Friday, November 16, 2018

Black Friday Preview

Black Friday is a week from today. About 38 percent of American consumers plan to shop on Black Friday this year, and six in 10 of those shoppers anticipate making at least half of their holiday purchases on that day, according to a new Reuters/Ipsos poll.

Fifty-nine percent of the people who plan to shop Black Friday deals intend to finish at least half of their holiday shopping that day. The poll showed 37 percent of consumers intend to do their shopping primarily or totally online, while 16 percent expect to shop primarily in a physical store.

American consumers are less interested in buying clothing, jewelry, electronics, toys and gift cards this year compared to years past, the survey found, but they are eager to spend more on food. By 2022, online grocery shopping could be a $100 billion industry, and as many as 70 percent of consumers could be doing a portion of their food shopping online.

Thursday, November 15, 2018

The Natural Gas Bounce

Oil prices finally finished higher on Wednesday, with U.S. benchmark crude putting an end to its record 12-session streak of declines. But the real story was in natural gas, which settled at its highest price since February 2014.

Natural-gas futures saw a spectacular climb of about 18 percent on the day—their biggest gain in more than 14 years. The rise was fueled by cold weather forecasts that continued to feed concerns about tight U.S. supplies.

December natural gas  jumped 73.6 cents, or about 18 percent, higher to $4.837 per million British thermal units. That was the largest one-day percentage gain since September 29, 2004, and the largest gain in dollar terms since January 30, 2007. Wednesday’s rally also took natural gas futures to their highest settlement since February 26, 2014.

Wednesday, November 14, 2018

How Prepared Is the Middle Class?

Middle-class Americans’ own assessment of financial security suggests they may be too optimistic, according to a new survey from CUNA Mutual Group. It found that many middle-class people  have a disconnect between their aspirations and their resources.

The survey finds that Americans with an annual income of $35,000 to $100,000 tend to feel positive about their prospects for upward mobility. Some 62 percent say they feel somewhat or very confident about their personal financial situation, and nearly half (46 percent) believe it is very unlikely that they will miss a loan payment over the next one to two years.

However, the survey finds that this cautious optimism belies a more troubling financial picture. More than half of the respondents were ill-equipped for a serious financial emergency, with 23 percent saying they have no emergency savings and 30 percent saying they only have one to three months’ worth.

Tuesday, November 13, 2018

Blowout in Oil & Gas

More than 90 percent of S&P 500 companies have now reported results for this earnings season, and the numbers look good. S&P Global Market Intelligence expects S&P 500 companies to report a 24.7 percent increase in earnings per share from a year earlier.

A little deeper inside those numbers, the biggest story in sales came from the energy sector. The top six S&P 500 companies in quarterly sales growth were all oil & gas companies. They include:

  1. Pioneer Natural Resources, up 92 percent
  2. Concho Resources, up 90 percent
  3. EQT Corp., up 86 percent
  4. EOG Resources, up 78 percent
  5. Occidental Petroleum, up 73 percent
  6. Newfield Exploration, up 62 percent

Monday, November 12, 2018

Worries Over Wages

In a strong quarter for earnings results, climbing labor costs have become a growing future concern, with more than a dozen companies in the S&P 500 mentioning them in conference calls so far this earnings season. That is up from just a handful of companies that noted these concerns over a similar period in the year-ago quarter.

In the recent U.S. jobs report for October, wages recorded their largest annual gain in nine and a half years. The Employment Cost Index, the broadest measure of labor costs, increased 0.8 percent in the third quarter after a 0.6 percent rise in the second quarter, putting the year-on-year rate of increase at 2.8 percent.

These wage pressures are widely expected to be a factor in declining earnings growth in 2019. Earnings growth for S&P 500 companies has been forecast to slow to about 9 percent next year following 2018’s tax-fueled earnings gains, estimated at 24 percent, according to IBES data.

Friday, November 9, 2018

Oil in Bear Territory

The news just gets worse for oil, or better for consumers, depending on how you want to look at it. The five-week rout for oil prices officially turned into a bear market yesterday, ending the longest bull run in oil since 2015.

West Texas Intermediate crude for December delivery fell $1, or 1.7 percent, to settle at $60.67 a barrel, marking its ninth straight losing session. That's the lowest close for U.S. oil since March. That left the U.S. oil benchmark down 21 percent from its October 3 peak, exceeding the widely applied definition of a bear market.

WTI is still clinging to a gain for the year, up 0.5 percent so far in 2018. Brent crude, the international benchmark, is still up 6.1 percent. Thursday’s close means that the bull market peaked on October 3, ending a 324-day run that began on June 21, 2017.

Thursday, November 8, 2018

Retirement Savings Hit a New High

Americans are saving more for retirement than ever before, according to a new report from Fidelity Investments. At the end of the third quarter of 2018, average retirement account balances reached record highs in all categories. Those September 30 average balances were:

  • $106,500 in 401(k) plans, up 2.4 percent from the second quarter
  • $111,000 for individual retirement accounts, up 3.8 percent
  • $85,500 for 403(b) plans, up 2.5 percent

Those averages are nearly double from where savers were a decade ago, at the start of the financial crisis. The average employee contribution reached its highest level since late 2006, at 8.7 percent, and average rates among women hit a record of 8.5 percent.

Tuesday, November 6, 2018

The Iran Sanctions and Oil Prices

Last month, the threat of U.S. sanctions on Iran drove oil prices to multiyear highs. Those sanctions kicked in on Monday - but oil prices have stopped climbing. In fact, they've fallen.

At the start of last month, as oil shipments from Iran declined, Brent crude prices, the international benchmark, breached the $86-a-barrel threshold for the first time in four years. West Texas Intermediate, the U.S. gauge, hit around $76 a barrel, also near a four-year high.

Those increases, though, seem to be the extent of the effects that the sanctions will have on oil prices.  Since early October, Brent has fallen almost 16 percent, and WTI 17 percent. The sanctions, now being imposed, are unlikely to have more effects than that.

Election Day Notes

No matter what your political disposition, you may be a little nervous about today's elections, but you shouldn't be nervous about how it will affect the markets. Since 1946, there have been 18 midterm elections. Stocks were higher 12 months after every single one.

Since 1946, stocks have risen an average of 17 percent in the year after a midterm. If you measure from the yearly midterm lows, the results are even better. From their lows, stocks jumped an average of 32 percent over the next 12 months. That’s more than double the average performance for stocks in all years.

One more political note: The second year of the presidential cycle, which is the year we're in right now, is typically the worst for stocks. The performance of stocks in the third year of a presidential term beats all other years by a long shot, returning an average of nearly 14 percent between 1928 and 2016.

Monday, November 5, 2018

Buybacks Lose Their Impact

In the period before earnings releases, public companies face greater restrictions to buying back their own shares, known as a “buyback blackout period.” By the end of last week, about three quarters of S&P 500 companies have reported earnings, according to FactSet. So the buyback announcements have now begun, with companies ranging from EstĂ©e Lauder Companies to Intercontinental Exchange announcing purchases of their own shares.

But these repurchases are not likely to power the stock market beyond its recent peaks. Companies in the S&P 500 index are on track to buy back 30 percent less in stock than they did in the second quarter.

And investors are no longer rewarding companies that buy back their own stock. Since the Federal Reserve began raising rates in December 16, 2015, the Invesco Buyback Achievers fund has gained 28 percent, compared with a 33 percent gain for the S&P 500 index over the same period. In other words, a fund that purchases shares of companies that have consistently bought back their shares hasn’t outperformed the S&P 500.

Friday, November 2, 2018

October's Jobs Report

October was another strong month for the job market, with the American economy adding 250,000 new jobs. That follows an average monthly gain of 211,000 over the prior 12 months. The unemployment rate stayed at 3.7 percent, the lowest since December 1969,  even though there was a slight rise in the labor force participation rate to 62.9 percent.

The biggest story may be wage growth, which has been the missing piece of the economic recovery. Average hourly earnings increased by 5 cents an hour for the month and 83 cents year over year, representing a 3.1 percent gain. The annual increase in wages was the strongest since 2009.

The big month for job gains comes off a disappointing September that may have been weighed down by the violent hurricanes in the Carolinas. That month's reading fell further, from an initially reported 134,000 to 118,000. However, that decline was  offset by an upward revision to August's numbers, from an already strong 270,000 to 286,000.

Thursday, November 1, 2018

Black October

October was a rough ride for U.S. stocks, which ended as one of the market's worst months since the financial crisis.The S&P 500 lost 6.9 percent in October, its biggest one-month slide since September 2011, when it fell 7.2 percent. The Nasdaq plunged 9.2 percent, its largest monthly pullback since November 2008, when it lost 10.8 percent.

The S&P 500 lost $1.91 trillion in value for the month, with widespread losses almost across the board. Consumer staples and utilities were the only major S&P 500 sectors in the black in October.

Big technology stocks, including the FAANG group, were among the hardest hit. Amazon ended the month down 20.2 percent, and Netflix ended down 19.3 percent. Facebook and Alphabet finished October down 7.7 percent and 9.7 percent, respectively.

Wednesday, October 31, 2018

New Highs for the Pleasure Index

Are you feeling financial pleasure? The American Institute of CPAs has reported that its pleasure index was up two points from the second quarter to 73.9, setting an all-time record for the seventh quarter in a row. The largest factor is the stock market index, but the big driver was The Job Openings Per Capita Index, the pleasure index’s second largest contributor, which increased 1.1 points over the previous quarter. With 7.1 million job openings for 6.2 million job seekers, the tight labor market saw 3.6 million workers voluntarily leave their jobs in August, the fastest pace in 17 years, according to the Bureau of Labor Statistics.

The other two components of the pleasure index also rose. The AICPA Economic Outlook Index, which captures CPA executives’ expectations in the year ahead for their companies and the U.S. economy, was 3.5 percent higher than the prior year level.

The Real Home Equity Per Capita index, which measures the wealth we have in our homes, was 6.5 percent above the prior year value and 2.1 percent ahead of the previous quarter level. However, it is still 11.6 percent below its record high, set back in 2006.

Monday, October 29, 2018

Economic Snapshot

Inflation, incomes and spending are all still growing - but slowly. According to the monthly report published yesterday by the Bureau of Economic Analysis, the Personal Consumption Expenditures (PCE) price index in September rose 0.1 percent on a monthly basis to match August's reading. On a yearly basis, PCE  edged down to 2 percent from 2.2 percent. Meanwhile, core PCE, which strips volatile food and energy prices, increased 0.2 percent in September.

Meanwhile, the Commerce Department reported that income recorded its smallest gain in more than a year on moderate wage growth. All told, personal income increased $35.7 billion, or 0.2 percent, in September.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.4 percent last month. The growth came as households bought more motor vehicles and spent more on health care. Personal consumption expenditures increased $53.0 billion for the month, or  0.4 percent.

Third Quarter GDP Report

Gross domestic product decelerated a bit to a 3.5 percent annual pace in the third quarter, down from a torrid 4.2 percent pace in the prior three months, the Commerce Department said Friday.  But expansion in the last two quarters is still the fastest six months of growth in four years.

What caused this? Consumer spending rose 4 percent in the third quarter, even stronger than the prior three months. This was offset somewhat by a slowdown in business and residential investment. Household investment has fallen for three straight quarters.

The value of unsold goods - or business inventories - added 2.1 percentage points to growth, as companies stocked up. A significantly larger trade deficit took 1.8 points off top-line growth. Government spending picked up, expanding 3.3 percent after a 2.5 percent gain in the second quarter.

Friday, October 26, 2018

Bear Market? Not So Fast

A market correction is often defined as a 10 percent pullback from a recent peak. Using that as a yardstick, after yesterday's stock market plunge, the S&P 500 is about 2 percentage points away from joining the Nasdaq Composite in correction mode.

But a correction doesn’t necessarily mean that a bear market is lurking around the corner. In fact, history and data make for a strong case that this recent selloff is nothing out of the norm. Data from the Schwab Center for Financial Research showed that there have been 22 market corrections since 1974 and only four of them, occurring in 1980, 1987, 2000 and 2007, eventually ended up as bear markets.

Even in the current bull market. which started in 2009, there have been six corrections that avoided turning into bears. Most recently, a dive in February was followed by stocks getting back to record territory by late summer.

Thursday, October 25, 2018

The Big Drop

You've heard about it by now: Yesterday the Dow and the S&P 500 index wiped out all their hard-fought gains over the past 10 months to turn negative for 2018. October is shaping up to be a brutal month, with the S&P falling 8.9 percent month-to-date, the Dow down 7.1 percent, and the Nasdaq down 11.7 percent.

Indeed, the S&P 500 has had 14 down days so far in October, the highest number of losing days for the index since May of 2012 when it fell 14 days, according to Dow Jones Market Data. One more loss, and it will mark its highest number of down days since October of 2008.

Meanwhile, the Nasdaq Composite Index shed 329.14 points, or 4.4 percent, to 7108.4, which put the index more than 10 percent below its August 29 all-time high, meeting the widely used definition of a market correction. The loss also marked the worst day for the Nasdaq since August 18, 2011.

Wednesday, October 24, 2018

Women's Worries

Women have a more negative view of their financial health than men, even if they’re in good shape financially. That’s according to Prudential’s new Financial Wellness Census, which finds that among financially healthy women, 10.1 percent have a negative view of their money situation, compared with just 6.3 percent of financially healthy men. The same holds true, with no statistically significant difference, among women who aren’t financially healthy.

Prudential defined “financially healthy” as doing better than average, based on income levels, savings and debt. On average, women have saved 43 percent less for retirement than men. In addition, 46 percent say they have no retirement savings at all.

The data shows women and men on average expect to retire at age 67. But women have saved an average of only $115,000 compared with an average of $203,000 for men. That may be contributing to their negative views of their finances.

Tuesday, October 23, 2018

The New Charitable Landscape

It looks like we're in for a giving year. Eighty-two percent of Americans who itemized charitable deductions on their 2017 tax returns plan to maintain or increase their giving this year, according to a survey released this week by Fidelity Charitable.

The downside is that the poll also found that 58 percent of donors still planned to itemize in 2018, even though in the new tax landscape, that's not always appropriate. Many donors may not have fully worked out how the increased standard deduction in the revised tax code affects them.

For example, half of households with incomes of less than $100,000 currently plan to itemize their 2018 taxes, the survey showed. Fidelity Charitable said most of these donors will likely discover that their itemizations, including charitable donations, will not push their total deduction amount past the newly enacted standard deduction thresholds, of $12,000 for singles and $24,000 for married couples.

Monday, October 22, 2018

Housing Sales Are Slowing

Has the housing market run out of gas? Existing-home sales ran at a seasonally adjusted annual rate of 5.15 million in September, the National Association of Realtors said last week, which was a 3.4 percent decline from August. It was the lowest pace of sales since November 2015.

Sales of previously owned homes had stabilized in August after declining for four straight months, so September’s drop came as a bit of a surprise. Sales were 4.1 percent lower than year-ago levels.

On the other hand, the median sales price in September was $258,100, which was 4.2 percent higher than a year earlier. Inventory is ticking up gradually: At the current pace of sales, it would take 4.4 months to exhaust available supply, up from 4.3 months last month. And it’s taking properties longer to get snatched up: Homes stayed on the market for 32 days in September, up from 29 days in August.

Friday, October 19, 2018

Manufacturing Is Booming

Another sign of a still-strengthening U.S. economy: American manufacturers increased their capacity for the 16th straight month in September. In that month, manufacturing was up 1.4 percent from a year earlier, according to data out from the Federal Reserve this week. 

The Fed's report suggests investment in U.S. manufacturing has been increasing at a steady pace over the past three years. In June of this year, it finally passed its prior peak from 2008. Manufacturing capacity began recovering from a steep decline in 2011, faded in 2014 and resumed a modest march higher in mid-2015. 

The latest Fed manufacturing report showed factory output also rose in September, helping drive overall industrial production up 0.3 percent for the month. And that's in spite of being “held down slightly” by Hurricane Florence, which reduced output by less than 0.1 percentage point.

Thursday, October 18, 2018

The Fed's Wary Outlook

The Federal Reserve released the minutes from its September meeting yesterday, and it looks as if we will be in an environment of rising interest rates for some time to come. A majority of top Federal Reserve officials believe that interest rates will have to continue to increase until the economy slows down.

The length of these interest rate hikes was a matter of some debate. A “few” officials thought policy would have to remain “modestly restrictive for a time,” while an additional “number” thought policy would need to be restrictive only “temporarily.”

At the September meeting, Fed officials voted to lift their benchmark federal-funds rate to a range between 2 percent and 2.25 percent. Fed officials have said that a 3 percent fed funds rate would be the “long-run” neutral level of interest rates, neither boosting nor slowing growth.

Wednesday, October 17, 2018

College Costs Are Actually Coming Down

After decades of hearing how college costs were spiraling out of control, here's some good news: The average net cost of a year at a four-year public college or university, including tuition, fees, room and board, fell to $14,880 in 2018–19.

That's down slightly from $14,910 in 2017–18, although the trend isn't in place for all schools. The net price for four-year private schools was $27,290, which was up slightly from $27,160 last year.

The reason for this is that the sticker price for higher education continues to inch up even though fewer students actually pay it, according an annual pricing-trends report by the College Board. Grants and tax benefits climbed to $21,220 this year, up from $13,860 in 2008 (in 2018 dollars) at private schools. At public institutions they rose to $6,490 this year, from $4,970 in 2008.

Tuesday, October 16, 2018

What Killed Sears?

You have probably heard that Sears, an American retailing icon for more than a century, is filing for bankruptcy. While Sears certainly has problems of its own, this is part of a larger trend for department stores. U.S. retail sales for September grew 0.1 percent from the prior month, sales specifically at department stores fell by 0.8 percent.

Those numbers have been diverging for a long time. Since 2000, overall U.S. retail sales have grown by more than 300 percent. But sales at department stores have declined by about 35 percent.

Sears is much diminished from the retailing giant it once was, but even today, it still was a significant force among department stores. In the first half of its current fiscal year, its merchandise sales were equal to about 6.5 percent of all U.S. department-store sales.

Monday, October 15, 2018

Assessing Last Week in the Market

The S&P 500 closed up by 1.4 percent on Friday, but that wasn't enough to erase the concerns over its worst two-day slide in eight months on Wednesday and Thursday. Even with the uptick, nearly three quarters of the S&P 500's components in correction territory, or worse.

Following Wednesday and Thursday’s 5 percent drop, the S&P is down nearly 7 percent from its record high close on September 20. But that doesn't tell the whole story, because the downturn has been incredibly widespread.

About 380 S&P 500 stocks have fallen 10 percent or more from their 52-week highs, putting the vast majority of the index in correction territory. In addition, 164 stocks have fallen by 20 percent or more from their highs, putting roughly a third of the market in bear territory.

Thursday, October 11, 2018

Yesterday's Rout

It was a very rough day on Wall Street yesterday. The Dow Jones Industrial Average lost more than 800 points, and the S&P 500 had its worst day since February. Technology stocks were the worst offender, as even the biggest names went into a freefall.

The Dow Jones Industrial Average lost 3.2 percent of its value yesterday, logging its worst one-day drop since February. All 30 Dow stocks finished in the red. The S&P 500 index lost 3.3 percent, falling for its fifth straight day, its longest losing streak since November 2016.

The S&P’s losses were topped by the technology sector, which slid 4.8 percent, the steepest percentage drop since August 2011. The tech-heavy Nasdaq dropped more than 4 percent for its worst percentage decline since June 2016. Apple and Amazon both had their worst day in two and a half years.

Wednesday, October 10, 2018

Small Caps Meet the Bear

Most people who watch the markets carefully have noticed that the recent weakness in stocks has been especially tough on the small-cap space. One good measurement of that trend is to look at the distance that stocks are currently trading from their 52-week highs. And by that measure, smaller stocks are getting hammered.

Within the large-cap S&P 500, the average stock is currently 13.2 percent below its 52-week high.  Moving down the market cap spectrum, though, the numbers get progressively worse.  In the S&P 400 midcap space, the average spread is 16.9 percent,

But members of the S&P 600 Small Cap index are down an average of 20.7 percent from their high over the past 52 weeks.  Using the standard bear market definition of a 20 percent decline from a high, that means that the average small-cap stock is in a bear market.

Tuesday, October 9, 2018

The Cost of Being Retired

What do people really spend in retirement? According to the latest Bureau of Labor Statistics data,  “older households” — defined as those run by someone 65 and older — spend an average of $45,756 a year, or roughly $3,800 a month. That’s about $1,000 less than the monthly average spent by all U.S. households combined.

In some categories, spending does indeed decrease, even in surprising ones like food. In others areas, like health care, life becomes more expensive as you age. Here’s the data shown as a monthly breakdown of how households headed by a retirement-age person spend money, on average, in seven major categories:

  • Housing: $1,322 Housing is the biggest spending category for all age groups — retirees included.
  • Transportation: $567 The average outlay is about one-third less than the average for households of other ages.
  • Health care: $499 
  • Food: $483  Retirees spend nearly 20% less than the average household does on food.
  • Personal insurance/pensions: $237
  • Cash contributions: $202
  • Entertainment: $197 Older households spend about as much on fun stuff as do those ages 25 to 34.

Monday, October 8, 2018

Inside the Bond Market

In the midst of a strong year for stocks, bonds continue to suffer. The Bloomberg Barclays U.S. Aggregate Bond index, maybe the most prominent benchmark among bond indexes, is on track to post its second-worst showing in history.

Year to date, the index year is down around 2.5 percent on a total return basis, which takes into account both the value of bonds held in the basket and the yields derived from those assets. The Barclays Agg's weakest returns came in 1994, when the index slipped around 2.9 percent, so it wouldn’t take much for the index to log its worst yearly performance. 

What is the Barclays Agg? It is largely composed of U.S. government bonds and mortgage-backed securities backed by government-sponsored enterprises, including Fannie Mae and Freddie Mac, and underweights the riskier corners of the bond market, including high-yield corporate debt or collateralized loan obligations. Ultra-safe Treasury notes represented around 36 percent of the index in 2017.

Friday, October 5, 2018

September's Jobs Report

The employment outlook slowed slightly in September: The economy added 134,000 jobs over the month, compared with an average monthly gain of  201,000 over the prior 12 months. Nevertheless, the headline unemployment rate ticked down to 3.7 percent from 3.9 percent in August.

It's worth noting that we have now reached a remarkable eight straight years of monthly job growth. That's double the previous record. The unemployment rate is the lowest it's been in nearly 50 years, since 1969.

The key industries: Employment in professional and business services increased by 54,000 in September and has risen by 560,000  over the year. Health care employment rose by 26,000 jobs in September. Construction employment continued to trend up in September  with 23,000 new jobs. and has now added 315,000 jobs over the past 12 months.

Thursday, October 4, 2018

Surprisingly Tough Times for Asset Management Stocks

You would think that financial services firms would be doing well in this lengthy bull run, but that's not necessarily so. The shares of America's biggest asset managers have been trampled during this year's market rise.

A selection of 10 large publicly traded asset-manager stocks put together by CNBC are off an average of more than 25 percent from their 52-week highs. Some of the biggest names are the worst off:

  • Legg Mason, down 34 percent this year
  • Franklin Templeton, down 34 percent
  • Janus Henderson, down 36 percent
  • AMG, down 37 percent
  • Invesco, down 40 percent

Wednesday, October 3, 2018

The Dangers of a Cyberattack

Are you prepared for a cyberattack? Not if you're like most Americans. According to the new 2018 Chubb Cyber Risk Survey, a whopping 86 percent are clueless not only about what to do, but about how vulnerable their data is, in case of cyber threats.

The drained bank account actually isn’t the biggest risk people face, although that’s what 80 percent of respondents are most worried about. Bigger threats that insinuate themselves further into people’s lives involve Social Security numbers (60 percent), medical records (30 percent), email addresses (18 percent) and public WiFi exposures (12 percent).

People might think they’re safe as long as they have a password, but the report points out that only 40 percent reported using cybersecurity software and just 30 percent regularly change online passwords and use multifactor authentication to log into their accounts. Besides, 67 percent said they “always” or “often” use the same password for multiple sites.

Tuesday, October 2, 2018

What the Past Six Months Mean

The U.S. stock market has been on a roll the past six months, and it can keep on rolling if the past is any indicator. The S&P 500 rose for six months between April to September, something that has only happened six times since 1928. And each of those times, the stock market has gone on to notch strong gains for the remainder of the year, according to Bespoke Investment Group.

In the previous years that this has happened, the S&P 500 has risen four out of five times in October. The average gain in those October has been 2.38 percent, compared with 0.61 percent for all Octobers.

A solid April-to-September performance also has been a positive signpost for market performance in the fourth quarter. In the previous years when that has happened, stocks have notched an average rise of 9.2 percent in the final three months of the year.

Monday, October 1, 2018

The Big Third Quarter

The S&P 500 soared more than 7 percent in the third quarter, which ended on Friday. That's the strongest quarter for the S&P since the fourth quarter of 2013. The Dow spiked more than 2,100 points, or 9 percent, in the quarter.

Health care was the best-performing sector of the third quarter, surging 14.1 percent, its best quarterly gain since the first quarter of 2013. Industrials and tech, meanwhile, rose 9.7 percent and 8.5 percent.

The strong third quarter on Wall Street could also be a good omen for the rest of the year. When the S&P 500 rises in the third quarter, it has advanced an average of 3.8 percent in the fourth quarter of all years since 1945, according to CFRA Research. In midterm election years, the S&P 500 rallies an average of 7.1 percent in the fourth quarter following a third-quarter gain.

Friday, September 28, 2018

Retiring Around the World

Thinking of retiring abroad? There are lots of other countries where people get to retire earlier than we do here in America. A new study from Aperion Care looked at retirement ages around the world, and here were the lowest:

1. United Arab Emirates, 49
2. China, 56.25
3. Russia, 57.5
4. India, 60
5. Japan, 62.7

On the other hand, the U.S. falls in the Top Five oldest retirement group:

5. Australia, 65
4. Netherlands, 65.75
3. United States, 66
2. Iceland, 67
1. Norway, 67.75

Thursday, September 27, 2018

The Fed Speaks

The Federal Reserve raised interest rates on yesterday for the third time this year - and signaled they will raise rates again in December. The Fed's increase of the Fed funds rate to a range of 2 percent to 2.25 percent set the benchmark interest rate at its highest level since April 2008.

The Fed’s statement on Wednesday also included the release of updated economic projections. The most notable change is a steep upgrade in expectations for economic growth this year. Fed officials’ median forecast now calls for GDP growth to hit 3.1 percent in 2018, up from 2.8 percent in June’s projections and substantially higher than the Fed’s forecast for 2.5 percent GDP growth this year at the end of 2017.

The Fed described the economy as “strong,” writing that information since the Fed’s August meeting shows “the labor market has continued to strengthen and that economic activity has been rising at a strong rate.... Household spending and business fixed investment have grown strongly.”

Wednesday, September 26, 2018

Consumer Confidence Keeps Soaring

Consumers’ outlook on the U.S. economy improved further in September, to the highest level since the waning days of the dot-com boom.  The Conference Board said Tuesday that its index of consumer confidence rose to 138.4, up from 134.7 in August. The consumer confidence index was last higher 18 years ago, in September 2000.

In a sign of optimism on the labor market, the labor differential, measuring the gap between respondents saying jobs are plentiful and those saying jobs are hard to get, widened for a third month to 32.5 percentage points. That’s the biggest difference since January 2001.

Just about all the future readings were strongly positive. For example, 27.6 percent of consumers said they expect better business conditions in next six months, up from 24.4 percent in August. That's the highest that number has been since December 2003.

Tuesday, September 25, 2018

New Sector on the Block

Friday will see the launch of the brand-new S&P Communications Services sector, a reshuffling of major industry groups that will impact some of the most widely followed and traded names on Wall Street. The new sector includes both companies that facilitate communication operations, as well as ones that offer the content and information. The move was seen as a way to address how some companies span multiple sector categories and don’t always reflect the industry they’re currently classified in.

The new sector will include companies that are currently in three different industry groups: telecommunications, including AT&T and Verizon Communications; technology, including Facebook and Google parent Alphabet; and consumer discretionary, where Walt Disney and Netflix are making the shift.

The new sector will account for nearly 10 percent of the S&P 500’s market capitalization. The weighting of the technology sector will drop from about 26 percent of the overall market to 21 percent, though it will remain the single biggest influence. The discretionary sector will drop to 10 percent from roughly 13 percent.

Monday, September 24, 2018

Investors Unfazed by Dow Records

The U.S. stock market is back at record levels, but investors aren’t in a celebratory mood. According to the weekly survey of sentiment conducted by the American Association of Individual Investors, market participants are feeling somewhat tepid about the market.

That's in spite of a lengthy move higher that took both the S&P 500 and the Dow Jones Industrial Average to records last week. That was the first such milestone that the Dow had reached since its previous record set last January.

But according to the survey, 32 percent of investors describe themselves as bearish on the market, meaning they expect prices will be lower in six months. That represents a slight dip of 0.8 percentage points from the previous week, although it is still above the historical average of 30.5 percent.

Friday, September 21, 2018

Those Soaring Corporate Profits

These are boom times for American corporations. The Commerce Department said this week that after-tax profits across the U.S. rose 16.1 percent in the quarter ended June 30 from a year earlier. That's the largest year-over-year gain in six years.

Lower taxes were a big driver of this. Because of the lower corporate tax rate signed into law last year, taxes paid by U.S. companies in the quarter were down 33 percent from a year earlier, according to the government data, or more than $100 billion at an annual rate.

Strong economic growth also played a role. The Commerce Department recently revised upward its estimate of how fast the U.S. economy grew in the second quarter, to an annual rate of 4.2 percent from an earlier estimate of 4.1 percent.

Thursday, September 20, 2018

Safety First

What's been driving the market rally in September? A flight to security. This month, the biggest gainers in the S&P 500 include firms focusing on telecommunications services, consumer staples and utilities—so-called safe sectors whose steady dividend payouts have long made them investor favorites when markets are volatile or declining.

These shares typically lag behind major indexes during rallies, in part because they are perceived to offer limited potential gains. But in September, telecom shares are up 3.1 percent, consumer staples are up 1.5 percent and utilities are up 1.5 percent, versus a 0.1 percent increase in the S&P 500.

Meanwhile, many well-known high-flyers have been tumbling. Apple, and Alphabet each has declined at least 3 percent apiece in September, partly reversing double-digit percentage gains for the year. Facebook has declined more than 8 percent this month, adding to its retreat in the second half of this year.

Wednesday, September 19, 2018

The Strength of the U.S. Market

The American economy is increasingly becoming the envy of the world. The latest evidence: According to the latest monthly survey of fund managers by Bank of America Merrill Lynch, released yesterday, global investors are favoring U.S. stocks more and more strongly.

There is currently a net allocation of 21 percent overweight to the United States equity market, the highest such level since January 2015, and the U.S. was named as the most favored equity region globally for a second straight month. The allocation to global equities fell 11 percentage points to a net overweight of 22 percent, slightly below the long-term average.

In large part, the optimism about U.S. stocks is related to the outlook for corporate profits. According to the survey, a net 69 percent of those polled said that U.S. is the most favorable region when it comes to earnings expectations, a record level in the 17-year history of the survey. Currently, the divergence between U.S. and emerging-market earnings expectations is at the widest it's been since January 2014.

Tuesday, September 18, 2018

The U.S.: Bad for Retirement?

The U.S. ranked just 16th as one of the best nations to retire in, according to the 2018 Global Retirement Index, just released by Natixis Investment Managers. The U.S. maintained its top 10 ranking for finances, chiefly because of improvements in tax pressure, fewer nonperforming bank loans and rising interest rates, which improve saving levels and income in retirement. But the U.S.’s quality of life sub-index score declined in the 2018 index, and its happiness indicator score, which evaluates the quality of retirees’ current lives, also fell.

So which countries provide a better retirement landscape than the U.S.? Here is Natixis' Top Ten:
1. Switzerland
2. Iceland
3. Norway
4. Sweden
5. New Zealand
6. Australia
7. Ireland
8. Denmark
9. Canada
10. The Netherlands

Monday, September 17, 2018

The Good News on Inflation

August's consumer-price index was a welcome slowdown on the inflation front. The CPI, which gauges what Americans pay for everything from rent to razor blades, was up 2.7 percent from a year earlier, a drop from the prior two months. Core inflation, which excludes food and energy, rose 2.2 percent, slightly slower than in July.

Worker pay gains, by contrast, are accelerating. Adjusted for inflation, hourly earnings rose 0.2 percent from a year earlier. While modest, that’s an improvement from the prior three months when there was no real wage growth.

That's significant because since the recession ended, inflation-adjusted pay is up just over 4 percent for American workers. Inflation-adjusted wages are up less than 1 percent for all workers and a scant 0.2 percent for production and nonsupervisory workers over the past two and a half years.

Friday, September 14, 2018

Lehman, Ten Years Later

Ten years ago this weekend, the U.S. government allowed a major global investment bank, Lehman Brothers, to file for bankruptcy. It remains the largest bankruptcy filing in U.S. history, with Lehman holding over $600 billion in debts.

By that point, Lehman had already announced an expected $3.9 billion loss in its third quarter, as well as a near $5.6 billion loss in write-downs of so-called "toxic" assets. In the first week of September, Lehman's stock dropped drastically, losing more than three quarters of its value. The Fed had already helped salvage Bear Stearns, but there was to be no bailout for Lehman.

The American economy was already technically in recession at that point, but the Lehman bankruptcy seemed to trigger an entire meltdown of the U.S. financial system.  By the time it was over with, an estimated 6 million jobs were lost, unemployment reached 10 percent, and the Dow Jones Industrial Average dropped an astounding 5,000 points. Let's hope we never see the likes of that again.

Thursday, September 13, 2018

The Value of a Degree

Is a college degree losing its value? The Census Bureau’s annual report on income and poverty released yesterday highlights this depressing fact: Among bachelor’s degree recipients, roughly 3.6 million or 4.8 percent were living in poverty in 2017, according to the Census Bureau. That’s up from 3.3 million and 4.5 percent in 2016. Bachelor’s degree recipients were the only educational cohort to see the number or the share of people in poverty rise among their ranks.

Even with this increase, though, among educational attainment groups, people with at least a bachelor’s degree had the lowest poverty rates in 2017. People with at least a bachelor’s degree in 2017 represented 35.0 percent of all people aged 25 and older, but just 16.5 percent of people aged 25 and older in poverty.

The 2017 poverty rate for those with a high school diploma but with no college was 12.7 percent, down from 13.3 percent in 2016. For those with some college but no degree, 8.8 percent were in poverty in 2017, a decline from 9.4 percent in 2016.

Tuesday, September 11, 2018

New Highs in Small Business Optimism

U.S. small business optimism surged to a record in August, according to a new survey by the National Federation of Independent Business. The NFIB Small Business Optimism Index jumped to 108.8 last month, the highest level ever recorded in the survey's 45-year history and above the previous record of 108 in 1983, set during the second year of Ronald Reagan's presidency.

The August figure was up from an already strong 107.9 reading in July. Six of ten indicators tracked by the NFIB increased last month. The biggest gain came in plans to increase inventories.

On top of that, the NFIB noted record readings for job creation plans and the amount of owners saying it was a good time to expand. Capital spending plans reached their highest level since 2007.

Consumers Keep Borrowing

Here's another sign of a strong economy: Consumer borrowing accelerated in July, the Federal Reserve reported yesterday. Total consumer credit rose $16.6 billion in July to a whopping $3.91 trillion. That’s an annual growth rate of 5.1 percent.

The bulk of the increase came from nonrevolving credit, which is typically auto and student loans. Those debts rose  6.4 percent in July after a 4 percent gain in the prior month, for the category's largest increase in eight months.

On the other hand, revolving credit, such as credit cards, rose only slightly in July. Borrowing on credit cards rose by 1.5 percent, although that was a reverse from a 1.4 percent drop in June.

Monday, September 10, 2018

The Emerging Markets Meltdown

While emerging-market stocks were one of the strongest equity performers in 2017, they have collapsed this year. The MSCI emerging-markets index fell into-bear market territory last week, dropping 20 percent from a recent peak. The Vanguard FTSE Emerging Markets ETF lost 3.3 percent last week, its worst week since March. Year-to-date, it is down 11.5 percent.

Meanwhile the S&P 500 has gained 7.7 percent this year. According to Bespoke Investment Group, the divergence between emerging markets and the U.S. stands at a 14-year high.

There are a number of issues facing emerging economies, including a recession in South Africa, Turkey’s high levels of debt and inflation, political uncertainty in Brazil, and Argentina’s central bank raising interest rates to 60 percent in the face of a currency crisis. Additionally, the category has been pressured by a rising U.S. dollar—a headwind for many emerging markets.

Friday, September 7, 2018

August's Jobs Report

The economy had another strong month, adding 201,000 jobs in August, the Labor Department reported this morning. Over the last three months, employers have added an average of 185,000 workers to payrolls per month, slightly outpacing 2017’s average monthly growth of 182,000. The headline unemployment rate remained at 3.9 percent.

The biggest news in the August employment report was a sharp increase in pay. The average wage paid to American workers rose by 10 cents to $27.16 an hour. The yearly rate of pay increases climbed to 2.9 percent from 2.7 percent, reaching its highest level since June 2009.

White-collar professional firms filled 53,000 positions, bringing the total created over the past 12 months to more than half a million. These are the fastest growing jobs in the country.

Thursday, September 6, 2018

The Markets and the Election

What does the upcoming election season mean for the stock market? A quick look at historical performance shows that stocks often see rough sledding in the September of years that feature midterm elections. But stocks tend to do just fine as Election Day nears as well as in the aftermath of the vote, regardless of the outcome.

Analysts at UBS note that the S&P 500 has rallied an average of 14.5 percent from the end of August to the end of March around midterm elections. That includes a rocky start, marked by a median decline of 1.4 percent from the end of August through early October, followed by a rally into the next year.

This rally in equities around midterm elections has actually been much stronger than the average returns seen in all other years. Taking a more short-term approach, Deutsche Bank has noted that the three-month period running from a month ahead to two months after the election has produced a median 8 percent gain.

Tuesday, September 4, 2018

Inflation Curiosity

The good news is that most investors take inflation into account for their retirement savings, according to a recent Nuveen survey of adults with at least $100,000 in investable assets. The bad news: Most investors don't know what the inflation rate is.

Most respondents said they carefully monitored inflation as they planned for retirement, invested or spent money. Some seven in 10 investors correctly recognized that inflation was low at present, and they largely understood that retirees experienced higher inflation rates than the norm.

Yet, 60 percent incorrectly said the U.S. inflation rate was 5 percent or higher or admitted that they were not sure. Only 32 percent came near the real number of 2 percent to 3 percent.

Monday, September 3, 2018

Thoughts for Labor Day

“All growth depends upon activity. There is no development physically or intellectually without effort, and effort means work.” ~ Calvin Coolidge

“If a man is called to be a street sweeper, he should sweep streets even as a Michelangelo painted, or Beethoven composed music or Shakespeare wrote poetry. He should sweep streets so well that all the hosts of heaven and earth will pause to say, 'Here lived a great street sweeper who did his job well.'” ~ Martin Luther King Jr.

"The best way to learn is by doing. The only way to build a strong work ethic is getting your hands dirty." ~ Alex Spanos

Friday, August 31, 2018

America's Old Cars

How old is your car? If it follows the trends of most American drivers, it's probably pretty old. According to a study from the Energy Department, the average age of vehicles owned by households increased from 9.3 years in 2009 to 10.5 years in 2017.

Cars may just be living longer. In 2009, about 7 percent of all vehicles were five years old, and by 2017, this had fallen to just 5.8 percent of all vehicles. But in 2017, there were more vehicles on the road that were 10 years and older than in 2009.

This is up sharply from recent decades. The average car's age rose from just 6.9 years in 1980 to 7.9 years in 1985. For a while, the average age hovered just below 8 years, and as recently as 1992, it was just 8.1 years. But it's risen pretty consistently since then.

Thursday, August 30, 2018

Stocks and Hurricanes

We're now heading into the thick of hurricane season, and various sectors of the market will be positively or negatively affected by the amount of severe weather we experience. But some of these effects are not as obvious as others.

Some of the market segments that react positively to preparation and recovery efforts include home-improvement retailers like Home Depot and Lowe’s, which typically see a boost in sales post-storm as damaged property is repaired. Grocery retailers often see a prestorm surge in sales as consumers stock up on necessities, and hotel companies benefit if people are forced into temporary lodging.

But the industry with the largest negative impact is branded apparel and footwear stocks, according to an analysis by Morgan Stanley. PVH Corp., the parent company of Calvin Klein and Tommy Hilfiger, scored the highest possible “hurricane exposure score” in Morgan Stanley’s analysis, alongside Tiffany & Co. Dunkin’ Brands Group is also among the companies with high hurricane exposure: In the third quarter of 2017, there was a 120 basis-point drag on the doughnut company’s same-store sales because of hurricanes.

Wednesday, August 29, 2018

Housing Hits the Brakes

There are a couple signs out there that the housing market is softening. First off, sales of previously-owned homes, which make up the vast majority of housing market sales, declined for the fourth month in a row in July. They've touched their lowest point in over two years, according to the National Association of Realtors.

Another sign of a slowdown: Although prices are not declining, price growth is decelerating. The national index’s 6.2 percent annual gain was down from 6.4 percent in the three-month period ending in May. The 20-city’s annual gain was also down two ticks, from 6.5 percent.

In addition, the number of new homes available for sale hit its highest level since 2009. At that month’s pace of sales, it would take 5.9 months to exhaust available inventory. Six months has historically been considered a marker of a market evenly balanced between supply and demand.

Tuesday, August 28, 2018

Young People's Money Woes

Young adults are living on the edge with their finances, according to a new study from the University of Illinois. About a third of young adults (those between 18 and 24 years old) were considered “financially precarious,” meaning they had few money management skills and little income stability, according to the study.

Another 36 percent of participants were considered financially “at risk” because they had an unexpected drop in income within the year and had no savings to support themselves - and didn’t have enough to pay for a $2,000 emergency. Approximately 10 percent also said they struggled with money management, such as budgeting and credit-card usage, and would put their health in jeopardy by avoiding doctor visits and prescriptions because of costs.

Only 22 percent were deemed financially stable, meaning they were saving at a mainstream bank and steered clear of financial services that charge higher interest and fees, such as payday lenders. Members of this group were more likely to be white males, employed and college-educated.

Monday, August 27, 2018

The Worst Place to Retire

We talk a lot here about how to get the best out of your retirement years, but what's the worst place to retire? According to a new survey from WalletHub, it's right here in New Jersey. Newark rates as exorbitantly expensive while also having little in the way of activities for retirees. On the bright side, the health care options are good.

Jersey City also finished high up on the list, at No. 8. Its primary advantage over Newark appears to be that there's more to do there. The top ten unfavorable cities for retirees:

  1. Newark
  2. Bridgeport, Conn.
  3. Warwick, R.I.
  4. Baltimore
  5. Stockton, Calif.
  6. Providence, R.I.
  7. Bakersfield, Calif.
  8. Jersey City
  9. Modesto, Calif.
  10. Fresno, Calif.

Friday, August 24, 2018

The Cost of the Crisis

What did the economic meltdown of 2007-2009 cost us? A new report from the Federal Reserve Bank of San Francisco points out that not only is the economy “significantly smaller than it should be based on its pre-crisis growth trend,” but says that Americans lost $70,000 apiece in present-value lifetime income thanks to the financial crisis.

The letter says that “the size of the U.S. economy, as measured by GDP adjusted for inflation, is well below the level implied by the growth rates that prevailed before the financial crisis and Great Recession a decade ago.” Actual U.S. GDP is running about 12 percentage points below where it would have been had the crisis not occurred.

We're not the only ones, though. The report said that the U.K. and European economies are also trailing where they would have been, had the financial crisis and Great Recession not intervened.

Thursday, August 23, 2018

The Record Bull

Welcome to the longest bull market in history. Since March 9, 2009, which marked the low of the financial crisis and which many consider the birth date of the current bull market, the S&P 500 index has advanced 320 percent.

This bull now has 113 months under its belt. The previous longest was set during the 1990s. Then, the S&P 500 index bottomed out on October 11, 1990, and finally peaked nearly ten years later on March 24, 2000.

One advantage for that bull: With the dot-com fueled runup in the late 1990s, that market returned an annual average of 19.0 percent per year. The current buildup, by contrast, has returned a slightly more modest average of 16.5 percent per year.

Wednesday, August 22, 2018

Who Owns America's Debt

America’s debt climbed to a record $21.21 trillion at the end of June, a 6.9 percent increase from a year earlier. Who owns all this money? By and large, Americans. Some 70 percent of the national debt is owned by the U.S. government, institutional investors and the Federal Reserve. A shade under 30 percent is owned by foreign entities, according to the latest information from the U.S. Treasury.

American institutions such as private and state pension funds as well as individual investors were the biggest holders. They owned $6.89 trillion in debt or about 32.5 percent of the entire pie.

Foreigners, led by the Chinese and Japanese, owned $6.21 trillion, or 29.3 percent. Those two countries have cut their stakes since 2015, but each country still owns more than $1 trillion worth of Treasury bonds and notes.

Tuesday, August 21, 2018

Exiting Correction

The Dow Jones industrial average entered what is generally considered to be correction territory on February 8, when it completed a drop of 10 percent from its recent peak. This is the longest stint that the Dow has spent in correction territory since 223 trading sessions in 1961, according to Dow Jones Market Data.

But now the Dow stands less than 0.5 percent shy of emerging from correction territory. It need a gain of just 130 points to reach that mark, and notch a 10 percent gain from its recent low point.

Both the S&P 500 and the Nasdaq Composite Index also moved into correction territory back on February 8. But bot of those indexes have already emerged from their correction phases.

Monday, August 20, 2018

Young Folks Are Finding Work

The unemployment rate among young Americans fell to its lowest level in more than 50 years this summer, the labor Department said last week. On the other hand, the share of young people looking for work remained well below its peak in 1989.

Among Americans between 16 and 24 years old who were actively looking for work this summer, 9.2 percent were unemployed in July. That's a drop from the 9.6 percent youth unemployment rate in July 2017. It was also the lowest midsummer joblessness rate for youth since July 1966.

Similarly, the unemployment rate among older Americans who don’t have a high-school diploma fell to a record low this year. The jobless rate also fell sharply for those who completed high school but never attended college.

Friday, August 17, 2018

The Outlook for Raises

The tight job market means that employers are willing to part with “slightly larger” pay raises when the calendar ticks over, according to a new survey by Willis Towers Watson. The 2018 General Industry Salary Budget Survey finds that U.S. employers intend to reward their non-management exempt employees with average pay increases of 3.1 percent in 2019; this year they handed out pay raises of 3.0 percent. Executives are in for slightly smaller raises, 3.1 percent compared with 3.2 percent.

Pay increases have lagged in the neighborhood of 3 percent for the past 10 years, though only 3 percent of companies intend to freeze salaries next year. The last year in which raises were significantly larger was back in 2008, when they were around 3.8 percent.

Companies are still rewarding “star” performers at a notably higher percentage than “average” performers. Those with top marks in their evaluations got an average raise of 4.6 percent in 2018; that’s 70 percent higher than average-rated employees, who got 2.7 percent raises.

Wednesday, August 15, 2018

A Strong July for Retail

U.S. retail sales rose a healthy 0.5 percent in July, the Commerce Department reported yesterday. The report came with one big caveat, though: The government also said sales in June rose a smaller 0.2 percent instead 0.5 percent as originally reported.

That means the increase in July was starting from a lower baseline. On the other hand, retail sales have increased 6.4 percent over the past 12 months, close to the long-run average since 1980.

Clothing stores and restaurants posted a 1.3 percent increase in sales to lead the way in July. Sales also rose 1.2 percent for department stores and 0.8 percent for both Internet retailers and gas stations. Sales fell for home furnishings, pharmacies and stores that sell sporting goods and other hobby-style items such as books and music.

Our Shrinking Debt Burden

The debt burden of U.S. households is the smallest it’s been in nearly 16 years. Household debt — including mortgages, credit cards, auto loans, student loans and other credit — grew for the 16th consecutive quarter in the three months ending in June, rising by 0.6 percent to $13.29 trillion, the New York Fed reported yesterday. But that's only half the equation.

On the other side, personal disposable incomes reached an annual rate of $15.46 trillion in the quarter. That means the debt-to-income ratio dipped to 86 percent. That’s the lowest, by a very small amount, that this figure has been since the fourth quarter of 2002.

But it's a long way down from where this number peaked. At the height of the credit bubble in 2008, household debts topped out at 116 percent of disposable income.

Tuesday, August 14, 2018

A Slight Slowdown in Consumer Expectations

A monthly survey conducted on consumer expectations showed a notable pessimistic trend in July. The New York Fed’s survey — based on a panel of 1,300 household heads across the United States — found declines in one-year expectations on earnings growth , household spending, stock prices and house prices. Some highlights:

  • Median one-year-ahead wage-growth expectations fell from 2.7 percent in June to 2.4 percent in July, dropping below the 2.5 percent to 2.7 percent range it had been in since November 2017
  • Median home price change expectations dropped from a recent high of 3.9 percent reached in June to 3.7 percent 
  • The probability that stock prices will be higher in a year fell to 40.3 percent, the lowest level since October 2016
  • Median household spending growth expectations decreased by 0.1 percent to 3.2 percent in July

Monday, August 13, 2018

What's Your Goal?

Protection or production? That is the key question for most investors' portfolios. According to a new report from a global research and consulting firm Cerulli Associates, more than three-quarters of investors explicitly state that they would prefer a protection-focused portfolio versus one that outperforms.

The desire for protection is very strongly correlated with age, although not necessarily the way you think it might be. The report finds that a protection mindset is highly concentrated among investors who are 60 and older - and among affluent investors under 30 years old.

There are similar strata involved for different wealth tiers. The highest concentrations of the protection-focused mindset are among those investors with $250,000 to $500,000 (83 percent) and greater than $5 million (80 percent).

Friday, August 10, 2018

Signs of Inflation in July

U.S. consumer prices rose by 0.2 percent in July, pointing to a steady increase in inflation pressures, according to figures out from the Labor Department this morning. In the 12 months through July, the Consumer Price Index increased 2.9 percent.

Excluding the volatile food and energy components, the CPI rose 0.2 percent, the same gain as in May and June. The annual increase in the so-called core CPI was 2.4 percent, the largest rise since September 2008.

Shelter costs were a big driver of this: Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3 percent last month after increasing by the same margin in June. Overall, the so-called shelter index rose 3.5 percent in the 12 months through July. Prices for new motor vehicles rose 0.3 percent in July, apparel prices fell 0.3 percent, and healthcare costs fell 0.2 percent.

Thursday, August 9, 2018

The Tight Labor Market

The economy has reached a point of such strength that there are now more job openings in the U.S. than there are unemployed. Overall in June, the number of available jobs exceeded the number of unemployed Americans by nearly 100,000.

There were 6.7 million job openings on average in the three months ended in June—the highest quarterly level on record dating back to 2001. The number of available jobs grew by nearly 750,000 this spring, compared with a year earlier, according to Labor Department data released this week. 

The problem is most acute in a few fields, led by transportation. The number of unfilled jobs in transportation, warehousing and utilities, combined, grew by 109,000 over the past year to 298,000, a 58 percent increase. That's the largest growth rate of about 20 broad groupings tracked by the Labor Department.

Wednesday, August 8, 2018

Misunderstanding Long Term Care

There is a wide disconnect between what many Americans believe about long-term care versus what the actual needs are. Today, 70 percent of Americans will need some type of long-term care, but only 46 percent believe they will need it, according to a new study by the Moll Law Group, a personal injury firm.

Most Americans — 64 percent — have nothing saved for long-term care. In addition, 67 percent aren’t able to contribute to their parent’s long-term care. Most of study participants believe the age at which they will need long-term care is 79 years old, while it’s actually 73. Women will need long-term care on average for 3.7 years, while men will need it for 2.2 years.

Another misconception is the out-of-pocket cost of long-term care. The study found that the actual out-of-pocket cost is more than $47,000, while many Americans believe it is roughly half that, $25,350.

Tuesday, August 7, 2018

Earnings Beats by Sector

Earnings season always features headlines that say companies “beat” or “miss” analysts’ estimates. In the latest quarter, even more companies have been beating than usual, with a total of 80 percent exceeding the analysts' expectations for their earnings per share.

Leading the way has been the health-care industry. The S&P 500's health-care sector has 63 companies, of which 61 (a whopping 97 percent) beat analysts’ estimates when they most recently reported their results. Information technology isn't far behind, at 93 percent.

The worst sector for beating estimates has been energy: Just 55 percent of those stocks exceeded the street's forecast. But notice that even there, a majority of the stocks outperform the estimates.

Monday, August 6, 2018

The Race to $1 Trillion

Apple became the first U.S.-listed company in history to achieve a $1 trillion market capitalization on Thursday. U.S. Steel is generally cited as the first U.S. publicly listed company to reach a $1 billion market capitalization, immediately upon going public in 1901.

IBM is sometimes identified as the first publicly listed U.S. company to reach the $100 billion milestone, doing so on August 20, 1987. However, IBM never closed above that threshold. Meanwhile, AT&T Corp. closed above $100 billion in November 1992, according to FactSet.

A cautionary tale: On July 16, 1999, Microsoft became the first U.S. company to reach a market cap of $500 billion. It stayed above $500 billion for just two trading sessions before dipping back below that level. This was, of course, the heyday of the dot-com boom. Microsoft went on to again hit $500 billion in market value, eventually reaching $607 billion in market cap, in December 1999. But in the spring of 2000, the bubble popped — and Microsoft finished that year with a market cap of $231 billion.

Friday, August 3, 2018

July's Jobs Report

The U.S. economy added 157,000 jobs in July, according to figures out from the Bureau of Labor Statistics this morning. Incorporating revisions for May and June, which increased employment by a net 59,000, monthly job gains have averaged a very healthy 224,000 the last three months.

The unemployment rate ticked down to 3.9 percent after edging up in June, reflecting more job seekers entering the labor market. Another 105,000 people joined the civilian-labor force in July, but that was nearly exactly matched by the increase in Americans reporting they’re not in the labor force.

White-collar professional firms added 51,000 jobs last month, continuing a strong run of employment gains. Manufacturers filled 37,000 jobs. Health-care providers hired 34,000 people.The financial industry and government were the only industries to lose jobs over the month.

Thursday, August 2, 2018

Will You Owe More in Taxes?

Despite the tax cuts that take effect this year, more than 30 million taxpayers could owe money to the government next year, according to a Government Accountability Office report based on a simulation run by the Treasury Department. Taxes for more than a fifth of Americans (21 percent) could be underwithheld, meaning that their employer hasn’t taken enough money out of their paychecks to cover taxes.

Had there been no change in the tax law, 18 percent would have been underwithheld. That’s 3 million fewer people. Six percent of taxpayers are expected to break even next year, and the remainder will get some sort of refund.

So why might more Americans owe taxes next year? The IRS and Treasury Department had “limited documentation” for how it updated the withholding tables, according to the GAO report. And employees in high-tax states - like New Jersey - may be affected by the new limitations on state and local tax deductions, which would increase their tax burden.

Wednesday, August 1, 2018

Apple's Massive Buybacks

Apple reported its earnings yesterday, and also noted that it had bought back $20.8 billion of its stock in the year’s second quarter. That’s down from its record $22.8 billion worth of buybacks in the first quarter, but still ranks as the second-largest ever among S&P 500 companies, according to S&P Dow Jones Indices.

Apple's first quarter repurchases made up the entirety of 12 percent of S&P 500 buybacks. Companies in the broad index bought back $189 billion in the first quarter, according to S&P Dow Jones Indices, and are on pace to be about flat in the second quarter.

If Apple hadn’t bought back its stock, the S&P 500′s total buybacks wouldn’t have set a new record high in the first quarter. Subtracting out Apple buybacks from all quarters would have left first quarter buybacks trailing the third quarter of 2007.

Tuesday, July 31, 2018

Inklings of Inflation

Are we seeing signs of higher inflation? According to the Wall Street Journal, consumers are starting to see higher prices for recreational vehicles, soda, beer and other goods that now cost more to make as a result of recent tariffs on metals and parts.

U.S. steel and aluminum prices are up 33 percent and 11 percent, respectively, since the start of the year. Producer prices, a measure of what businesses are paid for goods and services, have also climbed to their highest level in years. The producer-price index rose 3.4 percent in June from a year earlier as energy and shipping costs climbed along with metal prices.

Those higher costs are starting to show up in what we pay for retail goods. Consumer prices rose 2.9 percent in June from a year earlier, the Labor Department said, the highest rate in more than six years.

Monday, July 30, 2018

That Huge GDP Number

Gross domestic product grew by 4.1 percent in the second quarter, according to numbers released by the Commerce Department on Friday. This is the best quarter we've seen since a 4.9 percent in the third quarter of 2014. What went right?

  • Personal consumption expenditures rose 4 percent  
  • Business investment grew 7.3 percent 
  • Exports added 1.06 of the 4.1 percent total with their largest positive result since the fourth quarter of 2013
  • Federal government outlays increased by 3.5 percent

Friday, July 27, 2018

Facebook's Big Plunge

After its disappointing earnings report on Wednesday, Facebook's stock took a bath yesterday with its biggest single-day drop since it started trading publicly in May 2012. On a market-capitalization basis, the company saw $120 billion erased, the biggest one-day loss in U.S. stock-market history.

The decline exceeded the previous record set by Intel, which had a $91 billion single-day loss in September 2000.  In just a single day, the decline in Facebook’s market value was roughly the entire market value of McDonald’s or Nike.

Remember, though, that a loss of this magnitude is only possible if the company is gigantic to begin with. Facebook dropped to a $510 billion valuation from a peak of $630 billion, after an eye-popping 472 percent run-up in its stock price since going public.

Thursday, July 26, 2018

Millennials: Not Good Investors

According to a new study from, many millennials think cash is the best long-term investment. Almost one in three millennials said cash instruments, such as savings accounts and certificates of deposit, are the best place to invest money they won’t need for the next 10 years. That compares with only 21 percent of older generations, most of whom prefer the stock market.

Cash is, of course, not a good investment, especially these days. Only 18 percent of all American adults are earning more than 1.5 percent on their savings, at a time when top-yielding national available savings and money-market accounts are yielding interest rates of more than 2 percent. Baby boomers are the generation most likely to earn more than 1.5 percent on their cash.

Millennials - defined as those between the ages of 18 and 37 - aren't even doing that well. More than one in five millennials said they’re earning less than 1 percent interest on their savings, while roughly 19 percentsaid they’re not earning any interest whatsoever, according to the study.

Wednesday, July 25, 2018

Google's investment Savvy

What helped fuel Google's earnings blowout earlier this year? The same thing that fuels a lot of our wealth: Alphabet, Google's parent company, is a savvy investor. Alphabet gained more than $1 billion just on its outside investments in the first quarter. Alphabet was the most active and largest corporate investor in the tech sector in 2017, surpassing international players like both SoftBank Group of Japan and Intel’s Intel Capital.

During the quarter Alphabet reported Monday, one investment, Glassdoor Inc., was sold for $1.2 billion to a Japanese human resources company called Recruit Holdings, while another, the electronic signature company DocuSign had a strong IPO. Two security investments have paid off recently as well, as cloud security firm was acquired by Palo Alto Networks and Zscaler went public in the first quarter.

Alphabet’s investments gained more than $3 billion in the first quarter. With the $1 billion-plus disclosed Monday, the total gains for Alphabet’s investments in the first half of the year account for nearly one-third of Google’s GAAP net income figure for that period.

Tuesday, July 24, 2018

A Big Week for Earnings

If you're looking for information on the biggest stocks in the market, this is the week to pay attention. There are 174 S&P 500 index  companies scheduled to report earnings this week, and 11 of the 30 Dow Jones Industrial Average components are on the docket as well.

The most important Internet stocks are all up this week. Facebook reports Wednesday afternoon, is scheduled for Thursday afternoon, and Twitter reports on Friday morning.

We've already had one big Internet blowout: Alphabet, Google's parent, reported yesterday, with revenue of $26.24 billion, up from $20.91 billion in the second quarter of 2017 and higher than the average analyst estimate of $25.58 billion. Its share price jumped by nearly 5 percent in after-hours trading yesterday.

Monday, July 23, 2018

The Importance of Getting Help

How important is it to work with a financial advisor? According to the Northwestern Mutual’s new Planning & Progress Study, 67 percent of Americans who use a financial advisor believe they have clarity on how much to spend now and save for later compared to less than half (44 percent) of those without an advisor.

The survey also finds that individuals without an advisor are more than twice as likely as people with an advisor (34 percent vs 13 percent) to say they are “not at all confident” they have the balance between spending and saving correct. This may be one reason why those without an advisor are more likely than those with an advisor (60 percent vs. 37 percent) to point to debt reduction as a top priority.

The study also finds that a majority (59 percent) of Americans with an advisor believe that, if they work past traditional retirement age, it will be by choice rather than out of necessity. The opposite is true for those without an advisor, with 6 in 10 (61 percent) expecting to remain employed past retirement age out of necessity.

Friday, July 20, 2018

The Race to $1 Trillion

For years now, Apple has been on a relentless push to become the first company to reach $1 trillion in market capitalization. Then Amazon came along. Apple still holds the edge with a market cap of $944 billion, but Amazon, riding another strong showing on Prime Day, just crossed $900 billion for the first time this week, and it seems to have momentum on its side.

Amazon banged out a fresh high on Wednesday and is up more than 50 percent for the year. Meanwhile, Apple hasn’t set a new share price record since June and is up only about 12 percent year-to-date.

To hit $1 trillion in market value, Amazon needs to rally about 13 percent and raises its share price $2,060, while Apple only has to get to $203.45, a 6 percent gain. Amazon reports its earnings next week, while Apple reports on July 31.

Thursday, July 19, 2018

The Beige Book Warns on Tariffs

Ten of the Federal Reserve’s 12 districts reported moderate or modest economic growth so far this summer, the Fed said in its latest roundup of anecdotal information about regional economic conditions known as the Beige Book. But manufacturers across the U.S. expressed concern about tariffs, with many reporting higher prices and supply-chain disruptions in the wake of new trade policies.

In the Philadelphia Fed district, “one machinery manufacturer noted that the effects of the steel tariffs have been chaotic to its supply chain—disrupting planned orders, increasing prices, and prompting some panic buying,” the Beige Book said. The Philadelphia district covers the bottom half of New Jersey.

The New York district, which covers the northern half of our state, reported similar concerns: “A number of manufacturing contacts remarked that tariffs have raised their costs. Moreover, uncertainty about future trade policy was cited as a major concern, particularly in parts of upstate New York, where there is substantial trade with Canada.”

Wednesday, July 18, 2018

The Danger of a Strong Dollar

U.S. corporations are warning that currency fluctuations are weighing on their results, raising a red flag for investors heading into the thick of the second-quarter earnings season. Roughly half of the first 23 S&P 500 firms that posted results for the latest quarter as of Friday said currency swings either had a negative impact on earnings or revenue or were expected to become a headwind in the coming months, according to FactSet.

That makes currency swings by far the most mentioned headwind on earnings calls so far. In comparison, seven firms mentioned the rising cost of raw materials, while five mentioned oil and gas prices and just one cited tariffs.

The strengthening dollar suggests that multinational firms could face an increasingly tough environment in the second half of the year. S&P 500 companies grew their earnings at the fastest pace since 2010 in the first quarter, boosted in part by a depreciating U.S. dollar. A weaker dollar benefits U.S. multinationals by making exports cheaper to foreign buyers, and also by making their overseas profits look bigger when translated back into the U.S. currency.

Tuesday, July 17, 2018

Netflix Stumbles

Netflix has been one of Wall Street's hottest and most-watched stocks in the past 12 months - its share price has risen by about 150 percent over the past year. But it took a hit today when it reported second quarter subscriber numbers that were short of what the analysts were expecting, and the stock is paying for it.

During the quarter, the company added 670,000 domestic streaming subscribers, and 4.47 million international subs. That compares with consensus estimates for 1.2 million and 5.04 million, respectively. The numbers missed those targets as well as Netflix's own forecast for 1.2 million and 5 million domestic and international subscriber additions, respectively.

On the other hand, Netflix beat earnings expectations of 79 cents per share, reporting 85 cents for the quarter. But that wasn't enough to keep the stock from reeling, falling by about 13 percent in after-hours trading last night.

Monday, July 16, 2018

Trying to Get Out of Correction

The U.S. stock market could hit a notable milestone today, but it isn’t one that investors will feel particularly good about. Both the Dow Jones Industrial Average and the S&P 500 index  have been in correction territory since February 8, when concerns that inflation was returning to the economy sparked a sell-off that led to their dropping 10 percent from record levels hit earlier in the year.

Both the Dow and the S&P have been in correction territory for 108 trading days. This matches the longest such stretch since the financial crisis in 2008. Should they stay in correction through today, that will mean they are in their longest such stretch since 1984. In that stretch, it took the S&P 122 days to emerge from correction territory, and the Dow 123 days.

Based on their current levels, the Dow would need to rise about 6.2 percent to hit a new record and exit correction territory. The S&P 500 would need to gain just 2.6 percent to ease the correction.

Friday, July 13, 2018

Retiring in New Jersey

New Jersey is towards the bottom of the pack among the best states to retire in, according to the latest survey from Our state ranked 32nd, right in between Pennsylvania and West Virginia.

What's wrong with retiring in New Jersey? On the bright side, the Garden State rates very well on crime (tied for 4th best), health care quality (10th), and culture (11th). It's middle of the pack on weather (24th) and well-being (28th).

But what kills us is that it's expensive to live here. New Jersey ranks 42nd among all the states in cost of living, and dead last in taxes. Bankrate says South Dakota is the best state for retirement, and New York the worst.

Thursday, July 12, 2018

The Sudden Drop in Oil Prices

Oil prices dropped suddenly yesterday for the first time in more than a year, signaling that the recent rally in energy prices may be coming to an end. August West Texas Intermediate crude, the U.S. benchmark, marked its sharpest daily decrease in about 13 months amid fears of flagging demand and renewed production from Libya.

The drop marked the worst percentage decline for oil futures since June of 2017. It was the steepest fall on a dollar basis in nearly three years, since September of 2015.

What made the losses more surprising is that the U.S. oil supply is also dropping, which could be expected to bolster prices. The Energy Information Administration reported yesterday that domestic crude supplies plunged by 12.6 million barrels for the week ended July 6.

Wednesday, July 11, 2018

Why Is Small Business So Optimistic?

Figures out yesterday show that the NFIB Small Business Optimism Index was at 107.2 in June, a tick below below May’s record high but still the sixth highest reading in the index’s 45-year history. The record high for this index is 108.0, reached in 1983.

Reported job creation rose five points, as 63 percent of businesses reported hiring or trying to hire. However, 55 percent reported few or no qualified applicants for the positions they were trying to fill. Twenty-one percent of employers surveyed cited the difficulty of finding qualified workers as their top business problem.

Credit concerns remained historically low, as just 3 percent of owners reported that all their borrowing needs were not met. Only 2 percent of business owners surveyed reported that financing was their top business problem, while 16 percent of survey participants listed taxes as their top business problem.

Tuesday, July 10, 2018

ETFs Continue to Slow

Even though the market remains relatively solid for 2018, exchange-traded funds continue to suffer. U.S.-listed ETFs posted net monthly outflows in June for a third month in 2018, according to the latest U.S. ETF Flash Flow report from State Street Global Advisors.

This is the greatest number of months with outflows in any year since 2008, and we are only halfway through 2018, the report says. If the year has just one more month of net outflows, 2018 would tie the record of four such months, reached a few times in the late nineties.

According to the report, international and emerging market funds have been hurt the worst, registering their largest back-to-back months of outflows since the start of 2016. International equities saw outflows totaling $3.3 and $9.9 billion in May and June, respectively.

Monday, July 9, 2018

The Downside to Low Unemplyoment

As the economy teeters at full employment, rising wages are beginning to eat into the profits of some U.S. companies. That’s good news for U.S. workers, but the steady rise in wages poses a threat to U.S. companies after a streak of double-digit quarterly profit growth that has helped underpin the broader stock market.

Economists at Goldman Sachs predict that every percentage-point increase in labor-cost inflation will drag down S&P 500 earnings by 0.8 percent. In total, labor costs amount to 13 percent of revenue for S&P 500 companies.

The industrials sector is most susceptible to increasing wages, Goldman reports. Those companies have a 21 percent ratio of labor costs to revenue, the most out of the S&P’s 11 sectors. The consumer discretionary sector, the S&P’s best-performing sector this year, is also likely to take a hit if wage growth accelerates.

Friday, July 6, 2018

June's Jobs Report

June was another big month from an employment standpoint, with the economy adding 213,000 new jobs, the Bureau of Labor Statistics said this morning. Job gains have averaged 215,000 per month over the first half of 2018. Nevertheless, the unemployment rate ticked up to 4.0 percent.

U.S. employers have added to payrolls for 93 straight months, extending the longest continuous jobs expansion on record. The BLS report showed professional and business services adding 50,000 jobs in June. Employment also grew in manufacturing, health care and construction. All levels of government added 11,000 jobs last month.

The unemployment rate rose in June from its lowest mark since April 2000 because 601,000 Americans entered the labor force, and not all found jobs. It’s a sign that historically low unemployment may have prompted some of those on the sidelines to start job searches.

Thursday, July 5, 2018

2018's Biggest Winners So Far

With the first half of 2018 now in the books, these are the top 10 best-performing stocks in the entire S&P 500 index for the first six months of the year:

  1. Fossil Group, up 215 percent
  2. ABIOMED, up 114 percent
  3. Netflix, up 95 percent
  4. Twitter, up 80 percent
  5. XL Group, up 62 percent
  6. Tripadvisor, up 60 percent
  7. Under Armour, up 59 percent
  8. Align Technology, up 53 percent
  9. Chipotle Mexican Grill, up 50 percent
  10. Macy's, up 44 percent

Wednesday, July 4, 2018

Thoughts for Independence Day

"Humanity has won its battle. Liberty now has a country." ~Marquis de Lafayette

 "Liberty has never come from the government. Liberty has always come from the subjects of it. The history of liberty is a history of resistance." ~Woodrow Wilson

"For to be free is not merely to cast off one's chains, but to live in a way that respects and enhances the freedom of others." ~Nelson Mandela

Tuesday, July 3, 2018

The Year So Far

It's been a pretty middling year in the markets: Halfway into 2018, the S&P 500 is up less than 2 percent. Moreover,  all of those gains are thanks to a rally in just two sectors: technology and consumer discretionary.

The S&P 500 information technology sector, in fact, accounted for 102 percent of the year-to-date gains as of Friday., which is in the consumer discretionary sector, has accounted for 34.6 percent of all the gains. has gained more than 45 percent since the start of the year.

Considering market caps, the five largest contributors to the year-to-date gains have been:

  •, up 0.82 percent   
  • Microsoft, up 1.42 percent 
  • Apple, up 1.12 percent 
  • Netflix, up 1.72 percent 
  • Facebook, up 1.56 percent 

Monday, July 2, 2018

Today's the Day

Is today the best trading day of the year? According to the website Marketwatch, the first trading day of July - that's today - is the one day of the year most likely to have a positive return for the S&P 500, which it has done 83.3 percent of the time.

The first half of July tends to be mildly bullish, and often hosts a brief summer rally. Keep in mind, though, that the summer rally tends to be the weakest of all seasonal rallies. Before you get too excited, note that the average return for the S&P on this date is 0.35 percent.

The S&P isn't the only likely winner on this date. The win rate for the Dow Jones Industrial Average  is 77.77 percent, and the win rate for the Nasdaq is 72.22 percent.

Friday, June 29, 2018

How Hot Is GDP?

The U.S. economy is roaring, at least for now. Macroeconomic Advisers, which runs one of the more sophisticated economic forecasting models, is tracking a 5.3 percent growth rate in the second quarter. That would be the fastest pace in almost 15 years.

A narrowing trade deficit, tax cuts coupled with more government spending, a resurgent consumer and decent business investment are all supporting what appears to be a strong rebound in growth. The Atlanta Fed’s GDPNow model shows a 4.5 percent growth rate, although such estimates jump around as new data arrives.

But we’ve seen economic head fakes before—gross domestic product advanced 5.2 percent in the second quarter of 2014 only to quickly revert to the mean. Overall, growth has averaged about 2 percent during the current expansion.

Thursday, June 28, 2018

Does America Have a Retirement Crisis?

Americans are reaching retirement age in worse financial shape than the prior generation, for the first time since Harry Truman was president. A new analysis by the Wall Street Journal shows that Americans verging on retirement have high average debt, are often paying off children’s educations and are dipping into savings to care for aging parents.

This cohort should be on the cusp of their golden years, but their median incomes including Social Security and retirement-fund receipts haven’t risen in years, after having increased steadily from the 1950s. Median personal income of Americans 55 through 69 leveled off after 2000—for the first time since data became available in 1950.

The percentage of families with any debt headed by people 55 or older has risen steadily for more than two decades, to 68 percent in 2016 from 54 percent in 1992, according to the Employee Benefit Research Institute. Americans aged 60 through 69 had about $2 trillion in debt in 2017, an 11 percent increase per capita from 2004.

Wednesday, June 27, 2018

Confusion over Retirement Savings

How much money will you need in retirement? A whopping 61 percent of Americans don’t know how much they’ll need to save to get them through retirement, according to a new survey from Bankrate.

Millennials are the group most in a quandary over how much they’ll need, with 69 percent admitting to such ignorance. But they’re far from the only ones: 56 percent of GenXers (ages 38 to 53), 58 percent of boomers and 59 percent of those aged 73-plus have the same problem.

Among the ones who put forth an estimate of what they'll need in retirement, the median estimate is $650,000. Those who have given estimating a shot are all over the financial map, with 7 percent saying $250,000 to $500,000, and 8 percent saying either $250,000 or less, $500,000 to $1 million or over $1 million, respectively.

Tuesday, June 26, 2018

A Disappointing End to a Dow Streak

A winning streak extending nearly two years for the Dow Jones Industrial Average ended yesterday. The Dow closed sharply lower, falling around 328 points to 24,252.80, below its 200-day moving average, which stood at 24,280.02.

The Dow hadn’t closed below its 200-day moving average for 501 consecutive trading days, going back almost two years exactly to June 27, 2016. That's the point at which the market reacted negatively to the U.K. Brexit vote.

The streak of 501 consecutive trading days above the 200-day moving average is the Dow’s third longest since 1952, when the New York Stock Exchange began its current five-day-a-week trading schedule. The only longer stretches were a 652-day run that ended in May 1956 and a 715-day stretch that ended in October 1987.

Monday, June 25, 2018

Bonus Bonanza

The share of workers’ pay going to bonuses hit the highest level on record this year, reflecting a shift in how employers woo job candidates while still trying to keep a lid on base pay. That's according to a new report out from the Department of Labor.

Private-sector bonuses that aren’t directly tied to a worker’s output reached 2.8 percent of employer pay and benefit costs in the first quarter. That’s the biggest share since the Labor Department started tracking the figure in 2008.

Anecdotally, the trend of bonuses rather than permanent wage increases continues. The most popular measure of annual wage growth has bounced around 1.5 percent to 2.5 percent in recent years, which is below prerecession levels. With a 2.7 percent gain in May, though, it has finally shown signs of picking up as the labor market tightens.

Friday, June 22, 2018

Micro Caps Are on Fire

As we noted yesterday, small-capitalization stocks have been soaring lately. But a subset of even smaller-cap equities has produced even more stellar results this year.

The Russell Microcap Index, which is a benchmark of companies with an average market value of about $730 million, has gained 14 percent so far in 2018, as of Wednesday’s close. That compares with a only slightly less impressive year-to-date gain of 11.1 percent for the Russell 2000 index, which has a roster of companies with an average market value of $2.6 billion.

Both indexes are trading in record territory, with the Russell Microcap having just put in a 24th all-time high close for 2018. That is one more record than the Russell 2000 has set.

Thursday, June 21, 2018

Big and Small Stocks, in Opposite Directions

On the big board, it was a rough day in the stock market yesterday. The Dow Jones Industrial Average closed down 0.2 percent, recording its seventh straight daily loss.

There's much better news down among the smaller stocks. The Russell 2000 Small Cap index made it four positive days in a row yesterday. In the process, it also set an all-time high.

But there are rumblings that the small-cap rally may have run its course. Investors have yanked more than $1 billion from the bellwether iShares Russell 2000 Exchange-Traded Fund since June 11, after pouring money into it for much of this year.

Wednesday, June 20, 2018

The Coming Corporate Bond Wave

The bill is coming due on trillions of dollars in companies’ bonds. As much much as $1.7 trillion of non-financial corporate bonds matures globally this year, and $2 trillion or more could mature in each of the next four years, according to research out this week from McKinsey & Co.

Record amounts of debt are maturing just as interest rates are rising, forcing companies to pay up if they want to refinance their maturing bonds. Credit quality has also been declining as top-rated companies have taken on more debt. Roughly 40 percent of nonfinancial corporate bonds now have triple-B credit ratings, the lowest that’s considered investment grade. That’s up from 22 percent in 1990,

Stock investors are starting to take notice. Shares in companies with strong balance sheets have outperformed those with weak balance sheets by 6.3 percentage points this year. For much of the economic cycle, weak balance sheet companies were the outperformers, as companies were rewarded for adding leverage.

Tuesday, June 19, 2018

Volatility Has Settled Down

After spiking to levels not seen in a couple of years back in March and April, U.S. equity market volatility has really settled back down. Over the last 50 trading days, the S&P 500 has averaged a daily move of just plus or minus 0.56 percent. 

That’s half the daily move we were seeing at peak levels of volatility earlier this year. It’s also 0.14 percent below the bull market’s average daily move of plus or minus 0.70 percent

While volatility has settled down, we’re going to need to see a continued slowdown to get back to the historically low level that investors got used to in 2017.  Back in November 2017, there was a 50-trading day period where the S&P experienced an average daily change of just plus or minus 0.22 percent.

Monday, June 18, 2018

Where MBAs Are Going

If you have a family member graduating from an MBA program this spring, they might be considering going to work for a bank - or they might not. More MBA graduates are choosing jobs in technology and consulting even as banks have been raising starting salaries.

The share of full-time MBA graduates from the top 10 business schools accepting jobs at financial-services firms dropped between 2012 and 2017 from 36 percent to 26 percent. The share accepting jobs in technology rose from 13 percent to 20 percent in the same period. Consulting edged out financial services as the top draw in 2017, as the choice of 29 percent of grads, up from 27 percent in 2012.

Banks are trying to do more to attract the top MBAs. For graduates of MIT Sloan School of Management, median starting salaries paid by financial-services firms jumped 25 percent between 2012 and 2017 to $125,000. Tech- and consulting-firm median salaries rose just 9 percent—to $125,000 and $147,000, respectively—over the same period.

Friday, June 15, 2018

Burning a Hole in Our Collective Pockets

Americans are spending a lot of money. Retail sales rose 0.8 percent in May, the government reported yesterday — much better than expected. Spending was up 5.9 percent from a year ago.

And the gains were broad: Spending surged at clothing stores, at restaurants and at home-improvement stores such as Home Depot and Lowe's. In fact, the jump in spending at physical stores in May outpaced what the government calls nonstore retailers, a category that includes Amazon and other online retailers.

With all that spending, the savings rate dipped to 2.8 percent in April, as the rate of consumer spending outpaced the increase in personal income. The savings rate has only been below 3 percent three times since the 2008 financial crisis. It was also lower than 3 percent last November and December, but it rebounded after the holiday shopping season.

Thursday, June 14, 2018

The Fed Hikes Rates

As expected, the Federal Reserve lifted its benchmark federal funds rate by a quarter-percentage point, yesterday, to a range of 1.75 percent to 2 percent. But he biggest news is what it might do over the rest of the year.

By a narrow margin, the Fed projected a total of four rate increases in 2018, instead of three as previously planned. Fed leadership remains closely divided: Eight Fed officials said they expected interest rates to rise at least four times, while seven forecast three rate hikes.

The Fed’s preferred inflation barometer, the PCE index, has already hit the bank’s long-run 2 percent target. Yet the Fed predicts inflation will end up around 2.1 percent by year end, suggesting that they think prices will ease later this year.

Tuesday, June 12, 2018

The Revolving World of Credit Card Debt

Americans repaid $40.3 billion in credit card debt during the first quarter of 2018, according to a new analysis of data from the personal-finance website WalletHub. That’s the second-highest amount paid off in one quarter since the first quarter of 2009, when consumers paid off more than $44 billion.

Now, the bad news: Their debts are not getting that much smaller. Americans ended 2017 with $91.6 billion in new credit-card debt, the largest annual amount since 2007 and 104 percent above the post-recession average. Outstanding credit card debt is at the second-highest point since the end of 2008.

In 2017, Americans hit a record high of $1.021 trillion in outstanding revolving debt (often categorized as credit-card debt). As of April 2018, they still had more $1.030 trillion to pay off, according to the Federal Reserve.

Selling a House Is Easy

In yet another sign of the ultra-competitive housing market buyers now face, the time homes spend on the market has never been shorter since the recession began. The median list-to-sale time, which is the period of time between when a listing is officially posted and when the home is officially sold, is now just 64 days, down from 77 a year ago, according to real-estate website Trulia.

Premium homes take longer to sell, with a median list-to-sale period of 72 days. Starter homes (59 days) and trade-up homes (57 days), on the other hand, sell faster than the average.

It’s the latest sign of a housing market that may be reaching its peak. Median home values increased 8.7 percent on average nationwide from April 2017 to $215,600. That represents the fastest pace of acceleration since June 2006 — right before the start of the housing crisis that triggered the Great Recession — when they rose 9 percent annually.