Friday, September 22, 2017

Who's Moving?

The share of Americans who moved to a different residence last year fell to its lowest point in the past decade, according to new estimates from the Census Bureau’s American Community Survey. But the degree of movement isn't the same for every generation.

This all-time low only holds when you include people under age 29, many of whom fall in the millennial generation. The number of people aged 20 to 24 who move has dropped by 6 percentage points in the last decade.

At the other end of the scale, older workers and those at or approaching retirement age are actually moving a bit more than they used to. U.S. residents ages 65 and over stopped moving as often in the wake of the recession, but in 2016 they actually moved at a faster rate than before the recession began.

Thursday, September 21, 2017

The Wild World of Consumer Stocks

Retail-sector blowups have driven the correlation between stocks in the S&P 500′s consumer discretionary sector to their lowest levels in years. The rolling 65-day correlation for consumer discretionary stocks in the S&P 500 stocks is at 0.39, near the lowest in at least seven years, according to Chris Verrone and Todd Sohn at Strategas Research Partners. The average since the start of 2011 is 0.56.

The changing retail landscape has made for very different fortunes for different consumer companies. Some of the biggest movers this year:

  • Wynn Resorts: up 66.58 percent
  • Netflix: up 45.52 percent
  • Mattel: down 47.30 percent
  • Foot Locker: down 51.81 percent

Wednesday, September 20, 2017

A World of Contrasts

A lot of stocks listed in emerging economies are are having banner years. The  MSCI Emerging Market Index has climbed 28 percent in dollar terms in 2017, far outpacing the 12 percent advance for S&P 500, according to Yardeni Research.

But not all of them are flourishing, and the range of individual country performances has been extreme. Yardeni says the correlation between individual emerging-market stock exchanges this year has plunged to 10-year lows.

For example, the MSCI India Index this year is up 23 percent in rupees while Brazil has climbed 24 percent in reals. Meanwhile, Russian stocks, as measured by the MSCI benchmark in rubles, have slumped 9.1 percent. Pakistan, which was upgraded from frontier market to emerging status just this year, is down 19 percent.

Tuesday, September 19, 2017

Where the Buybacks Here

Buybacks for companies in the S&P 500 index have been steadily dropping: They reached $120.1 billion in the second quarter, which is off 5.8 percent from the year-ago period, when companies repurchased $127.5 billion of their own stock. It's also down 9.8 percent from the first quarter of 2017.

One area where buybacks actually increased was the technology sector. Tech spent $27.6 billion on buybacks in the quarter, up 0.5 percent from the first quarter of 2017. Tech represents 23 percent of all buybacks, according to S&P.

On the other hand, there's Apple. The largest company in the economy by market capitalization, Apple spent "just" $7.1 billion on buybacks in the second quarter, down from $10.2 billion in the second quarter of 2016.

Monday, September 18, 2017

Another Year for Coming Out of the Market

Even with stocks in the midst of one of their best-ever runs, investors are on pace to pull more money out of U.S. stock funds than they put in for the third straight year and the eighth in the last 10 years. Through the first seven months of this year, investors pulled a net $8 billion out of U.S. stock funds.

In the years running up to the Great Recession, more money was going into the market than coming out. Now, the tide is in the opposite direction. Investors pulled an average of nearly $24 billion out of domestic stock funds annually from 2008 through 2016.

Instead of U.S. stocks, investors have been more interested in bonds. More than $235 billion went into bond funds through the first seven months of the year.

Friday, September 15, 2017

The Bulls Are Back

After tracking below historical levels for much of the year, bullish sentiment among investors jumped to its highest level since January for the week ended Wednesday. That's according to the American Association of Individual Investors’ latest sentiment survey.

Of those polled, 41 percent said they felt the stock market would rise over the next six months, up from 29 percent in the prior week. Meanwhile, 22 percent said they expected stocks to fall, down sharply from 36 percent.

But remember, the AAII results are often a contrarian indicator. That’s because some feel the stock market is most likely to crash when investors are piling in with little hesitation, as was the case around the time of the dot-com boom. On March 8, 2000, AAII said 58 percent of investors were bullish on the stock market - two days before the Nasdaq Composite finally reached its peak.

Thursday, September 14, 2017

The High Cost of Sports

America’s sports-industrial complex took in more than $100 billion last year, according to a survey released this week by CreditCards.com. Fans’ spending included $55.9 billion for sporting events, $33.4 billion for athletic equipment, $19.2 billion for gym memberships, $8 billion for sports-themed games, $4.8 billion for race entry fees and $2.3 billion for fantasy sports leagues.

In addition, 43 percent of the 18-to-53 age cohort paid to attend a sporting event in the preceding 12 months. Among those 53 and older, only 21 percent attended a sporting event.

CreditCards.com noted that a family of four put out $503 in 2016 to attend an NFL game, up 232 percent from $151 in 1991 - covering two adult tickets, two children’s tickets, two small beers, four small soft drinks, four hot dogs, two programs, two adult-size ball caps and parking. The same family spent $339 in 2016 to attend an NBA game, and $219 to watch a Major League Baseball game.

Wednesday, September 13, 2017

America's Good News

America's middle class had its highest-earning year ever in 2016, the U.S. Census Bureau reported yesterday. Median household income in America was $59,039 last year. That surpassed the previous record of $58,655 set in 1999.

We're even doing a little better here in the Northeast: Median household incomes here are the highest in the nation, at $64,390. That's followed by the West ($64,275), the Midwest ($58,305) and the South ($53,861).

The Census Bureau also reported Tuesday that the poverty rate fell 12.7 percent in 2016 — meaning 2.5 million people escaped poverty. This is the first time since the recession that the poverty rate has returned to the basic 2007 level of 12.5 percent, a sign of how the U.S. economy has recovered from the Great Recession.

Tuesday, September 12, 2017

The Old Bull

With the S&P 500 closing at a new all-time high yesterday, it has now been 3,108 calendar days since the last 20 percent decline, the traditional marker for a bear market.The current bull is now the second longest in history, behind the 4,494 days that passed between December 1987 and March 2000.

Today’s close was also a big deal in terms of gains for the current bull market.  The S&P’s gain of 267.6 percent over the course of this bull makes this the second strongest bull market on record as well, after the 1987 to 2000 era.

We haven't had a 10 percent correction in more than 18 months, but we also haven’t even had a correction of 5 percent since last June. The 441-day streak without a 5 percent correction is the sixth longest on record for the S&P 500.

Monday, September 11, 2017

A Good Time for Active Management

The research is in, and everyone agrees: This is a great investing landscape for active management. Nearly half of all actively managed U.S. stock funds did better than a composite of index funds in the 12 months through June, according to Morningstar.

The reason? Stocks are moving less often in herds, a departure from the years following the Great Recession. A scattered performance gives stock-picking managers more opportunities to differentiate themselves from index funds.

The Standard & Poor’s 500 rose 15.5 percent in the year through June 30, but that masks some big differences in performance underneath. The best-performing sector of the 11 that make up the index, financials, jumped nearly 33 percent over that time. The worst, telecoms, lost nearly 16 percent. That gap of nearly 49 percentage points between the first- and last-place sectors compares with a gap of 28 percentage points at the end of last year.

Friday, September 8, 2017

What Makes Millennials Sick

Do your money troubles make you sick? Financial anxiety has made about a quarter of millennials feel physically ill, according to a new study by Northwestern Mutual. It's also made more than half feel depressed.

For many millennials, who came of age and entered the job market during the economic recession, the bad feelings are pervasive. Some 69 percent said they experienced anxiety because of their income, 67 percent said it was because of their level of savings, and 53 percent said it was because of worry about losing their job.

About a third of the millennials surveyed said they were prone to excessive or frivolous spending, more than the 26 percent of those in Generation X and 19 percent of baby boomers who said this. Millennials spent $233 a month on meals, compared with $182 in older generations, and $161 per month on cellphone charges, versus $135 for people in older generations.

Thursday, September 7, 2017

Worries for the Car Business

In the periodic Beige Book of regional economic reports, the Fed said that the U.S. economy expanded at a modest to moderate pace in July through mid-August, but that signs of an acceleration in inflation remained slight. While consumer spending increased in most districts, there are also many signs of worry about a prolonged slowdown in the auto industry.

In Cleveland, year-to-date production at auto assembly plants declined more than 16 percent when compared with the same period a year ago, although much of decline was due to retooling. Slowing demand for autos has led some of the Fed's reporters to temper their outlook for the economy in coming months. In Chicago, one contact noticed auto suppliers no longer are searching for space to build new factories.

Vehicle sales in August slumped to the worst rate in more than three years. After a multiyear auto expansion, there are mounting signs that American car buyers are beginning to lose interest.

Wednesday, September 6, 2017

Manufacturing Shows Strong

U.S. factories expanded at a brisk pace in August, a likely sign of strength for the U.S. economy as new orders, production and employment all improved. The Institute for Supply Management said last week that its manufacturing index rose to 58.8 percent last month from 56.3 percent in July.

Anything above 50 signals that factory activity is increasing. The measure now stands at its highest level since April 2011, pointing to solid economic growth.

Of the 18 industries in the index, 15 showed expansion, while only apparel, primary metals and furniture contracted. On Friday, data from the Bureau of Labor Statistics showed that manufacturing was one of the leading sources of U.S. job growth in August, adding 36,000 new positions.

Tuesday, September 5, 2017

Hollywood's Bummer Summer

Did you have a good summer? It was probably better than the one Hollywood had. The 18-week summer movie season — the first weekend in May through Labor Day weekend — is down more than 14 percent compared with the last two years.

The final numbers aren't in, but this will all but certainly be the first time in a decade that the summer season didn’t break $4 billion at the box office. The month of August brought in $649.5 million, a nearly 35 percent decline compared with the $993.8 million the August box office brought in last year.

Adding insult to injury, the movie business is set to end the season with possibly the worst Labor Day weekend in 30 years. Over the holiday weekend, there wasn't a single major wide release opening in theaters for the first time since 1992.

Monday, September 4, 2017

Thoughts for Labor Day

"When you have a country that can boast that more than 95 percent of its eligible workforce is employed and pumping money back into economy, that's exceptionally good news, especially as we prepare to observe Labor Day." ~ J. D. Hayworth

"God sells us all things at the price of labor."  ~ Leonardo da Vinci

"A mind always employed is always happy.  This is the true secret, the grand recipe, for felicity."  ~ Thomas Jefferson

Friday, September 1, 2017

August's Jobs Report

The employment situation cooled off slightly in August, with the economy adding 156,000 jobs, according to figures out this morning. That's down a bit from the average gain of 185,000 over the past three months. The headline unemployment rate ticked up to 4.4 percent.

Overall, hiring this year has averaged 176,000 a month, roughly in line with 2016's average of 187,000. The leading source of job growth in August was manufacturing, which added 36,000 jobs. Another 28,000 jobs came from construction.

One mystery remains: Why, with the economy nearing full employment, wages aren't rising faster. Average hourly pay has risen just 2.5 percent over the 12 months ending in August. Pay raises typically average 3.5 percent to 4 percent when the unemployment rate is this low.

Thursday, August 31, 2017

An Even Stronger Second Quarter

The U.S. economic rebound in the second quarter was stronger than initially reported, the Commerce Department said Wednesday. It now says that gross domestic product rose at 3 percent rate from April through June, up from an initial 2.6 percent reading.

Consumer spending was the main engine for the strength in the second quarter, rising a revised 3.3 percent, up from the government’s original estimate of a 1.9 percent gain. Outlays of business investment rose at a revised 0.6 percent in the second quarter, up from a prior 0.4 percent estimate.

The government also reported that corporate adjusted pretax profits were up 6.7 percent over the past year, That's despite falling by 0.5 percent from the first to the second quarter.

Wednesday, August 30, 2017

Confident About Jobs

Consumers confidence strengthened in August to its second highest level since late 2000, a survey from the Conference Board released yesterday shows. The "present conditions" measure increased to its highest reading since July 2001.

The biggest reason for the boom in confidence is jobs. The labor differential, measuring the share of those saying jobs are plentiful minus the share saying jobs are hard to get, widened to 18.1 points, the most that figure has been since July 2001.

Those stating jobs are “plentiful” rose to 35.4 percent from 33.2 in July. Those saying that jobs are hard to get dipped to 17.3 percent, the lowest that number has been since August 2001.

Tuesday, August 29, 2017

Funds on the Run

It's been a rough stretch for domestic equity funds. Mutual funds and exchange-traded funds that invest in U.S. equities marked their 10th consecutive week of net outflows during the seven days that ended last Wednesday, according to Bank of America Merrill Lynch data. That's the longest such streak in 13 years.

There was $2.6 billion pulled from U.S. equity funds in that stretch, the latest recorded week. That's pushed withdrawals to $30 billion since late June, per Bank of America.

At the same time, investors put $3.1 billion into Japanese equity funds, the biggest inflow in five months, according to Bank of America. European equity funds had six straight weeks of inflows through mid-August, though they experienced $200 million in outflows in the most recent week.

Monday, August 28, 2017

Harvey's Impact

Hurricane Harvey brought unimaginable devastation to Texas this weekend, and our best wishes go out to all those affected. The economic impact promises to be immense: According to one estimate, rebuilding homes in the Houston area could end up costing as much as $40 billion.

We'll likely feel the effect here as well, since roughly a third of the nation's oil refineries are in southeast Texas. Wholesale gasoline prices are already looking at a 10 cent-a-gallon rise because of Harvey. Gasoline prices are likely to start rising in the coming weeks, say energy industry experts.

Places like New Jersey are expected to feel the biggest impact. In the Mid-Atlantic states, the price of a gallon of gas could rise 10 cents to 20 cents over the next two weeks.

Friday, August 25, 2017

Mortgage Rates Dropping Again

In a landscape where interest rates remain low, some are even dropping again. According to mortgage buyer Freddie Mac, 30-year mortgage rates have dropped to a new low for the year, reaching their lowest point since last November.

Thirty-year, fixed-rate mortgages fell to 3.86 percent, down from 3.89 percent last week. It was the fourth straight weekly decline for the key rate, bringing it to its lowest level since November 10, 2016.

But mortgage rates were even lower for most of 2016. A year ago at this time, the rate stood at 3.43 percent; it averaged 3.65 percent for all of last year.

Thursday, August 24, 2017

Banks Are Lending Longer

According to a new report from the FDIC, banks are loading up on a record amount of loans that carry low rates for long periods. The percentage of bank assets that won’t mature or change rates for more than five years reached a new high in the second quarter.

Across all banks, the percentage of total assets that are at a fixed rate for more than five years was 27.5 percent in the second quarter of 2017. That's the highest that figure has been since the FDIC started tracking it in 1984. The measure reached 33.7 percent in the second quarter at larger banks, those with $1 billion to $10 billion in assets.

That means banks are allowing more borrowers to lock in low rates for long periods. That's a potential risk to the banks should rates move sharply higher, so it seems to be signaling that they expect rates to stay low for quite some time.

Wednesday, August 23, 2017

The Hidden Reason for Slow Wage Growth

The July jobs report from the U.S. Bureau of Labor Statistics brought welcome news on wage growth: Median weekly earnings rose 4.2 percent on an annual basis, the fastest pace seen since 2007. But the underlying story may be different from what the headline number suggests, according to a new report from the San Francisco Fed.

Wage growth for continuously full-time employed workers has been rising and is currently in line with rates seen at the previous economic peak in 2007. But aggregate wage growth continues to be held down by the entry of new and returning workers to full-time employment, who generally earn less than workers who already have full-time employment. And the turnover is in large part due to retiring baby boomers.

Sluggish wage growth, then, is less a condition of the labor market than it is due to demographics. Low wage growth is due in part to the large-scale exit of higher-paid baby boomers from the labor force. With so many of this generation still approaching retirement, the so-called Silver Tsunami will continue to be a drag on wage growth for some time.

Tuesday, August 22, 2017

The Crisis in Student Loans

Could the student loan debt crisis be getting even worse? Total student debt crisis has ballooned to more than $1.4 trillion, according to a new report from the Consumer Finance Protection Bureau - but that's not the end of it.

More than 40 percent of borrowers now leave school owing $20,000 or more, double the percentage from 2002. The share of borrowers owing $50,000 or more has more than tripled over the same time period, from 5 percent to 16 percent.

In addition, they're starting their repayments later. Half of student loan borrowers are over 34 when they start to repay their loans, twice the percentage since 2003. The share of borrowers who have failed to reduce loan balances after five years in repayment has also doubled, from 16 percent in 2008 to 30 percent in 2016.

Sunday, August 20, 2017

The Ever-Steady Stock Market

How sleepy has the stock market been this year? For 2017 so far, the average daily trading range has been a minuscule 0.55 percent. That's the lowest percentage ever.

Here's another way to look at it: The S&P 500 through the end of last week, has not had a 5 percent decline, from peak to trough, since June 28, 2016. That sell-off, 6.1 percent over several days, occurred after Britain’s surprise vote on June 23, 2016, to leave the European Union.

So it's been nearly 14 months and counting since we had a serious sell-off. Going all the way back to 1950, the current streak is the fourth longest period without at least a 5 percent decline in the S&P.

Friday, August 18, 2017

The Dow Finally Stumbles

The Dow Jones industrial average, at long last, had a serious drop yesterday. The index fell by 1.2 percent, ending a 63-day streak of sessions without moves of 1 percent or more in either direction. That stretch was the longest since a 69-day streak in 1995.

All 30 Dow stocks also ended the day in the red. The Dow, which had just finished gaining 180 points over a four-day winning streak, had previously closed higher in 14 of the past 18 trading days.

The S&P 500 and Nasdaq both also dropped by more than 1 percent; the last time all three major benchmarks had finished down 1 percent or more was May 17. The Dow is now 1.7 percent off its closing record, with the S&P 500 and Nasdaq off 2.1 percent and 3.1 percent their respective closing highs.

Thursday, August 17, 2017

The Good News in Retail

Americans have been in a spending mood. The Commerce Department reported this week that retail sales rose 0.6 percent in July from June. June's sales also were revised higher.

In July, Americans increased their spending on most goods except for clothes and gasoline. Sales also rose 1.2 percent at auto dealers, 1.2 percent at home and garden centers and even 1 percent at department stores that have been losing ground to internet rivals.

But market share losses to Amazon and similar companies remain a big problem for those department stores. Sales at nonstore retailers—a category that includes many online retailers—rose 1.3 percent last month from June. They were up 11.5 percent from a year earlier.

Wednesday, August 16, 2017

In Fear of Inflation

Americans rank inflation as top economic worry today, according to a new study from Allianz Life Insurance. When asked about their main economic worries today, the majority of respondents put inflation at the top of their list, with 32 percent saying they were either “panicked” or “very worried” about it.

The study found that 64 percent of respondents do not have a financial plan that addresses the rising cost of living in retirement. Of those who do, 51 percent claimed their financial “plan” to address it was to “be more frugal with money” when they retire.

On the other hand, respondents overestimated how much the cost of living will rise during retirement by predicting an average increase of 4.4 percent per year. According to the study, 31 percent of respondents thought the cost of living would go up between 5 and 10 percent per year and nearly one in 10 reported costs would increase more than 10 percent each year. The average inflation rate in the United States for the last 20 years has been only 2.15 percent.

Tuesday, August 15, 2017

Someone Still Loves Buybacks

One consequence of higher share prices for U.S. stocks this earnings season is that companies have pulled back considerably from buying back their own shares. New stock buybacks are at their lowest levels in five years, according to TrimTabs Investment Research. An average of just 2.8 S&P 500 companies have announced $1.4 billion in buybacks on a daily basis over the past five weeks of earnings season, the lowest such volume since May 2012.

But there's one area where there's still a lot of interest in buybacks: big banks. Bank of America, Citigroup, Goldman Sachs, J.P. Morgan Chase, Morgan Stanley, and Wells Fargo have accounted for a combined 20 percent of all stock buyback volume this year.

In addition to the 20 percent of buyback volume from banks, Apple alone accounted for 9 percent of buyback volume. Apple led buybacks with $7 billion in the second quarter, although that's off from the $10.2 billion it spent on buybacks in the second quarter of 2016.

Monday, August 14, 2017

The Dow's Losers

It's been a very strong year for the Dow Jones industrial average, which is up 14 percent so far in 2017. But not every Dow stock is a winner. Seven of the Dow's 30 stocks have lost ground on the year:
  • Disney, down 3 percent
  • Goldman Sachs, down 6 percent
  • Chevron, down 6 percent
  • Verizon, down 10 percent
  • ExxonMobil, down 13 percent
  • IBM, down 15 percent
  • General Electric, down 20 percent


Friday, August 11, 2017

A Lost Decade for Retailers

Macy's and Kohl's both reported earnings yesterday, both disappointed, and both saw their stock drop like a rock. Macy's was off 8.8 percent on the day, while Kohl's was down 6.9 percent.

But it hasn't just been a bad quarter for retailers; it's been a bad decade. Pressed by the success of Amazon.com and lower-end retailers like Wal-Mart, many of the big retail chains have lost enormous amounts of their value in the past ten years. Some examples:

Nordstrom $12.4 billion market cap in 2006 to $8.3 billion in 2016: down 33 percent
Best Buy $28.4 billion to $13.2 billion: down 54 percent
Macy's $24.2 billion to $11.0 billion: down 55 percent
Kohl's
$24.2 billion to $8.8 billion: down 64 percent
JCPenney $18.1 billion to $2.6 billion: down 86 percent
Sears $27.8 billion to $1.1 billion: down 96 percent

Thursday, August 10, 2017

Gas Prices Hold Steady

Labor Day is now less than a month away and the summer driving season is starting to wind down.  According to AAA, the current national average price of a gallon of gas is $2.36 per gallon. While that is up considerably from this point last year, there have only been two years (one of them being last year) where gas prices were lower at this time of year than they are now. The only other year was 2005. 

Gasoline prices have shown a year-to-date increase of just 1.0 percent. There hasn’t been a single year since 2005 where prices saw a smaller year-to-date gain through August 8th.

Prices are typically up over 20 percent year-to-date by this point. The main reason for this year’s shortfall is that prices never saw the typical seasonal increase in the spring. We'll have to see if they also avoid the typical sharp price decline after Labor Day.

Tuesday, August 8, 2017

Record Job Openings

Employers across the U.S. had a record 6.2 million job openings posted at the end of June, a sign that employers are hungry for new workers, according to the Labor Department’s Job Openings and Labor Turnover Survey. After the recession, the number of job openings first set a new record in April 2015, and has continued to climb since then.

The number of job openings climbed by 417,000 in June for private employers. There were also an additional 44,000 government postings, which include state and local government.

On top of that, Americans are less likely to be laid off than at any point in at least 50 years. For every 10,000 people in the workforce, only 66 claimed new unemployment benefits in July, trending at the lowest point on record going back to 1967. The previous low point, 83 per 10,000, was touched in April 2000, at the height of the dot-com boom.

A Trillion Dollars in Debt

Americans now collectively have the most outstanding revolving debt — which is primarily credit card debt — in U.S. history. According to a report released by the Federal Reserve yesterday, Americans had $1.021 trillion in outstanding revolving credit in June 2017.

This beats the previous record set in April 2008, when consumers had a collective $1.02 trillion in outstanding credit revolving credit. Once the recession hit, banks wrote off more than $100 billion in credit-card loans over the next two years.

This year, total household debt — including housing, auto loans and student-loan debt — in the U.S. also surpassed the 2008 peak. Housing-related debt is down nearly $1 trillion since the 2008 peak, but auto loan balances are $367 billion higher, and student loans are a whopping $671 billion higher, according to the Federal Reserve.

Monday, August 7, 2017

The Dow's Slow and Steady Climb

Stocks have been rising most of the year, with the most recent visible success being the Dow Jones Industrial average climbing past 22,000 for the first time ever last week. But the market’s march higher has been slow. The Dow’s average daily move in either direction so far this year is 0.31 percent, the smallest since 1964, when it hit a record-low 0.30 percent, according to analysis by The Wall Street Journal’s Market Data Group.

The index hasn’t even had a move of more than 1 percent in either direction since mid-May. During the index’s move to 22,000 from its first close above 21,000 in March, the Dow had only four days where it moved by more than 1 percent.

And it’s not just the Dow. On Friday, the S&P 500 closed out its 12th consecutive session on Friday without a move of 0.3 percent or more in either direction. That's the longest such streak ever.

Friday, August 4, 2017

July's Jobs Report

July was another strong month for employment, with the economy adding another 209,000 jobs, according to figures released by the Labor Department this morning. The headline unemployment rate ticked down to 4.3 percent.

Employment growth has averaged 184,000 per month thus far this year, which is right in line with the average monthly gain for 2016, at 187,000. Over the past three months, job gains have averaged 195,000 per month.

The leading sector was food services and drinking places, where employment  rose by 53,000 in July. The industry has added 313,000 jobs over the course of the year. Professional and business services added 49,000 jobs in July, and health care employment increased by 39,000,

Thursday, August 3, 2017

Why the Dow Is Soaring

The Dow Jones industrial average closed above 22,000 for the first time yesterday. That marks yet another record high in what has become one of its longest bull markets in history.

By far the biggest contributor to this surge has been Boeing, which has accounted for 45 percent of the Dow’s rise this year, far more than any of the other 29 companies in the index. Its shares have risen by more than 70 percent since last November.

Since the Dow hit 20,000 in January, investors have received a 57 percent return on investment from Boeing. They've also gotten a 37 percent return on Apple, and a 29 percent return on McDonald’s.

Wednesday, August 2, 2017

An Era of Personal Finance Pleasure

Americans are experiencing their highest levels of personal financial satisfaction in more than 10 years, according to the American Institute of CPAs. The AICPA's second quarter Personal Financial Satisfaction Index said stock market gains, more job openings and a decrease in inflation from the first quarter drove personal financial satisfaction to a high not seen since the fourth quarter of 2006.

The PFSi is calculated as the difference between the Personal Financial Pleasure Index minus the Personal Financial Pain Index. The pleasure part of the index set a record for the third consecutive quarter, clocking in at 66, up 1.4 points from the first quarter and 5.6 points from a year ago.

The pleasure index comprises four equally weighted factors that measure the growth of assets and opportunities. The Market Index has been the biggest contributor to the pleasure index for several years, setting a new record in the first quarter of this year.

Tuesday, August 1, 2017

Credit Card Losses on the Rise

In what could be a warning sign for markets and the broader economy, credit-card losses are mounting, a reversal of a six-year-long trend. The average net charge-off rate for large U.S. card issuers—the percentage of outstanding debt that issuers write off as a loss—increased to 3.29 percent in the second quarter, its highest level in four years, according to Fitch Ratings. The quarter was also the fifth consecutive period of year-over-year increases.

All eight large issuers, including J.P. Morgan Chase, Citigroup, Capital One and Discover Financial Services, had increases for the quarter. Card balances nationwide rose 6 percent over the last 12 months through May, a growth rate that is up from about 1 percent four years ago, according to the Federal Reserve.

While losses are rising, they remain low compared with historical levels. As the recession came to an end, the net charge-off rate reached 10 percent in early 2010.

Monday, July 31, 2017

Schwab Sees Confidence

A new report from Charles Schwab finds the firm’s retail clients more confident in decision making and better off financially in the first half of this year than they were in 2015 and 2016. Many think it’s a good time to invest. Twenty percent of Schwab clients said they expected to move money to individual stocks over the next three months, while 30 percent said they would hold steady.

The survey found that retail investors’ outlook for the U.S. stock market was up in the second quarter, with 42 percent feeling bullish, compared with 33 percent during the same period last year. Bearish sentiment declined from 39 percent in the 2016 second quarter to 35 percent a year later.

The average cash allocation among all Schwab clients in the first half fell to 19.8 percent from 21.1 percent at the end of 2016. Among investor types, millennials held more cash, 27 percent of their portfolios, than millionaires, with 16.6 percent, and active traders, with 18.2 percent.

Friday, July 28, 2017

Second Quarter GDP

U.S. economic growth picked up in the second quarter of the year, according to the report released by the Commerce Department this morning. Gross domestic product rose at a 2.6 percent annual rate in the April to June period. The second-quarter advance is a welcome rebound after a lackluster start to the year, when GDP grew at only 1.2 percent.

Consumer spending, the main engine of the economy, led the way with a 2.8 percent increase. Business investment in equipment rose 8.2 percent, while outlays on structures advanced 4.9 percent.

There were a couple of disappointing areas: The value of inventories fell slightly, to mark their second quarterly decline in a row. Investment in new housing also sank 6.8 percent. Exports rose 4.1 percent while imports edged up just 2.1 percent.

Thursday, July 27, 2017

The State Rates

The new state-level employment reports are out from the Bureau of Labor Statistics, and New Jersey is ahead of the pack. Our state unemployment rate for June was 4.1 percent, just under the national rate of 4.4 percent. It's also down from 5.1 percent a year earlier.

Unemployment rates were at all-time lows in six states: Arkansas, California, Colorado, North Dakota, Tennessee and Washington. At 2.3 percent, Colorado has the lowest unemployment rate in the nation. Records for state unemployment rates go back to 1976.

At the other end of the scale, Alaska had the highest jobless rate, 6.8 percent, followed by New Mexico at 6.4 percent. But no state had a statistically significant increase in its unemployment rate over the past year.

Wednesday, July 26, 2017

Investing in a Weaker Dollar

The dollar’s unexpected drop in value this year is poised to boost the earnings of some of the biggest U.S. companies. The ICE Dollar index, which measures the currency against six peers, is down about 8 percent this year, nearing its lowest level in 13 months.

That’s good for companies that sell large amounts of their goods abroad. A weaker dollar often translates into increased demand for their products, which become cheaper to foreign buyers. S&P 500 companies obtained about 43 percent of their sales abroad at the end of 2016, according to S&P Dow Jones Indices, led by the energy sector, where 59 percent of revenue came from outside the U.S.

That means that if  the dollar's value ends 2017 where it is now, the 8 percent drop for the year would boost per-share earnings in the S&P 500 by 4 percent in 2018, according to Morgan Stanley. They estimate that profits increase 1 percent for every 2 percent fall in the dollar.

Tuesday, July 25, 2017

The Death of the 20 Percent Down Payment

It used to be axiomatic that first-time home buyers would need to come up with 20 percent of a house's purchase price for a down payment. But a new study shows that the 20 percent down payment is all but dead — and has been for quite some time, especially for first-time buyers.

More than 70 percent of noncash, first-time home buyers made down payments of less than 20 percent over at least the past five years, according to the National Association of Realtors. Just over half, or 54 percent, of all buyers put down less than 20 percent.

The typical down payment for 60 percent of first-time home buyers is 6 percent or less, according to NAR’s latest data. But NAR’s research finds few adults 34 and younger (just 13 percent) realize they can buy a house with a down payment of 5 percent or less.

Monday, July 24, 2017

Wall Street's Image Problem

Americans still don't like Wall Street. Despite efforts by Wall Street banks to regain trust since the 2008 financial crisis, fewer than a third of Americans view the industry positively -- no more than did in 2009, according to the latest Bloomberg National Poll.

Just 31 percent of Americans look favorably on corporate executives and Wall Street. The poll also shows that Americans are much more likely to distrust billionaires than admire them, 53 percent to 31 percent.

The Fed, meanwhile, improved its standing as the economy strengthened in recent years. Fifty-two percent of those surveyed view the central bank favorably, its highest score since the poll began tracking it in September 2009. Fed Chair Janet Yellen continues to toil in relative obscurity. More than half of respondents said they don’t know enough about her to form an opinion, while 28 percent view her favorably and 15 percent unfavorably.

Friday, July 21, 2017

Changes in the S&P

Next week, there will be five new entries on the S&P 500. MGM Resorts will replace Reynolds American, because British American Tobacco is acquiring Reynolds American in a deal expected to be completed next week.

The others are dropping off because their market caps have dropped them down to the S&P MidCap 400 The departing stocks:
  • Mallinckrodt 
  • Murphy Oil 
  • Bed Bath & Beyond 
  • Transocean 
Moving up from the S&P MidCap 400 to replace them:
  • ResMed 
  • Packaging Corporation of America
  • A.O. Smith Corp. 
  • Duke Realty Corp.

Wednesday, July 19, 2017

High Tech

Tech stocks broke a nearly two-decade-old record yesterday. The S&P 500’s information-technology sector ended the day at 992, closing above its previous all-time high of 988 set in March 2000 at the peak of the dot-com bubble. Tech stocks are by far the best-performing among the index’s 11 sectors this year, up 23 percent after posting their ninth consecutive day of gains on Wednesday.

Apple, the largest publicly traded company in the U.S., has posted its longest streak of consecutive gains since August 2014. Shares of other tech titans, such as Facebook and Microsoft, have also closed at all-time highs.

The tech-heavy Nasdaq Composite has been setting fresh highs all year, but the S&P tech sector has been slower to reclaim record levels than the Nasdaq, in part because it is missing some of the Nasdaq’s biggest gainers. Netflix and Amazon.com, though they are often associated with tech stocks and included in the Nasdaq, are classified by S&P as consumer-discretionary companies.

How to Pay for College

According to the latest annual "How America Pays for College" report, from Sallie Mae, here’s how a typical family financed a college education in 2016-2017:
  • Scholarships & grants:                    35%
  • Parent income & savings:                23%
  • Student loans:                                19%        
  • Student income & savings: loans:    11%                         
  • Parent loans:                                   8%
  • Relatives & friends:                          4%
There was little change in these breakdowns from last year – just a 1 percentage point difference up or down in all categories except for parent income and savings, which fell by six percentage points, and student loans, which rose by six percentage points.

Forty-two percent of families surveyed borrowed money to help pay for college this year, according to the report. The typical loan amount was just over $9,600 for students and almost $3,900 for parents.

Tuesday, July 18, 2017

Employers Kicking In More

Some good new for employees: The average company contribution to 401(k)s rose to an estimated 4.7 percent of employee salaries in 2016, up from 3.9 percent in 2015, according to workplace retirement savings plans run by fund giant Vanguard Group. It was the highest percentage and biggest year-to-year jump since at least 2007.

Here’s why this is happening: Some companies in certain industries say they need to spend more to retain the best employees and motivate staff. In 2009, when unemployment was sky-high, the average company contribution was just 3.0 percent.

But many U.S. workers still aren’t saving enough on their own. The average percentage they set aside among Vanguard-run retirement accounts has dropped since 2007. largely because new 401(k) savers were enrolled at lower initial savings rates. The average total employee and company contributions to workplace savings plans among workers who participate hasn’t moved above 11 percent of salaries for at least a decade.

Monday, July 17, 2017

Making Bank

Here's an unlikely indicator: Deposits are growing at banks, credit unions and so-called thrifts, a term for savings and loans associations. At those financial institutions, deposits reached their highest levels since 2006 in the first quarter of 2017, according to a new report from Moebs Services, an economic research firm.

In the first quarter of 2017, deposits reached a level of 77.6 percent, when measured as a percentage of the institutions’ total assets. Deposits are up 10.2 percent at all banks since 2006, and up 17 percent at thrifts.

At the same time, those institutions are lending less money to customers. The ratio of loans to assets at those same three financial institutions fell to 54.9 percent in the first quarter of 2017, a decline of 9.7 percent since 2006. Bank loans have fallen 5 percent since 2006.

Friday, July 14, 2017

Neither Bulls Nor Bears

It's now been 132 weeks it has been since bullish sentiment in the weekly AAII sentiment survey has been above 50 percent, and this week it wasn’t even close. Bullish sentiment declined from its already depressed level of 29.58 percent down to 28.24 percent, its lowest point since the start of June.

But there was really no boost to bearish sentiment either. In this week’s survey, the percentage of bearish respondents declined from 29.86 percent down to 29.63 percent, the sixth straight week where bearish sentiment has been below 30 percent. That’s the longest streak since last August.

That means there are a lot of investors who just can’t make up their minds. The percentage of neutral investors came in at 42.13, the second highest weekly reading in neutral sentiment this year.

Thursday, July 13, 2017

The Steady Dow

Yesterday the Dow Jones industrial average rose 123 points to finish at  a new all-time closing high. It was the 31st 100-point move for the Dow industrials this year (either up or down), which is oddly enough the fewest number of 100-point moves through July 12 since 2012, according to the Journal’s Market Data Group.

It’s all the more interesting given that 100-point moves for the Dow mean far less than they used to. A 100-point move today would mark a gain or loss of less than 0.5 percent for the day. During the depths of the financial crisis just eight years ago, 100 points meant a move of more than 1 percent.

On a more positive note, the Dow Jones has had only ten days with 100-point declines in 2017. That's the fewest through July 12th for any year since 1998.

Wednesday, July 12, 2017

Millennials' Favorite Stocks

A new study from TD Ameritrade looks at the investing habits of the millennial generation. Not surprisingly, nearly half of the firm’s millennial clients trade on their mobile devices, twice as much as the overall customer base.

And what are they buying? It's mostly the same stocks they see on those smartphones. According to TD Ameritrade, the top five holdings for millennials are:
  1. Apple
  2. Facebook
  3. Amazon
  4. Tesla
  5. Netflix

Monday, July 10, 2017

High Expectations for Earnings

This could be a banner earnings season for the S&P 500, according to data from S&P Capital IQ. The company forecasts second-quarter earnings will grow at least 6.2 percent on a year-over-year basis. The increase would boost S&P 500 operating earnings per share for the trailing 12 months to an all-time high of $123.61 a share.

The most favorable sector? Wall Street consensus is that technology firms in the S&P 500 will report a 10.5 percent increase in earnings from the same period a year earlier. That’s the second-largest earnings growth of the 11 sectors, trailing only the volatile, beaten-down energy sector, where earnings are projected to grow nearly 400 percent.

The expectations for the tech sector are even more remarkable when you consider what it's already done in 2017. Tech is already the best-performing sector in the S&P index this year, up 18 percent.

The Dow and the S&P Diverge

The Dow Jones Industrial Average and the S&P 500 index, the most popular stock-market gauges, usually move in lockstep. After all, they're both baskets of some of America's largest stocks, even though the Dow has just 30 and the S&P has 500 of them.

But in recent trading days, they have seen the lowest level of correlation since 2003, according to data from WSJ Market Data Group. A 15-year average of the Dow and the S&P 500 shows that the relationship is nearly perfect, at a correlation of 0.9557 on a scale from 0 to 1. However, the rolling 20-day period shows  a reading of 0.4655. That's the lowest level of correlation between the S&P and the Dow industrials since August 4, 2003.

What's behind it? The recent tech slump has hit the S&P harder than the Dow, for one thing. And the financials, which are a huge part of the Dow, have been overperforming at the same time.

Friday, July 7, 2017

June's Jobs Report

The employment situation bounced back strongly in June with 222,000 jobs being created over the month, the Bureau of Labor Statistics reported this morning. Revisions added 47,000 more jobs to April and May than previously reported, so that over the past three months, job gains have averaged 194,000 a month.

The unemployment rate rose a tenth of a percentage point to 4.4 percent, edging up from its lowest level since May 2001. The increase in the unemployment rate reflects more Americans entering the labor force in June, although not all of them found jobs. The labor force participation rate is at 62.8 percent.

The strongest sectors: Health care added 37,000 jobs, and social assistance - family services and child care - added 23,000. Professional and business services, a broad category that includes everything from architects to temps, added 35,000 jobs. Financial services added 17,000 jobs, and mining added 8,000 jobs.

Thursday, July 6, 2017

The World's Most Valuable Brands

The latest ranking from WPP’s Kantar Millward Brown shows that the most valuable brands in the world are mostly tech companies, and overwhelmingly American. For the second year in a row, Google is the most valuable brand valued at a whopping $245.6 billion, followed by Apple at $234.7 billion.

There's one brand in the Top Ten you may not recognize: The Chinese internet service company Tencent, which is the first non-U.S. brand on this list since 2013. The full Top Ten:
  1. Google
  2. Apple
  3. Microsoft
  4. Amazon
  5. Facebook
  6. AT&T
  7. Visa
  8. Tencent
  9. IBM
  10. McDonald's

Wednesday, July 5, 2017

The First Half's Biggest Winners

In a generally positive first half of the year, the biggest winner so far among S&P 500 stocks was Vertex Pharmaceuticals, up a whopping 74.9 percent. Its shares jumped 21 percent in a single day back in March when the company revealed two of its cystic fibrosis drug trials yielded positive results, helping it become the top-performing stock in the entire S&P 500 in the first half of the year.

The rest of the top five:
2. Activision Blizzard, up 59.4 percent
3. Align Technology, up 56.1 percent
4. Wynn Resorts, up 55.0 percent
5. CSX Corporation, up 51.8 percent

Tuesday, July 4, 2017

Thoughts for Independence Day

“Those who deny freedom to others, deserve it not for themselves.” ~ Abraham Lincoln

"It does not take a majority to prevail, but rather an irate, tireless minority, keen on setting brushfires of freedom in the minds of men." ~ Samuel Adams


“We must be free not because we claim freedom, but because we practice it.” ~ William Faulkner

Monday, July 3, 2017

A Memorable First Half

The first half of 2017 is in the books, and the S&P 500 index and Nasdaq Composite each ended their first half of the year with the largest gains in several years. All told, the Dow was up 8 percent, the S&P 500 is up 8.2 percent, and the Nasdaq has risen by more than 14 percent.

The Nasdaq was the star performer of the first half, posting its largest first-half gains since 2009. That's nearly double the index's 7.5 percent increase for all of 2016.

And there may be even better times ahead. Since 1988 there have been 12 other times when the S&P 500 has seen a first-half gain of at least 6 percent. After each of those instances, the index has extended its increase through the second half — closing the year at a higher level than where it was at the end of June.

Friday, June 30, 2017

Commodities Take a Beating

After posting a gain last year for the first time in six years, the Bloomberg Commodity Index, which tracks 22 commodity futures contracts, is down roughly 7.7 percent year-to-date. It finished out 2016 more than 11 percent higher.

Many commodities have continued on the downward paths they were on by the end of the first quarter. Sugar is down about 36 percent for the year as of the middle of this week, iron ore down 18 percent, and oil down about 16 percent.

The big winner for the year? Gold has been a strong performer, up about 8.5 percent, but that's no match for the metal palladium, which is up 28 percent on the year.

Thursday, June 29, 2017

Why Car Insurance is Rising

Your car insurance prices are likely to keep going up. U.S. car insurance losses are expected to rise 6.7 percent this year to a record $153.6 billion, says S&P Global Market Intelligence in a new report. That's after losses rose 13 percent to $144 billion in 2016.

One in four drivers saw their insurance premiums rise in the past year, according to a JD Power survey released earlier this month. Given the industry's losses, S&P Global expects more rate increases this year.

What's driving all this? An improving economy and lower gas prices mean more cars on the road, and drivers are often distracted by smartphones and other devices. In addition, crashes are also becoming more expensive for insurers as new cars, equipped with high-tech safety gear, cost more to repair.

Wednesday, June 28, 2017

Fear of Life Insurance

Many Americans don’t buy life insurance, and more than a few of them view the product as an expense rather than an investment for retirement. According to a recent Princeton survey commissioned by insuranceQuotes, more than a third (37 percent) of the survey respondents say they don’t have a life insurance policy, and the cost of insurance is the most commonly cited reason (59 percent).

But money isn’t the only issue: Half (51 percent) of those who don’t buy life insurance say they are healthy and just don’t feel like they need it right now. For millennials, that figure rises to 71 percent.

But some people just think the entire issue is too difficult. The survey found one more prominent reason why people don’t have a life insurance policy: 33 percent say shopping for life insurance is too difficult or confusing.

Tuesday, June 27, 2017

The Difference Between Men and Women

Men are typically somewhat more optimistic than women when it comes to the economy. The University of Michigan Survey of Consumers has almost always found higher scores for men - researchers believe that the pay gap between men and women explains some of the persistent difference.

But the gap has gotten much wider in recent months. With 100 being neutral, in the most recent reading, men were at 104 while women were at 88. The 16-point gap between men and women’s economic sentiment has never been wider in 40 years.

But no traditional labor market measures show a major change for men but not for women. The unemployment rate for men was 4.2 percent in May, compared with 4.3 percent for women. Real wages are up for both. Total job growth has actually been slightly higher for women than for men, according to Labor Department data.

Monday, June 26, 2017

The Meaning of Small Drawdowns

With the first half of 2017 nearly complete, the S&P 500 has 24 all-time closing highs since the year started. The worst sell-off the S&P 500 has seen from a closing basis this year was a 2.8 percent decline over 32 trading days, from March 1st through April 13th.

The only other year in the S&P 500’s history that saw a smaller maximum drawdown in the first half of the year was 1995. That's significant because in years where the S&P 500 saw smaller than average pullbacks in the first half of the year, the second half of the year also generally saw smaller than average drawdowns. Of the 16 years since 1928 with a maximum drawdown of less than 5 percent in the first half, the S&P 500 averaged a maximum drawdown of 6.3 percent in the second half, which is well below the average 12.2 percent decline for all years.

The returns were also better than average. In the same 16 years, the S&P 500 averaged a gain of 7.8 percent in the second half, with positive returns 81.3 percent of the time. That’s twice the 3.9 percent average second half return for the S&P 500 in all years, and also more consistent than the 66.3 percent frequency of second half gains for all years.

Friday, June 23, 2017

Where the Millionaire CEOs Are

You might think New York City is home to the most millionaire CEOs on the world, but it's not. That honor goes to London, with 2.9 percent of these individuals living there, according to research conducted by financial publications Compelo and Wealth Insight.

In fact, New York isn't even in second place. San Francisco squeaks ahead of it, with 2.6 percent of all millionaire CEOs, while New York is third with 2.1 percent.


Most of the top 10 was made up of American cities, including Los Angeles, Houston, Boston, Chicago and Washington, D.C. That’s not a huge surprise — the report found that 48 percent of all the world’s millionaire CEOs reside in the U.S.

Thursday, June 22, 2017

What Happened to Buybacks?

Even as the stock market keeps hitting new highs, companies have been holding back on share repurchases. S&P 500 firms repurchased $133.1 billion of their own shares in the first three months of the year, down 18 percent from the same period a year earlier, according to S&P Dow Jones Indices.

What's odd about this is that the decline came during a quarter in which the S&P 500 hit 13 new record highs; corporate executives typically boost share repurchases when the market is strong. Buybacks, for example, hit a record in 2007 before plunging in 2009 during the financial crisis.

And it’s not as if they don’t have the assets available for more buybacks. Cash levels have risen to a fresh record high of $1.5 trillion for S&P 500 companies, excluding financials, utilities, and transportation firms, which already keep high reserves, according to S&P Dow Jones Indices.

Wednesday, June 21, 2017

A Bear Market for Oil

The oil market, which looked like it was recovering at one point, may now be entering a bear market. Another sharp drop in U.S. crude prices yesterday set new lows in oil prices dating back to August.

U.S. crude prices slumped 2.2 percent on the day, to settle at $43.23 a barrel, down 21 percent from its 2014 high of $54.45. It would be 2017′s first reversal from bull to bear market, following five such swings last year.

Earlier this year there were hopes that a historic agreement by OPEC to cut output might start to right the supply-demand imbalance. But rising production from the U.S. and Libya, along with stubbornly high stockpiles, have continued to buoy prices.

Tuesday, June 20, 2017

Hedge Fund Woes Continue

There were 189 new hedge fund launches in the first quarter of 2017, according to Hedge Fund Research, up from the 153 in the fourth quarter of 2016. This marked the first quarter since the first three months of 2016 where the number of launches grew, but there are still plenty of troubling signs for hedge funds.

There were also 259 liquidations in the first quarter. The greater number of closures than launches meant that the total number of active funds dipped to 9,773 in the first quarter. In 2016, more than 1,000 funds closed down, the most of any year since the financial crisis.

And the performance has not been there. In May, the HFRI Fund Weighted Composite Index rose 0.5 percent, bringing its year-to-date gain to 3.5 percent. To compare, the S&P 500 is up 9.4 percent so far in 2017.

Monday, June 19, 2017

College Kids Getting Warier

The younger generation is taking a more cautious approach to college tuition, according to the nonprofit College Savings Foundation. When asked if they would take on debt to cover college bills, only 11 percent of the high school sophomores, juniors and seniors who participated in the survey said yes.

That’s down significantly from 20 percent just last year. Seventy-nine percent of the respondents said costs are a factor on college choice, with 39 percent saying high costs caused them to change their path and enroll in state schools, community colleges and vocational and career schools.

Fifty-four percent have already taken jobs to earn money for higher education, and 85 percent said they would work during college, with 20 percent planning on holding a full-time job. As these kids are well aware, the total amount of student debt stands at $1.4 trillion.

Friday, June 16, 2017

Happy Father's Day!

Americans will spend a record amount on Father’s Day gifts this weekend, a survey from the trade association National Retail Federation found, hitting a 15-year high of $14.3 billion. Some 77 percent of Americans celebrate Father’s Day, and the amount of money consumers spend on the holiday has increased each year consistently since at least 2007.

The average American is now spending $134.75 on gifts, up from $125.92 last year. On the other hand, dads would increasingly prefer to spend time with their kids, rather than a pair of socks or the usual tie.

The number of people opting to give a special outing such as dinner or brunch is at 48 percent, up 5 percent from 2007. Now, 27 percent of dads say they would enjoy an “experience” gift, and 25 percent of shoppers plan to buy a ticket to a concert or a sporting event for the holiday, up from 22 percent last year.

Thursday, June 15, 2017

The Fed Raises Rates

As expected, the Federal Reserve raised its benchmark Fed Funds rate yesterday, to a range of between 1 percent and 1.25 percent. According to the so-called dot plot of forecasts, released at the same time, they’re still projecting one more increase this year, making three total in 2017.

The Fed also released its updated economic projections, and they are all very slightly better than the last set. The Fed members lifted their projected growth in gross domestic product this year to 2.2 percent at the end of 2017 from March’s forecast of 2.1 percent.

The projected unemployment rate was lowered to 4.3 percent from 4.5 percent. And the Fed’s preferred inflation measure is expected to come in at 1.6 percent at the end of the year, down from 1.9 percent.

Tuesday, June 13, 2017

What Worries Investors?

Investors are more likely to say they worry about current geopolitical matters harming their investments than worry about harm from the economy, according to the latest Wells Fargo/Gallup Investor and Retirement Optimism Index. When asked about possible threats to the U.S. investment climate in the coming year, three-quarters of investors were very or somewhat worried about the impact of the various military and diplomatic conflicts happening around the world.

The domestic political climate ranked a close second at 69 percent. The overall performance of the economy sparked far less concern, with about half, or 49 percent, saying they are very or somewhat worried.

The latest Investor Optimism index now registers at plus 124, down slightly from plus 126 in February. This marks the first time since the first quarter of 2016 that the index did not improve.

The FAANG Crash

The so-called FAANG stocks have been leading the market much of the year, but the past two days have been pretty rough for them. While tech stocks have been dropping, Facebook, Apple, Amazon, Netflix and Google parent Alphabet have had the most dramatic falls of all. Over the last two trading days:
  • Facebook has dropped 4.1 percent
  • Apple has dropped 6.2 percent
  • Amazon has dropped 4.5 percent
  • Netflix has dropped 8.7 percent
  • Alphabet has dropped 4.2 percent
Altogether, those five stocks have lost $125 billion in value since Thursday.

Monday, June 12, 2017

The Charitable Role of Women

One way in which women approach their finances differently from men is in their charitable giving. According to the recent Woman and Giving survey released by Fidelity Charitable, women are more spontaneous, engaged and empathetic. Half of the women interviewed say they give in the moment rather than as part of a formal giving strategy, as opposed to just 40 percent of men.

Woman-headed households are more likely to give to charity than male-headed households. At nearly every income level, women donate almost twice as much as men, but women in the top 25 percent of permanent income give 156 percent more than men in that same category.

Boomer women tend to be more confident and strategic in their philanthropy. Seventy-two percent of boomer women are satisfied with their philanthropy, compared with just over half of Millennial women.


Friday, June 9, 2017

The Nasdaq's Records Record

The Nasdaq Composite Index finished at another record high on Thursday, marking its 38th all-time closing high in 2017. That's the highest number of records in a single session for the equity gauge since 1999, according to WSJ Market Data Group.

On a year-to-date basis, the Nasdaq has registered its most all-time highs since 1986. Over the first part of that year, the index posted 48 closing records by June 8.

You might think we're on a pace to smash the all-time record of 62 record closes, set way back in 1980. But markets don't work with that much regularity. In 1986, after those 48 closing records by June 8, there were only seven more left the rest of the year..

Thursday, June 8, 2017

What the Wealthy Are Buying

Where are the wealthy putting their money? According to one new report, it's not hedge funds. Wealthy members of the Tiger 21 peer-to-peer learning network instead increased their allocations to real estate and commodities in the first quarter, according to the organization's latest report.

Real estate allocations hit a new high of 32 percent in the first quarter, two percentage points above the previous high in the fourth quarter. Members also allocated 1 percent to commodities in the first quarter, their first commodity exposure since the third quarter of 2014.

Allocations to private equity, fixed income and hedge funds each fell by one percentage point from the fourth quarter to 20 percent, 9 percent and 5 percent, respectively. At 5 percent, hedge funds have tied their historic low for members’ allocations.

Wednesday, June 7, 2017

The Jobs Mismatch

U.S. job openings surged to a record high in April, but employers appeared to have trouble finding suitable workers. The Labor Department's monthly Job Openings and Labor Turnover Survey, or JOLTS, published on Tuesday also suggests that a recent slowdown in job growth could be the result of a skills mismatch.

Job openings increased 259,000 to a seasonally adjusted 6.0 million in April, the highest since the government started tracking them in 2000. The monthly increase was the largest in just over a year and pushed the jobs openings rate to 4.0 percent, its highest level since last July.

Hiring, however, decreased by 253,000 jobs in April. The gap between job openings and hiring points to a growing skills mismatch; a report from the National Federation of Independent Business last week showed the share of small business owners reporting job openings they could not fill in May was the highest since November 2000.

Tuesday, June 6, 2017

The Scars of the Financial Crisis

Ten years after the financial crisis hit, it is still having a major psychological impact on investors, even those too young to have lost money in the crash. According to a new survey from Legg Mason Global Asset Management, millennial investors in the United States report that the financial crisis and subsequent recession strongly influence their investment decisions, leaving them more risk-averse than any other age group.

The survey finds that 82 percent of the surveyed millennials said their investment decisions are influenced by the financial crisis, with 57 percent saying they are “strongly influenced.” By comparison, 39 percent of Gen X, 13 percent of baby boomers, and 14 percent over age 65 said their investment decisions are still “strongly influenced” by the global financial meltdown.

A similar number of millennial investors said they are conservative investors (85 percent), with 52 percent calling themselves “very conservative.” Only 30 percent of Gen X, 29 percent of baby boomers, and 28 percent over age 65 consider themselves “very conservative.”

Monday, June 5, 2017

Amazon's Big Year

Amazon’s stock ended at $1,007 Friday, the first time it closed in four figures. It briefly pushed above $1,000 during Tuesday’s trading session before finishing at $997. Google parent Alphabet also came within pennies of $1,000, ending the week at $996.

Though it is a retailer, Amazon stock is acting much more in line with the other big tech firms. Amazon shares have climbed more than 34 percent this year, trouncing shares of traditional retailers. The SPDR Retail exchange-traded fund, which tracks more than 100 stocks, is down more than 6 percent on the year.

Amazon is keeping pace with the big gains that have been posted by tech stalwarts like Facebook and Apple. Each of those stocks has climbed 34 percent this year.

Friday, June 2, 2017

May's Jobs Report

In May, the economy added a mildly disappointing 138,000 jobs, but the unemployment rate fell to 4.3 percent, according to this morning's data from the Bureau of Labor Statistics. This is a new post-recession low for the unemployment rate — which is now at its lowest level since May 2001.

Employment in health care rose by 24,000 in May, while mining added 7,000 jobs. Employment in mining has risen by 47,000 since reaching a recent low point in October 2016, with most of the gain in support activities for mining.

The economy has seen an average monthly gain of 181,000 over the prior 12 months. With today's figures, the number of jobs added for March was revised down from 79,000 to 50,000, and the change for April was revised down from 211,000 to 174,000. With these revisions, employment gains in March and April combined were 66,000 less than previously reported.

Thursday, June 1, 2017

The Broad-Based Tech Rally

The market-cap weighted index of tech stocks in the S&P 500 is up 20 percent in 2017, more than double the 7.8 percent advance of the S&P itself. It's tempting to think this is the result of a few big tech stocks: Apple, Microsoft, Alphabet and Facebook by themselves account for 43 percent of the S&P 500’s tech sector market capitalization.

But it’s worth noting that the majority of tech stocks in the S&P 500 are having stellar years as well. An equally weighted iteration of the S&P 500 tech sector, in which Apple carries the same sway as software company Adobe Systems, is itself up more than 17 percent this year; the median tech stock in the S&P 500 is up 18%.

Even smaller tech stocks are outperforming. More than half of the 303 tech stocks in the Russell 3000 Index, a measure of large-, medium- and small-cap companies, have recorded at least double-digit percentage gains this year.

Wednesday, May 31, 2017

Surprises in Consumer Confidence

Consumer confidence showed an unexpected decline for the month of May, falling from 119.4 down to 117.9. With that drop, consumer confidence saw its first back-to-back drop since May of last year, although it still remains well above its long-term average of 93.

There's a fascinating divergence in confidence based on income levels in the past two months. Sentiment among consumers with incomes greater than $50,000 has dropped over 10 percentage points in the last two months, which is the largest two-month decline in two years. But confidence levels among consumers with incomes between $35,000 and $50,000 actually increased this month and is barely down in the last two months.

But for lower-income folks, it's a completely different story. For consumers with annual incomes below $15,000, confidence is at its highest level in nearly 16 years.

Tuesday, May 30, 2017

The Big Boppers

It's been a strong year so far for the S&P 500 index, rising nearly 8 percent on the year. But it's been remarkably top-heavy: If we strip out the performance contribution of the five largest stocks in the S&P 500, the index is up only 4.6 percent.

Those five biggest stocks are:
  • Apple,  up 16 percent
  • Facebook, up 32 percent
  • Amazon, up 33 percent
  • Microsoft, up 13 percent
  • Alphabet,  up 25 percent
At the start of the year, these five stocks accounted for 11.6 percent of the index’s market cap. That share stands at about 13.7 percent today.

Monday, May 29, 2017

Thoughts for Memorial Day

"It is foolish and wrong to mourn the men who died. Rather we should thank God that such men lived." ~ George S. Patton

“The legacy of heroes is the memory of a great name and the inheritance of a great example.” ~ Benjamin Disraeli

"The U.S. Military is us. There is no truer representation of a country than the people that it sends into the field to fight for it." ~ Tom Clancy

Friday, May 26, 2017

High Prices in Retail

Yesterday was a rare good day for retail stocks, as strong first-quarter results from retailers such as Best Buy and PVH led indexes to record highs. Best Buy soared 21.5 percent to $61.25 after the electronics retailer issued a strong first-quarter report, including better sales of mobile devices and gaming products.

PVH, the owner of brands including Calvin Klein and Tommy Hilfiger, climbed 4.8 percent to $107 after it raised its annual forecasts in the wake of its own strong report. Other retailers — including Guess, Abercrombie & Fitch and Burlington Stores — also made substantial gains.

There was good news for the biggest online retailer as well. Amazon rose 1.3 percent on the day,  peaking at a tantalizing $999 per share before falling back to $993.

Thursday, May 25, 2017

Skipping Vacation

Are you going on vacation this summer? Are you taking all the time your employer gives you? The average U.S. employee who receives paid vacation has only taken a little over half, or 54 percent, of those days in the past 12 months, a new survey of over 2,200 workers by careers website Glassdoor has found.

This is up slightly from how much vacation time employees reported taking in 2014, when Glassdoor first conducted this survey; it was 51 percent then. If an average worker who receives two weeks vacation leaves five days on the table, they’re effectively giving hundreds of dollars back to the company.

Why don’t they take what’s due? They fear getting behind on their work (cited by 34 percent), they believe no one else at their company can do the work while they’re out (30 percent), they are completely dedicated to their company (22 percent), and they feel they can never be disconnected (21 percent).

Wednesday, May 24, 2017

A Slow Summer Gas Season

If you’re planning to kick off your summer with a Memorial Day road trip, you couldn’t have picked a better year to do so. Gas prices going into the holiday, considered the unofficial start to the summer driving season, are well below where they typically are at this time of year, according to data firm Bespoke Investment Group.

A gallon of gas costs an average of $2.36 per gallon in the U.S. right now, 22 percent below the $3.04 average going back to 2005. It has only been cheaper to fill the tank in two other years since then: 2016, when prices were at $2.29 a gallon, and 2005, when they were at $2.12.

And this is the time of year, as we enter the summer, when prices are normally the strongest. On average, prices are up 22 percent between the start of the year and May 23, but thus far in 2017, prices are up a mere 1.1 percent, the lowest year-to-date increase in Bespoke’s data set by far.

Monday, May 22, 2017

Earnings Season Roundup

First quarter earnings season is now in the books. A total of 2,450 companies reported earnings, and of these, exactly 1,500 of them reported better than expected EPS numbers. That’s a 61.2 percent earnings beat rate.

Those stocks, not surprisingly, tended to rise in value after their reporting dates. On average, the stocks that beat their earnings estimates this season gained 1.97 percent on their earnings reaction days.

Since 61.2 percent of companies beat EPS estimates, that means 29.8 percent of them missed their estimates. These stocks averaged a one-day decline of 3.21 percent on their earnings reaction days. In other words, for those that missed, the drop was worse than the gain was for those that exceeded estimates.

History Lesson

The S&P 500 is off to its best start in four years, but that doesn’t mean it will end that way. Through May 18, the S&P 500 has gained 5.7 percent. In the past decade, two other years have better returns over the same time period, as Bespoke Investment Group noted in research published Friday.

In 2013, the S&P had jumped 17 percent by this time of year, and went on to finish the year up nearly 30 percent. In 2011, the S&P 500 had returned 6.6 percent by May 18, but would to take a tumble in August and would finish the year basically flat.

Bespoke also looked at the 10 years that correlated the most with the start of 2017. During those years, the S&P 500 averaged a gain of 4.7 percent from May 18 through end of the year, with returns positive in seven of the 10 years. But one of those years was 1987, when the stock market took a 14  percent tumble between May 18 and year-end.

Friday, May 19, 2017

Spinoffs Lose Their Luster

Companies are finding it more difficult to extract value by spinning off businesses, according to a new analysis from Citi’s investment banking group. The study examined returns for the parent company from announcement to deal completion and returns for the spinoff two years after the transaction closed. Spinoffs underperformed their industry sectors by 5 percent on average between 2011 and 2015.

They used to do much better than that. The underperformance of 5 percent in recent years compares with an average overperformance of 30 percent between 2001 and 2005, and 19 percent between 2006 and 2010.

Despite the negative trend, spinoffs remain popular. Companies completed $121.5 billion such deals globally, according to Dealogic. For the year as of May 17, companies have announced $34.9 billion in spin-offs, 27 percent ahead of last year’s pace.

Thursday, May 18, 2017

A Spike in the Fear Index

The CBOE Volatility Index posted its biggest daily jump yesterday since the day following Britain’s vote to exit from the European Union, which upset markets around the world last June. The VIX measures expectations for market swings in the S&P 500 index 30 days in the future.

The so-called Fear Index was up about 46 percent on the day. That is its biggest daily move since June 24. when the index jumped 49.3 percent. The S&P Index lost nearly 2 percent on the day.

Still, the level for the so-called fear gauge remains low compared with its long-term average of 20. This one-day climb comes just a week after the fear gauge registered its lowest close since 1993.

Wednesday, May 17, 2017

Industrial Output: The Latest Good News

U.S. industrial output rose sharply in April, the latest evidence that economic growth is picking up following a lackluster start to the year. Manufacturing output, the biggest component of industrial production, posted its strongest gain since early in 2014, pushing the Fed’s manufacturing index to a new post-recession high.

Industrial production—a measure of output at factories, mines and utilities—jumped 1.0 percent from a month earlier. That might not sound like much, but it was the largest gain in more than three years.

The strong showing follows a string of upbeat April indicators, including the unemployment rate falling to its lowest level since 2007, solid consumer spending gains at online sellers, restaurants and other retailers, and existing-home sales climbing at their fastest pace in a decade.

Monday, May 15, 2017

The Slow Road to 2400

The S&P 500 finished above 2400 for the first time ever yesterday, crossing a barrier that had proven elusive for months. This wasn't the first time it reached 2400, but it was the first time it had closed there.

The benchmark index first topped 2400 in intraday trading more than two months ago, on March 1, but dropped back below that level before the session ended. In the last few trading days, the index held just below 2400 on a closing basis.

The slow rise is a measure of how calm the stock market has been lately. The S&P 500 rose just 0.48 percent on Monday, its 14th straight session without an absolute move of 0.50 percent or more. That matches a streak last seen in 1995.

Sunday, May 14, 2017

The Retail Split

We talked last week about the problems that department store stocks have been having this quarter. It's not about dropping retail sales: A Commerce Department report on Friday showed a seasonally adjusted 0.4 percent jump in retail sales in April, as well as revisions higher to prior data.

But the data also showed a growing divide: sales among nonstore retailers, which includes online shopping, jumped 1.4 percent, while department-store sales had a much smaller increase of 0.2 percent. Nonstore sales are up nearly 12 percent over the past 12 months, while department store sales were down 3.7 percent.

So the news has been good for online retailers; Amazon’s shares climbed 0.6 percent Friday morning. But Nordstrom sank 8.2 percent, Dick’s dropped 6.6 percent, and J.C. Penney fell 7.6 percent. All are down more than 10 percent on the year, and J.C. Penney has fallen more than 40 percent.


Friday, May 12, 2017

Department Store Woes

There's one little segment of the economy that continues to show sign of trouble: Department stores. Big retailers have begun to report results for the first quarter, and the news is not pretty.

Macy’s reported Thursday a worse-than-expected drop in revenue during the first quarter as same-store sales marked a particularly large slide. Kohl’s said same-store sales fell more than expected. Nordstrom reported that same-store sales slipped 0.8 percent versus a year ago.

Macy's promptly sank 15 percent. Nordstrom dropped 8 percent, and Kohl's fell 6.4 percent. The three stocks were the worst performers in the S&P 500 for the session. The SPDR S&P Retail exchange-traded funds fell 2.4 percent on the day.

Thursday, May 11, 2017

In the Black

Here's some good news: The federal government ran its second highest monthly surplus on record this April. In its monthly budget report, the Treasury Department said yesterday that the surplus for April totaled $182.4 billion, the second largest surplus after a record $189.8 billion surplus set in April 2001.

Wait a minute, you're thinking: Don't most people pay their taxes in April? Yes they do.The government generally runs surpluses in April, and this year's was inflated because of a deadline change that allowed corporations until April to make their final tax payments for last year.

Through the first seven months of the current budget year, which ends in September, the federal government is running a deficit of $344.4 billion. That's still down 2.4 percent from the same period a year ago.

Wednesday, May 10, 2017

The Changing Face of Retirement

American are working longer because they want to, not because they have to. That’s according to Gallup's Economy and Personal Finance survey, which shows that 11 percent intend to work full time once they hit retirement age—while just 25 percent of employed Americans plan to stop working altogether.

Among the would-be full-time retirement workers, the majority plan to do so because they want to, not because they have to, and the proportion of “want to” versus “will have to” explanations has risen slightly since 2013. The percentage who say they want to keep working just part time has also increased, from 34 percent to 44 percent.

Two 1995 polls revealed that an average of 14 percent said they expected to retire after 65 and 49 percent before 65. Current retirees present a different image: 68 percent said they retired before age 65, while just 30 percent worked till 65 or older.

Tuesday, May 9, 2017

The $800 Billion Gorilla

Apple today became the first company to ever have a market capitalization of $800 billion - briefly. Apple stock crossed the $800 billion mark early in the afternoon, but then gave back some of its value before closing, ending the day at a market cap of $797.8 billion.

It's still by far the most valuable company in the world. The rest of the top five, in order of market cap:
  • Alphabet $652 billion
  • Microsoft $530 billion
  • Amazon.com $451 billion
  • Berkshire Hathaway $406 billion

Monday, May 8, 2017

Older Debt

The Federal Reserve Bank of New York released numbers recently showing that the share of all household debt held by people aged 60 and older has almost doubled, from 12.6 percent in 2003, to 22.5 percent in 2016. The total debt is now nearly $3 trillion.

Mortgages, auto loans, credit cards and even student loan balances have all grown significantly for older Americans -- and only older Americans. Borrowers under 60 reduced their mortgages and credit card balances relative to the peak during the 2008 financial crisis.

Seniors are holding $67 billion in student loans, and the number of seniors holding such loans has quadrupled since 2005. That makes older folks the fastest-growing segment of the student loan borrower population, according to a recent report by the Consumer Financial Protection Bureau.

Friday, May 5, 2017

April's Jobs Report

The economy bounced back strong in April, adding 211,000 jobs after a disappointing March. The headline unemployment rate ticked down to 4.4 percent, the lowest it's been since prior to the recession.

The March figure, already low at 98,000, was revised down to 79,000 jobs added on Friday. But all told, the economy has added an average 185,000 jobs a month in 2017, roughly matching last year’s pace.

The broader measure of unemployment known as the “U-6” rate fell to 8.6 percent, the lowest it's been since November 2007. This rate takes into account not only unemployed workers, but also Americans who are too discouraged to look for work and part-timers who would prefer full-time work.

Thursday, May 4, 2017

The Fed Stands Pat

No surprises on interest rates this month: The Federal Reserve announced yesterday that it held its benchmark interest rate steady after its latest policy meeting, as had widely been expected. The Fed kept the benchmark federal funds rate at a range of 0.75 percent to 1 percent, following the 0.25 percent increase in March.

The Fed acknowledged that the overall economy and consumer spending both slowed down during the first quarter. But they view it as temporary, and think the economy in general is strong enough to withstand further hikes.

In other words, the Fed expects to continue raising interest rates – and the next hike may be in June. The majority of the Fed's 17 leaders predict two or more rate hikes for the rest of the year. That's a faster pace compared to the last two years, when the Fed only raised rates once a year.

Wednesday, May 3, 2017

Putting the Brakes on Car Sales

Sales at all six of the biggest automakers in the U.S. dropped again in April, with Ford and Honda Motor posting the steepest declines -- about 7 percent each. Five of the six biggest companies — General Motors, Ford, Fiat Chrysler Automobiles, Honda and Nissan — all reported sales falling faster than analysts had forecast. Only Toyota posted monthly sales that were better than expected, but they too were down.

U.S. car sales are expected to fall this year after rising to a record of 17.55 million in 2016, up from 17.5 million in 2015. The annualized pace of U.S. auto sales slowed to 16.9 million in April. A year ago, the rate was 17.4 million.

Industrywide deliveries are down 2.4 percent so far this year compared to the same period last year. The four-month slump reinforces the sense among many that this year will hold the U.S. auto market’s first annual contraction since 2009, the year GM and Chrysler reorganized in bankruptcy court.

Tuesday, May 2, 2017

Sector Scoreboard

With a third of 2017 in the books, the S&P 500 is up 7 percent on the year, and those gains are pretty broad-based. Nine of the eleven sectors in the index have advanced in 2017 - but the two that have dropped have both fallen quite a bit.

The full scoreboard:
  • Information Technology, up 15 percent
  • Consumer Discretionary, up 11 percent   
  • Health Care, up 10 percent    
  • Consumer Staples, up 7 percent    
  • Materials, up  7 percent   
  • Utilities, up 7 percent    
  • Industrials, up 6 percent   
  • Real Estate, up 4 percent  
  • Financials, up 2 percent
  • Telecommunications Services,  down 7 percent    
  • Energy, down 9 percent  

Monday, May 1, 2017

A Cool Thousand

Earnings season has driven two well-known stocks close to the thousand-dollar-per-share-price level. Amazon.com reached its all-time high of $950 on Friday, while Google parent Alphabet rose as much as 5 percent, to a fresh intraday peak of $936.

Currently, there are only four companies in the S&P 500 at $1000 or more a share, led by Berkshire Hathaway class A shares, which are currently at nearly $250,000 apiece. The others in the $1,000 club include Seaboard (at $4,234), NVR (at $2,111), and Priceline Group (at $1,846).

Alphabet’s total market value of $607 billion is second only to Apple among S&P 500 companies. And Amazon comes in fourth, with a market capitalization of nearly $439 billion.

Friday, April 28, 2017

First Quarter GDP

Gross domestic product increased at just a 0.7 percent annual rate in the first quarter of 2017, the Commerce Department said this morning. That was the weakest performance since the first quarter of 2014. In the fourth quarter of 2016, real GDP increased 2.1 percent.

Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, slowed to a 0.3 percent rate in the first quarter. That was the slowest pace since the fourth quarter of 2009 and followed the fourth quarter's robust 3.5 percent growth rate.

One factor was higher inflation, which saw the personal consumption expenditures index averaging 2.4 percent in the first quarter, the highest since the second quarter of 2011. That also weighed heavily on consumer spending.

Thursday, April 27, 2017

New Job Creators Are Losing Ground

New companies simply aren’t the same job creators that they have been in decades past. According to Labor Department data released yesterday, during the expansion, new establishments have accounted for a little more than 11 percent of all new private-sector jobs created in the U.S.

During the 1990s, the figure was 15 percent.  That may seem like a small shift, but those few percentage points add up to nearly 300,000 jobs a quarter.

Looking back to 1992, the only sector where startups are now creating more jobs is education and health care. On the other hand, new manufacturing firms accounted for the creation of 22,000 jobs in the third quarter of 2016, down about 80 percent from 24 years earlier. Natural resources and mining, financial services and information—a sector that lumps together old-world publishing with software and internet services—are all down by about half.

Wednesday, April 26, 2017

The New Nasdaq

The Nasdaq reached a big benchmark yesterday, closing above 6000 for the first time ever. It's finally surpassed the heights it reached during the dot-com bubble in 2000.

The index is different now: Tech stocks only make up 44 percent of the index, versus about 60 percent when the dot-com bubble burst. Even in the last few years, the change has been noticeable. Consumer goods, which made up 3.2 percent of the index at the end of 2011, made up 5.3 percent at the end of March, and consumer services have gone from 18 percent to 21 percent over that same period.

The Nasdaq still includes it share of tech behemoths. Apple makes up more than 8 percent of the index by weighting. Microsoft makes up 5.7 percent; Facebook and Alphabet both make up more than 3 percent.

Tuesday, April 25, 2017

The Incredible Shrinking Bank

If you still like doing your banking by heading down to your local branch, you may have to change your ways. The number of bank branches in the United States will shrink by as much as 20 percent in five years, according to a report from commercial real estate firm JLL.

The U.S. banking industry could save as much as $8.3 billion annually if it trimmed the number of branches, and downsized the size of the average bank branch from 5,000 to 3,000 square feet, JLL estimates.

This has been a trend that has been in motion since the recession. U.S. banks have reduced their footprint by around 8 percent since the financial crisis, from 97,000 branches to roughly 90,000.

Monday, April 24, 2017

A Big Week for Earnings

This upcoming week will be a huge one for earnings reports, with more than 190 members of the S&P 500 index delivering quarterly scorecards. All told, the reports will account for around 40 percent of the S&P's total value.

Thursday will be the busiest day, with nearly 70 reports due. After the closing bell, we will hear from such heavy hitters as Alphabet (Google''s parent), Amazon, Intel, Microsoft and Starbucks.

Of the 95 S&P 500 companies that have reported earnings so far this quarter, 75.8 percent have topped analyst forecasts, slightly above the recent four-quarter average of 71percent. Some 62.1 percent have topped analyst revenue expectations, well above the 53 percent average over the last year.

Friday, April 21, 2017

Gleanings from the Beige Book

The economy continued to grow across the U.S. at a modest pace in recent weeks as a tight labor market helped broaden wage gains, though consumer spending was mixed, according to the latest beige book from the Federal Reserve. The report said that household purchases outside of automobiles were softer even as Americans were gaining more ability for future spending.

The report paints a picture of an economy maintaining its steady expansion, though without any rapid bursts of growth. Even so, wages showed progress in responding to a tightening jobs market, with most districts reporting "difficulty filling low-skilled positions" and stronger demand for higher-skilled workers.

The report made surprisingly little mention of the harsh weather that had the potential to interrupt activity, especially in the Northeast. The New York region reported "little adverse effect from the mid-March snowstorm" and "tourism and travel activity generally picked up" across regions, the book said.

Thursday, April 20, 2017

Fund Managers Look Overseas

The hottest category in stock funds right now: Europe. In April, allocations to equities in the eurozone jumped to a 15-month high, according to the latest survey of fund managers by Bank of America Merrill Lynch.

Meanwhile, allocations to U.S. equities dropped to their lowest level since early 2008. Some 83 percent of the respondents - a record for this particular survey - said U.S. equities were overvalued. Nearly a third of investors said global equities were overvalued, which is close to a 17-year high in that reading.

Fund managers also boosted their cash allocations slightly, up to 4.9 percent in April from 4.8 percent in March. The 10-year average for cash allocations is 4.5 percent.

Wednesday, April 19, 2017

Good News, Bad News

First the good news: Median usual weekly earnings for full-time workers rose 3.9 percent in the first quarter from a year earlier, the Labor Department said yesterday. That was the best gain since late 2008.

Nearly eight years after the recession ended, weekly pay is nearing the 4 percent annual growth pace that was reached in the prior two economic expansions. That’s a sign that the economy has returned to full health.

But there's some bad news: When adjusting for inflation, paychecks are growing more slowly than they were a year ago. Inflation is still fairly low, but higher than it was in 2015. When factoring in price changes, weekly earnings rose just 1.2 percent from a year earlier. That matches the fourth quarter of 2016 as the smallest advance since late 2014.

Tuesday, April 18, 2017

Where Your Tax Money Goes

Today is tax day, when most Americans file their income taxes. The Wall Street Journal has helpfully broken down where our tax money goes. For every $100 you pay in federal taxes:

  • Social Security gets $23.61    
  • Medicare  gets  $15.26    
  • National defense  gets  $15.24    
  • Medicaid  gets  $9.55    
  • Interest  claims  $6.25    
  • Other spending  claims  $4.94    
  • Veterans  get  $4.58    
  • Civilian federal retirement gets   $2.57    
  • Transportation  gets  $2.39    
  • Refundable credits get  $2.21