Vorisek Financial Weekly Market Update for August 1, 2018

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Good morning!

The real estate crisis that exploded across the globe more than a decade ago forced an untold number of Americans (mostly Millennials) to delay their purchase of the “American Dream” – owning a home.  Over the 10 years from 6/30/07 to 6/30/17, the number of “renter” households in the USA increased by 8.4 million to 43.4 million (up +24%), while the number of “owner” households was flat, increasing by just 0.9 million to 76.1 million (up just +1%).  However, over just the last year (the 12 months from 6/30/17 to 6/30/18), the trend has reversed as the number of “renter” households actually declined by 0.1 million to 43.3 million, while the number of “owner” households jumped by 1.8 million to 77.9 million (source: Census Bureau).                

The race towards a global trade war slowed last Wednesday (7/25/18) when US President Donald Trump and European Union President Jean-Claude Juncker announced the establishment of a “joint executive working group” that would focus on lowering tariffs between the US and the 28-nation EU, the 2 largest trading blocks in the world representing just under half of the globe’s economy.  Unsaid but clearly implicit in their post-meeting statement was the coordination of the US and the EU against Chinese trade violations, always the end target of the Trump White House (source: BTN Research). 

The US economy grew by +4.1% in the 2nd quarter 2018, i.e., quarter-over-quarter increase expressed as an annualized result, the best performance during the Trump administration.  In the last dozen years (48 quarters), there have been just 4 quarters that reported a higher growth rate (source: Commerce Department).  

Notable Numbers for the Week:

  1. A WILD TIME - The 10 best trading days for the S&P 500 in the last 10 years (i.e., 7/01/08 to 6/30/18) all occurred between 7/01/08 and 3/31/09, i.e., the first 9 months of the last 10 years.  The 9 months match the 8 months before and the 1 month after a “bear” market that ended on 3/09/09 (source: BTN Research). 

  2. ALREADY HAPPENING - Before the Trump White House began threatening to impose trade tariffs, the United States already was imposing a 2.5% tariff on imported foreign vehicles.  American autos exported to the 28-nation European Union were already subject to a 10% tariff (source: BTN Research).

  3. IT’S A GLOBAL MARKETPLACE - The companies in the S&P 500 received 43% of their 2016 sales from foreign customers (source: S&P Global Inc.)

  4. INSURED PROPERTY - Property and casualty insurers paid out a record $135 billion globally in 2017, the highest amount ever.  Catastrophes included hurricanes, earthquakes and wildfires (source: Munich Re).  

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