Vorisek Financial Weekly Market Update for April 18, 2018

Good morning!

Chinese automobile sales during 2017 were 28.88 million vehicles.  Just under 1% of that total (266,657) were Chinese purchases of cars exported from the USA.  A speech made by Chinese President Xi Jinping on Tuesday 4/10/18 included a promise to “significantly lower” tariffs on imported American vehicles, a comment that dampened fears of an escalating trade war with the United States.  American investors are also concerned about the $1.18 trillion of US Treasury debt that is owned by the Chinese government, 8% of the $14.47 trillion of US government debt that was outstanding as of the end of last year.  The Chinese could dump those debt securities on the world market, immediately causing higher interest rates on American borrowers but at a substantial cost to China (source: China Association of Automobile Manufacturers, Treasury Department). 

The state of New York last week became the 7th and latest state to officially endorse a voluntary retirement savings program for private-sector workers.  71% of American workers have access to an employee-funded defined contribution retirement plan at work, e.g., 401(k) plan, suggesting that the other 29% of workers (45 million people) could benefit from these new programs (source: Transamerica Center for Retirement Studies).   

The US government is projected to run a $12.4 trillion budget deficit over the next decade, i.e., $44.2 trillion of tax revenues vs. $56.6 trillion of spending outlays over the 10 fiscal years from 2019 to 2028.  The $56.6 trillion is split between 62% of mandatory spending (e.g., Medicare, Medicaid, Social Security), 26% of discretionary spending (e.g., defense) and 12% of net interest costs (source: Congressional Budget Office).    

Notable Numbers for the Week:

  1. THREE IN-A-ROW - The S&P 500, down on a total return basis in February and March this year, has been negative 3 or more consecutive months just 3 times in the last decade (source: BTN Research).   

  2. TOP FIVE AND THE REST - The top 5% of US taxpayers (based upon adjusted gross income) paid more federal income tax ($866 billion) during tax year 2015 (the latest year that tax information has been released) than the federal income tax paid ($588 billion) by the bottom 95% of taxpayers.  141 million tax returns were filed for tax year 2015 (source: Internal Revenue Service).   

  3. PUT IT ON THE CARD - Credit card debt in the USA was $1.03 trillion as of February 2018, its highest level ever.  Credit card debt was $1.02 trillion in May 2008 (source: Federal Reserve).  

  4. NOT MANY - A study released on 3/22/18 estimates that just 4% of personal bankruptcies are “associated with a prior hospital admission” (source: Myth and Measurement – The Case of Medical Bankruptcies).   

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