New Year's Resolutions

Are you planning to make a New Year’s resolution tonight? According to a study by Fidelity Investments, 37 percent of Americans are considering making a financial resolution in 2016, up from 31 percent in 2015. The kicker is that most of those who made such resolutions last year consider themselves to be in better financial shape today.

What do these resolutions consist of? By far the most popular was resolving to save more in the new year, which was cited by 54 percent of those surveyed. Another 19 percent vowed to spend less, and 16 percent said they wanted to pay off debt. Paying down credit card debt reached an all-time high of 11 percent in the annual study, compared with just 5 percent last year.

For those whose top priority was saving, 63 percent said they preferred to set aside money for long-term goals — such as college, retirement and health care — up from 57 percent in 2014. No matter your goals and plans, here’s hoping you have a happy and healthy new year.

Big Winners of 2015

Yesterday we took a look at the S&P 500's biggest losers of 2015. The other side of the coin is Netflix, the top performing stock in the S&P 500 this year. It opened the year at 49 and is now sitting at around 119, for a gain of a stunning 144 percent.

In second place is Amazon.com, which is up 114 percent on the year. Like Netflix, Amazon.com is in the S&P 500's consumer discretionary sector, which ended up being the best-performing sector of the year. It's up 9 percent in 2015.

In third place is the video game company Activision Blizzard, which could also be considered a consumer discretionary stock but is classified by S&P as an information technology company. It's up about 95 percent on the year.

The Biggest Losers of 2015

There are still a couple of days left in which things could turn around, but as it stands, it looks like the biggest loser in the S&P 500 this year will be Chesapeake Energy. The Oklahoma City-based energy exploration company opened the year at 19.42 but tumbled along with oil prices throughout the year. It's now at 4.07 - losing 79 percent of its value in a single year.

Close behind Chesapeake were a couple of other oil & gas stocks. Southwestern Energy has lost 75 percent of its value this year, and Consol Energy has lost 74 percent. All told, the S&P 500's energy sector is down 22 percent for 2015.

The biggest loser not in the energy sector was Freeport-McMoRan, which has lost 67 percent of its value. Although it's technically in the materials sector because of its extensive mining operations, Freeport also is involved in the oil & gas industry.

The Santa Claus Rally

The markets saw a little bit of what is commonly known as the Santa Claus rally last week. As often happens around the holidays, the S&P 500 index surged in the week leading up to Christmas by 2.4 percent, although on very little volume. That was enough to inch the S&P into positive territory for the year, although just barely - it's up by 0.1 percent.

This is typically a good time of the year for the stock market. According to the Stock Trader's Almanac, over the past 40 years, the S&P has risen by an average of 1.4 percent in just the week between Christmas and New Year's.

That sets us up for January, which has historically been a good month for stocks, as well as a barometer for the rest of the year. Since 1950, January has seen an average return in the S&P of about 1 percent.

Thoughts for Christmas Day

"Christmas is the gentlest, loveliest festival of the revolving year — and yet, for all that, when it speaks, its voice has strong authority." ~ W.J. Cameron

"Our hearts grow tender with childhood memories and love of kindred, and we are better throughout the year for having, in spirit, become a child again at Christmas-time." ~ Laura Ingalls Wilder

"Christmas is not as much about opening our presents as opening our hearts." ~ J.L.W. Brooks

The Source of New Holiday Ideas

Have you been overwhelmed this holiday season with having to come up with new ideas for cooking and decorating and celebrating? Fear not, for a new study has found that people can generally ome up with more creative ideas than they expect.

In a study conducted at two business schools, 24 students were given 10 minutes to think of dishes to serve at Thanksgiving. After they had done that, the students had to predict how many more ideas they could generate if they kept going for 10 more minutes. Then they were asked to try to generate ideas for another 10 minutes.

On average, the students predicted they could generate around 10 new ideas if they stuck with it for a whole. But when pressed, they were actually able to come up with around 15 more ideas. The researchers also found that the ideas generated while persisting were, on average, more creative than the initial ideas. So stick with it!

The Aging Population and Health Care Jobs

An estimated 10,000 Americans turn 65 every day as the baby boom generation reaches retirement age, while the number of school-age children has been falling.  From 2009 to 2014, the population ages 5 to 18 fell by 1 percent. That has meant a big shift in employment figures.

As the Labor Department reported recently, the health care industry has become  widespread source of jobs in America. The economy added 638,000 jobs in the education and health services industry sector between November 2014 and November 2015, the bulk of them in health care. Twenty-one different states added at least 10,000 in the sector over the past year.

The biggest states for this sector have been California, Texas and New York, which added 71,000, 63,800 and 72,100 respectively over the previous 12 months. With its many retirees, Florida added 46,900 jobs in the sector.

Wages Picking Up?

Unemployment has been falling steadily for about six years now, but wages haven't really kept pace. For the past five years, annual wage increases have averaged a meager 2 percent, but many economists feel that salaries are about to pick up.

Here's why: Joblessness has fallen to a seven-year low of 5 percent from a 26-year high of 10 percent in 2009. Because of that, there are now 1.5 unemployed job seekers for every posted opening, down dramatically from a 2009 high of 6.8. That's even lower than the level at the end of the last economic expansion.

Some people have already seen the benefits of the tighter labor market: workers are showing more willingness to leave a job. The quits rate, which shows the willingness of employees to leave their jobs, was at 1.9 percent in October, up from 1.3 percent in 2009 and nearly at the 2 percent average we saw during the last expansion.

A Rocky December

The Dow industrials dropped a whopping 370 points on Friday at the end of a historic week. Between the continuing drop in oil prices and the Fed raising interest rates for the first time in almost a decade, it is shaping up to be the most volatile December for the Dow Jones industrial average since 2008.

So far in December, the Dow has registered 12 days with moves of 100 points or more between one day’s closing bell and the next - five up moves and seven down moves. In December of 2008, there were a total of 13 such days.

December 2008 was just after the Lehman Brothers and Bear Stearns meltdowns. But even that December, as volatile as it was, looked better than this one. That December saw seven up days where the Dow moved up by at least 100 points, and six where it moved down by that much.

Investors Are Getting Nervous

The ups and down of the stock market are starting to have an effect on investors' attitude. According to a new Wells Fargo/Gallup Investor survey, 62 percent of all U.S. investors now say they are concerned about the stock market's volatility.  In February, before the market fluctuations in late summer and fall, a bare majority of 53 percent expressed concern.

Eighteen percent of U.S. investors now say they are "very" concerned about market volatility, and another 44 percent are "somewhat concerned." Those numbers are both up slightly from 14 percent and 39 percent, respectively, in February.

But the long term still looks pretty good. At the same time, 43 percent of those surveyed now say they have "a great deal" or "quite a lot" of confidence in stocks as a place to save and invest for retirement. That's actually up from 40 percent in February.

Interest Rates Going... Down?

As expected, the Federal Reserve raised its benchmark interest rate yesterday, hiking the Fed funds rate by one quarter of one percent. At the same time, though, Fed officials lowered expectations for future interest rate hikes.

The Fed meeting is also the occasion for Fed officials to issue their interest rate projections for the upcoming years - the so-called dot plot. And some of those projections for 2017 and 2018 have been revised downward.

After October's meeting, for instance, one official saw rates going as high as 4 percent by 2017, but after this meeting, the highest 2017 projection has dropped under 3.5 percent. In October, three members projected rates in 2018 to be below 3 percent, but now, that number has increased to six.

The Looming Rate Hike

Today is the big day for the Fed: This afternoon, the Federal Reserve's Open Market Committee is expected to raise interest rates above the near-zero levels they've been at for the past seven years.  With unemployment at 5 percent and inflation at around 2 percent, the Fed probably sees the economy as strong enough for an interest rate hike.

A departure from a policy that has stood for seven years could be thought to be disruptive to the economy, but this probably won't be. For one thing, the markets have been expecting this for some time, and it's already baked in to most prices. As we noted the other day, mortgage rates have already risen in expectation of this.

The other thing to keep in mind is that the first rate hike is likely to be one quarter of one percent, or possibly one half. If it were a change from any other baseline - from 2 percent to 2 and a quarter, say - it would have minimal effect on the economy. This one is likely to as well.

Going Nowhere Fast

How frustrating has the stock market been lately? Even though the S&P 500 was up slightly yesterday, it has now gone the 28 straight trading days without making back-to-back gains. That is tied for the longest such streak since 1970, according to Kimble Charting Solutions.

Over the past 45 years, the S&P 500 has managed to go that long without consecutive increases just three times. It happened in 1970, 1994, and once earlier this year between February and March.

The good news is, this pattern typically precedes a rise in the market. Since 1970, the large-cap index has gone at least 25 sessions without consecutive gains on seven previous occasions. Six months later, it was up by an average of 5.3 percent.

The Fed and Mortgage Rates

Thie biggest financial news of this upcoming week will be the results of the Fed's Open Market Committe on Wednesday. The Fed is widely expected to raise interest rates at that meeting, which would move the benchmark fed funds rates above the near-zero level for the first time since Dember 2008.

How widely expected is it? You can already see interest rates starting to rise in various corners of the economy. Last week, the average interest on a 30-year fixed-rate mortgage rose to 3.95 percent, according to Freddie Mac. At the end of October, a month and a half ago, that figure was at 3.76 percent.

The 15-year fixed-rate mortgage has also been creeping up, rising by 0.03 percentage points in the last week alone. But that rate is still just at 3.19 percent.

Not Really Standing Still

Investors know by now that it’s been a flat year for stocks. Year to date, the S&P 500 has declined by less than 1 percent. But flat doesn't mean that the numbers have flat-lined - we've actually seen, in one sense, a record amount of movement.

The S&P has flipped between positive and negative territory for the year 24 times, according to data compiled by Bespoke Investment Group. That's a record number for that category. And of course we still have 14 trading days left.

If history is any guide, that sort of flip-flopping could bode well for 2016. Since 1928, the 12 years with the most number of crosses above and below the baseline for the year were followed by years where the S&P was up an average of 9.6 percent, compared to an average annual gain of 7.5 percent in that time frame.

The Fall of the Middle Class

Yesterday we discussed the growth in high net worth households in America. Another study out this week shows the other side of the coin: The middle class, even though it's growing in terms of households, has been losing wealth in recent decades.

In early 2015, there were 120.8 million adults in middle-income households, according to a new analysis of government data by the Pew Research Center. However, the share of income held by middle-income families has fallen from 62 percent to 43 percent in 2015. The wealth held by lower-income households has remained stable, while the share of income held by upper-income households rose to 49 percent in 2015 from 29 percent in 1971.

The last 15 years have been particularly difficult for middle class households. Thanks to the collapse in housing prices and the Great Recession, their median wealth — assets minus debts — fell by 28 percent between 2001 and 2013.

Where the Wealthy Are

The wealthy keep on growing: According to the U.S. Wealth Report 2015 released yesterday by Capgemini, the population of U.S. high net worth individuals, or HNWIs - defined as those with at least $1 million in investable assets aside from their residence - reached a record 4.4 million in 2014.That figure grew by 8.6 percent last year,  and overall U.S. HNWI wealth expanded by a 9.4 percent increase to reach $15.2 trillion.

While New York remains the city with the highest HNWI population overall, the numbers are actually growing much faster in other parts of the nation. The top six cities for HNWI growth were in Texas and the West Coast, driven in large part by a strong real estate markets there.

The city with the fastest growing HNWI population in 2014 was Houston, at 14 percent. Seattle was second  at 12 percent. Chiccago was the major city with the slowest HNWI growth.

Another Blow to the Energy Sector

Just when you thought it couldn't get worse for energy stocks, they took another beating yesterday. Light, sweet crude dropped nearly 6 percent, to $37.65 a barrel, and several oil & gas stocks plummeted by 10 percent or more on the day. What happened?

• OPEC announced Friday that it was going to continue producing oil at near-record levels, despite the glutted market.
• Weather forecasts released Monday continued to show above-average temperatures in the next two weeks, putting a damper on expected purchases of heating fuel.
• Many oil and gas companies had taken on large debt loads to fund domestic drilling projects when prices were higher; oil companies with heavy debt loads saw their stocks hit especially hard in the downturn.

Happy in Retirement

We talk a lot about preparing financially for retirement, but there's some good news in the University of Michigan's recent Health and Retirement Study that should help ease a lot of worries. According to the survey, about 56 percent of retirees say they are very satisfied with retirement. Another 34 percent say they are satisfied, while only 9 percent say they aren’t at all satisfied.

On top of that, retirees also tend to become increasingly happy as they age in retirement. In the most recent survey, 21 percent of retirees aged 60 reported that they were not satisfied at all with retirement, as opposed to only 3 percent of retirees aged 90.

Not surprisingly, retirement happiness increased with wealth, income, and education level. But the most important driver of retirement satisfaction was self-assessed health status.

The November Jobs Report

November's jobs report couldn't have been more on the nose with recent trends. The Bureau of Labor Statistics said nonfarm payrolls increased by 211,000 jobs in November; the economy has added an average of 210,000 jobs a month this year. The headline unemployment rate was unchanged at 5 percent. 

On top of that, the October number was revised upward to 298,000  from the previous estimate of 271,000, and September was revised from 137,000 to 145,000. The consensus seems to be that the report gave the Federal Reserve plenty of confidence in the economy, and enough reason to raise rates later this month.

The construction industry led last month’s job creation, adding 46,000 jobs, while retailers added 31,000. But mining, which includes oil and gas extraction jobs, continues to reel: It lost 11,000 jobs last month, and is down 123,000 since December 2014.

State Spending

Personal consumption expenditures grew by about 3.5 percent in New Jersey in 2014, below the national average of 4.2 percent, according to a new study released by the Commerce Department. One reason our spending grew more slowly than those of other states is that it was already very high: At $9,128, New Jersey's annual spending on housing and utilities per capita is second highest in the nation, trailing only Maryland.

Expenditures on housing and utilities were the fastest-growing category in the nation last year, rising by 4.1 percent. Spending on health care was close behind, at 3.9 percent. Spending on gasoline and energy, meanwhile, dropped by 2.9 percent nationwide.

The state where overall spending grew the fastest in 2014 was North Dakota, where it was up 7.2 percent. In West Virginia, spending grew by just 2.1 percent, dead last among the 50 states.

Let's Make a Deal

The volume of mergers & acquisitions hit an all-time high in October of this year, a record that lasted all the way until November, when another new mark was reached. According to Dealogic, announced M&A volume for the month of November came in at $606.6 billion, which was up 7 percent from  October's record amount.

The biggest driver was the $160 billion merger between pharmaceutical titans Pfizer and Allergan, which is the second-largest deal on record. But there were a total of 11 deals valued at $10 billion or more last month, the highest such number on record.

Not surprisingly, we're headed for an annual record as well. By the end of November, Dealogic said that global M&A had hit $4.26 trillion, and the record for full-year volume is just $4.3 trillion, reached in 2007.

A Good Month for Small Caps

As we turn the calendar into December, if you're looking for a bargain in stocks, small companies appear to be the best bet. The market as a whole has posted positive returns 18 out of the past 20 years in the period between November 20 and the end of the year, but the Russell 2000, the benchmark for small-cap stocks, has risen an average of 5.6 percent during that period. The Russell 1000 large-cap index has risen by just 3.4 percent in that same stretch.

If you're not ready to get into the market just yet, that's all right. Research has found that most of that growth happens in the second half of the month. Since 1987, the Russell 2000 gains 3.5 percent on average in the last half of December versus 1.9 percent for the Russell 1000.

And the small-cap effect even limps along into January. Gains for that month since 1987 are 0.6 percent for the Russell 2000, and 0.5 percent for the Russell 1000.