to protect the jobs of the 170,000 Americans employed by steel and aluminum manufacturers, could be signed into law this week.  The proposed tariffs, which will add an inflationary push to the economy, are intended to reduce purchases of both metals from foreign manufacturers and increase the consumption of domestically produced metals.  China, the producer of nearly half the world’s steel, is the administration’s target of the steel tariff (source: White House).  

The stated objective of the Federal Reserve is stable prices (read that as low inflation) and maximum sustainable employment (read that as a low jobless rate).  Jerome Powell, who began as Fed Chair just a month ago today, is faced with a very different economic environment than his predecessor Janet Yellen.  Powell provided a bullish assessment of the US economy in testimony before House and Senate committees last week, leading bond watchers to speculate that as many as 4 Fed rate hikes could occur in 2018, up from the 3 increases that the debt marketplace had been expecting (source: Federal Reserve).         

The personal savings rate in the United States rebounded to 3.2% in January 2018, up from a near historic low of 2.4% in December 2017.  The monthly statistic, tracked since 1959, reached an all-time high of 17.0% in May 1975 and fell to a record low of just 1.9% in July 2005 (source: Commerce Department).   

Notable Numbers for the Week:

  1. NOT ALWAYS UP - The nearly 9-year bull market run for the S&P 500 that began on the morning of 3/10/09 has gained +381% (total return) through last Friday 3/02/18, an annualized return of +19.1% per year.  During the entire 9 years, the index has had 5 separate “corrections” of at least 10% but less than 20%.  The ending dates of the 5 “corrections” are 7/02/10, 10/03/11, 8/25/15, 2/11/16 and 2/08/18 (source: BTN Research).  

  2. SAVING - 51% of pre-retirees say that their efforts to save for retirement are “behind schedule” while only 15% of pre-retirees are “ahead of schedule” (source: Society of Actuaries). 

  3. IMPROVING TREND – American banks repossessed 292,000 homes in 2017, 379,000 homes in 2016 and 450,000 homes in 2015 (source: ATTOM Data Solutions).   

  4. MAESTRO - Former Fed Chairman Alan Greenspan turns 92 years old tomorrow (3/06/18).  Greenspan was the Fed’s Chairman for 18 ½ years beginning 8/11/87 through 1/31/06 (source: Federal Reserve). 

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