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.

Monday, June 11, 2018

Those Hot Tech Funds

Where are people investing these days? Technology funds just closed out one of their biggest weeks ever in inflows. According to Bank of America Merrill Lynch, tech funds saw $2.3 billion inflows this week, its second-highest weekly inflows ever.

Tech funds have taken in $17.3 billion so far this year, according to Bank of America analysts. That puts the sector on track for a record year in inflows. 

The other hot investing option? Money market funds, which pulled in nearly $34.9 billion during the seven days through June 6, according to Lipper. One big reason for that: Money fund yields averaged 1.41 percent at the end of May, up from just 0.49 percent a year ago.

Friday, June 8, 2018

Don't Sell in May?

One old maxim for stock market investors has been "Sell in May, then go away." The idea is that the market tends to spend the summer in the doldrums, and then picks back up in the fall.

But that hasn't been true this year. Though the stretch between May and October is typically thought to be weak for the stock market, equities have started off that period on a strong note. The S&P 500 has climbed 4.7 percent since the end of April, the best performance for that stretch since 2009.

The maxim does have some validity. Over the last two decades, the S&P 500 has climbed 0.3 percent on average between May and October, versus 6.5 percent between November and April. But over the last five years, the S&P 500 has actually performed better between between May and October than between November and April.

Thursday, June 7, 2018

The Hot, Hot Job Market

How hot is this economy? The U.S. had more job openings than unemployed Americans this spring. That’s the first time that’s happened since such record-keeping began in 2000.

U.S. job openings rose to a seasonally adjusted 6.7 million at the end of April, a record high. That's also more than the 6.3 million Americans who were unemployed during the month.

The largest number of April openings, 1.3 million, were in the broad business-services sector, which includes everything from accountants and software developers to temporary staffers and clerical workers. There were also ample job openings in lower-paying fields, with 844,000 accommodation and food-service jobs open in April and 735,000 unfilled retail positions.

Wednesday, June 6, 2018

The Wood Surge

One little-discussed trend affecting our economy: Wood prices are up 67 percent over the past year, adding thousands of dollars to the cost of each new house. Meritage Homes Corp. CEO Steven Hilton said recently that higher lumber prices have this year added about $3,000 on average to the cost of each house it builds.

The historic run-up in lumber prices is attributable to a trade dispute with Canada, wildfires and limited rail capacity. This comes as U.S. home builders are already struggling to meet demand amid shortages in buildable lots and labor.

But it's good news for timber companies. Shares of CatchMark Timber Trust, Rayonier and PotlachDeltic have each risen more than 11 percent over the past year. Shares of Weyerhaeuser, the largest private owner of timberland in North America, closed on Tuesday at the highest price in its 118-year history.

Tuesday, June 5, 2018

A Social Security Hike?

Are you on Social Security? If so, you could be in for a sizable raise. The annual Social Security cost-of-living adjustment for 2019 could top 3 percent in 2019, which would be the largest increase in seven years, according to a new estimate released by the Senior Citizens League.

A 3 percent cost-of-living adjustment, or COLA, in 2019 would be the biggest annual hike since 2012, when Social Security benefits grew by 3.6 percent. This year the COLA was 2 percent, following a meager 0.3 percent increase in 2017 and no increase at all in 2016.

The Senior Citizens League's COLA estimate for 2019 is based on consumer price index data through April. Social Security COLAs are based on the increase in the index that measures price inflation for urban workers, from the third quarter of the prior year to the corresponding third quarter of the current year.

Monday, June 4, 2018

Retirement and the Gig Economy

We hear a lot about the gig economy, but for many people, it's just a way to ensure their retirement plan. According to a new survey from the investment firm Betterment, 81 percent of gig economy workers say they are afraid of being to afford to save for retirement.

In fact, a third of those people with side jobs have that second job specifically to save money for retirement. And 49 percent of people aged 55 or older who have a second job are saving for retirement with their side gig.

Many of them plan to continue these side jobs into retirement. The survey found that 12 percent of second-job holders intend to hang on to a side-gig job as their main source of income after retiring from their traditional career, and 20 percent of those with a full-time job plan to take on incremental gigs to provide their main source of income once they’ve “retired.”

Friday, June 1, 2018

May's Jobs Report

More good news for the economy in May, as the economy added 223,000 jobs, and the unemployment rate edged down to 3.8 percent. Since 1969, the only other time unemployment has been this low was in April 2000, in the middle of the dot-com bubble.

The economy has now added an average of 191,000 jobs over the past 12 months. In May, retail trade added 31,000 jobs, and employment in health care rose by 29,000.  Employment in construction added 25,000 jobs and has risen by 286,000 over the past 12 months.

The beleaguered mining sector added 6,000 jobs in May. Since a recent low point in October 2016, employment in mining has grown by 91,000, with support activities for mining accounting for nearly all of the increase.

Thursday, May 31, 2018

Changing GDP

The U.S. grew economy grew a touch softer in the first quarter than originally reported, mainly because of a slower buildup in inventories, the Commerce Department said yesterday. Gross domestic product was trimmed to an annual 2.2 percent pace from the previously reported 2.3 percent.

What happened to change it? There were some positive changes to the first-quarter GDP number: Fixed investment in things like equipment, structures and software was revised higher show a 6.5 percent increase instead of 4.6 percent.

Yet stronger investment was offset by weaker inventory growth. The value of newly added inventories was slashed to $20.2 billion from an originally reported $33.1 billion. The increase in consumer spending was lowered a notch to 1 percent from 1.1 percent. On top of that, exports rose a bit slower at 4.2 percent vs. a preliminary 4.8 percent.

Wednesday, May 30, 2018

Billions for Women

The world's billionaire population increased by 15 percent to 2,754 individuals last year, surpassing the previous peak of 2,473 in 2015, according to Wealth-X, a wealth information and insight business. But maybe the biggest news is the rise of female billionaires.

Last year, the number of female billionaires rose by 18 percent to 321, outpacing the 14.5 percent growth in the male billionaire population. That increased women’s share of the global billionaire population to 11.7 percent.

In addition, Wealth-X noted a steady increase in the number of female billionaires whose net worth can be attributed to both inheritance and self-made wealth creation. According to the census, 56.8 percent of global billionaires are self-made, 13.2 percent inherited their wealth and 30 percent built their fortunes in part on inherited wealth.

Tuesday, May 29, 2018

Retirement Accounts Are Growing

As of the end of the first quarter, the average retirement account balance for workers with both a Fidelity IRA and a Fidelity workplace retirement account, such as a 401(k) or 403(b), is up by 9 percent from the end of the first quarter of 2017. That average balance now stands at $299,600, up substantially from the average balance of $275,700 at the end of the first quarter of 2017.

In addition, 401(k) contribution rates are on the rise, with the total savings rate (including not just employee contributions but also employer matches) hitting a record high of 13.2 percent at the end of the first quarter. That’s up from 13.0 percent in the fourth quarter 2017.

Interestingly, IRA account averages are consistently higher than either 401(k) balances or 403(b) balances at Fidelity. For the first quarter of 2018, Fidelity reported that its average IRA balance stood $105,100; its average 401(k) balance was at $102,900; and its average 403(b) balance was $82,100.

Monday, May 28, 2018

Thoughts for Memorial Day

“Honor to the soldier and sailor everywhere, who bravely bears his country’s cause. Honor, also, to the citizen who cares for his brother in the field and serves, as he best can, the same cause." ~Abraham Lincoln

“Heroes may not be braver than anyone else. They’re just braver five minutes longer." ~Ronald Reagan

"Of all the so-called natural human rights that have ever been invented, liberty is least likely to be cheap and is never free of cost." ~Robert A. Heinlein

Friday, May 25, 2018

The Good News on Student Loans

In this season of graduation, many of us are thinking about student loans. The news in that area is fairly good: The share of new delinquencies on student loans has fallen to its lowest level in more than decade. In the first quarter, slightly over 9 percent of student debt outstanding was newly delinquent, based on figures from the Federal Reserve Bank of New York.

In the first quarter, 10.7 percent of overall student-loan debt was considered delinquent, meaning a payment hadn’t been made on the debt in at least 90 days. This figure marked the smallest share of student-loan borrowers in serious delinquency since 2012.

During the recession, delinquencies across categories of debt--including auto loans and credit-card debt--spiked. Around 2011, debt delinquencies reversed course, except for student-loan delinquencies, which rose through 2012 and remained at an elevated level for several years. The student-loan delinquency rate is still far higher than rates for any other type of consumer debt.

Thursday, May 24, 2018

Another Rate Hike Seems Likely

Federal Reserve officials in their meeting in early May confirmed they planned to raise interest rates in June and were not concerned they were behind the curve on inflation. That was the primary takeaway from that meeting, whose minutes were released to the public yesterday afternoon.

“Most participants judged that if incoming information broadly confirmed their economic outlook, it would likely soon be appropriate for the FOMC to take another step in removing policy accommodation,” the minutes said. Traders in the federal funds futures market see more than a 90 percent chance of a June rate hike.

Although inflation hit the Fed’s 2 percent target in the latest reading for March, for the first time in a year, officials were not convinced it would remain there for long. “It was noted that it was premature to conclude that inflation would remain at levels around 2 percent, especially after several years in which inflation had persistently run below the Fed’s 2 percent objective,” the minutes said. Only a “few” officials thought inflation might move “slightly” above the 2 percent target.

Wednesday, May 23, 2018

A Big Quarter for Banks

Bank profits soared by 28 percent during the first quarter of 2018 to $56 billion, according to statistics published this week by the FDIC. The blockbuster earnings report easily tops the prior record set just three quarters earlier.

The FDIC said that 70 percent of the nation's 5,606 banks grew their bottom line during the last quarter. The percentage of money-losing banks dropped to just 3.9 percent. The FDIC's list of problem banks fell to just 92, the lowest that figure has been since the first quarter of 2008.

The financial industry owes a chunk of the mega earnings to the corporate tax cut passed at the end of last year. The FDIC said the tax law boosted bank profits by about $6.7 billion. However, banks would have still made a record $49.4 billion without the tax cuts.

Tuesday, May 22, 2018

Fortune's Top Ten

We are often in the habit of looking at America's biggest companies in terms of their market capitalization, but Fortune's venerable Fortune 500 list ranks corporations in terms of their revenues. That pushes the tech giants like Apple and Facebook down the list, in favor of the likes of Walmart, which is a clear No. 1 in this ranking. The top ten, with their 2017 revenues in millions:

  1. Walmart $500,343
  2. Exxon Mobil $244,363
  3. Berkshire Hathaway $242,137
  4. Apple $229,234
  5. UnitedHealth Group $201,159
  6. McKesson $198,533
  7. CVS Health $184,765
  8. $177,866
  9. AT&T $160,546
  10. General Motors $157,311
The least familiar name on that list is McKesson. What did they do to make $200 billion last year? McKesson sells medical supplies, pharmaceuticals, and other forms of medical technology.

Monday, May 21, 2018

What We Wish We'd Done

Regrets? We've had a few. A new survey from finds that not only do Americans have financial regrets, but they continue to procrastinate in addressing the issue, whatever it may be.

While the largest percentage of respondents, at 39 percent, say their biggest financial regret is not saving enough, the next largest, at 18 percent, say they wish they’d started saving for retirement earlier. Fourteen percent regret not saving enough for emergency expenses, and seven percent would have liked to have saved more for the kids’ education.

A whopping 49 percent of those who do have a regret say that they haven’t started to tackle it. Some plan to put it off indefinitely, with 25 percent saying they have no plans to address it; 19 percent think they’ll get around to it in the next year, while six percent say it will take them more than a year.

Friday, May 18, 2018

Sometimes You Have to Wait

More than one-third of Americans (35%) were forced to delay a major life decision in the last year because of finances, according to a new survey by the American Institute of Certified Public Accountants. That may sound like a lot, but it's actually a drop from the 51% who did so in 2015.

What are people delaying?

  • 14% of Americans waited to buy a home, compared to 22% in 2015.
  • 13% of Americans put off higher education, compared to 24% in 2015.
  • 12% of Americans put off a medical procedure, compared to 19% in 2015.
  • 10% delayed retirement, compared to 18% in 2015.
  • 7% delayed having children, compared to 13% in 2015.
  • 6% of people put off marriage, compared to 12% in 2015.

Thursday, May 17, 2018

What It Means to Be Wealthy

Charles Schwab has just come out with its annual Wealth Index. One of the most important questions it asks: What is the net worth an American needs to be “wealthy”? The answer: an average of $2.4 million, the same as last year, in the online survey of 1,000 Americans between age 21 and 75.

To be "financially comfortable" in America today isn't quite as difficult. That requires an average of $1.4 million, up from $1.2 million a year ago, according to the survey.

The survey also asked what made respondents feel “wealthy” in their daily lives. Spending time with family was most commonly cited, at 62 percent overall, followed by “taking time for myself,” which came in at 55 percent.

Wednesday, May 16, 2018

Fund Managers Still Bullish

Many fund managers remain bullish about U.S. stocks, with most of them thinking the market’s recent rally still has further to run. Just 19 percent of investors think January's peak represented the top of a bull run that began nine years ago, according to Bank of America Merrill Lynch’s monthly survey of fund managers.

Three-quarters (76 percent) of the fund managers surveyed thought equities would keep climbing. Almost half of them said stocks would remain strong until 2019 or beyond.

Although U.S. equities have recovered some over the past two weeks, the S&P 500 remains more than 5 percent off its January high. The index hasn't notched a record close since January 26, before a sudden burst of volatility rattled world markets.

Tuesday, May 15, 2018

Congratulations, and Welcome Home

Is someone in your family graduating from college this spring? More graduates are walking across the stage to pick up their diplomas—and then walking right back home to mom and dad’s house. The share of recent graduates moving back into their parents’ homes jumped to 28 percent in 2016 from 19 percent in 2005. 

The trend is most pronounced in areas particularly affected by the housing bubble of the late 2000s. Those areas include Las Vegas and Riverside, California, according to real estate site Zillow’s recent analysis of U.S. Census data, as well as perennially expensive cities like New York City.

In fact, New York had the second highest share of college graduates living with mom and dad in 2016 of any city in the nation, with 42 percent. Only Miami, which had 45 percent of grads living with their parents, was higher.

Monday, May 14, 2018

The Final Numbers on the Equifax Scandal

Last week, in a filing to the SEC, the credit-rating agency Equifax offered its most detailed analysis of its massive breach to date. The company disclosed not only how many consumers it believes were hit but also  broke down which types of information were most likely to have been stolen.

In the end, 147 million people were affected. Names, dates of birth and Social Security numbers were by far the most common type of data stolen by the attackers, Equifax said. Then came mailing addresses, phone numbers and just under 2 million email addresses. Roughly 209,000 credit card numbers and card-expiration dates were taken.

Beyond the information stored in those databases, Equifax said the hackers accessed thousands of images of official documents — such as government-issued IDs — that people had uploaded to the company to prove their identity. Photos of as many as 38,000 driver's licenses and 12,000 Social Security or taxpayer ID cards were accessed.

Friday, May 11, 2018

The Latest on Inflation

The Consumer Price Index rose 0.2 percent in April, with increases in the cost of gasoline and rents being offset by a drop in motor vehicle prices, the Labor Department said yesterday. In the 12 months through April, the CPI increased 2.5 percent, the biggest gain since February 2017. That followed a 2.4 percent rise in the 12 months to March.

Excluding the volatile food and energy components, the CPI edged up just 0.1 percent in April. That follows on the heels of two successive monthly increases of 0.2 percent.

Services prices excluding energy rose 2.9 percent in the year through April, but much of that was due to a rise in housing costs. If you also remove rents from that equation, overall services prices were up just 2.3 percent.

Thursday, May 10, 2018

The World Slows Down

Investors bought just $533 million in world equity mutual funds and exchange-traded funds, which invest primarily in international stocks, in the week ended May 2. That was the slowest weekly pace for this category since January 2017, according to the Investment Company Institute.

After surging to $43 billion in January, monthly inflows into world equity funds slowed to an estimated $8 billion in April. That's the lowest level for that figure since December 2016.

One reason for this is that growth abroad appears to be slowing. Data from European factory orders to European inflation readings have been missing forecasts lately. In the Citigroup Economic Surprise Index, a broad measure of how expectations for economic data are being met, the eurozone index has dropped to its lowest level since September 2011.

Wednesday, May 9, 2018

The Federal Government Rakes It In

Record tax receipts will lead to April having the largest-ever monthly budget surplus for the federal government, according to the nonpartisan Congressional Budget Office. The April surplus will total $218 billion, breaking the prior record of nearly $190 billion set in April 2001.

Greater-than-expected tax receipts drove the surplus. The record $515 billion in receipts for the month was as much as $40 billion more than the agency estimated about a month ago. The prior record for receipts had been $472 billion in April 2015.

The expected April surplus, meanwhile, isn’t keeping the U.S. from running a wider budget deficit for the fiscal year to date. For the first seven months of the budget year, the shortfall totals $382 billion, or $37 billion more than the same period a year ago, CBO estimates. The CBO recently estimated the full-year deficit would be $804 billion, and that trillion-dollar deficits would return in 2020.

Tuesday, May 8, 2018

Why Oil Prices Are Rising

In recent months, oil prices have risen to levels not seen in three and a half years, since a global glut of crude sent energy markets into a tailspin in 2014. Yesterday, the benchmark oil price reached $70 a barrel for the first time since November 2014.

Why has this happened? The biggest reason is that OPEC and other major oil producers, including Russia, agreed to cut crude production by roughly 1.8 million barrels a day from late 2016 levels in an effort to eliminate a longstanding glut of global supplies. OPEC’s crude production in April fell for a third straight month to a one-year low.

Another reason: Growing demand for oil. The International Energy Agency forecasts global oil demand at 99.3 million barrels a day this year, up from 97.8 million barrels a day in 2017.

Monday, May 7, 2018

Retirees Are Staying Put

As the health and wealth of retirees have increased, more are choosing to stay in or near their homes and neighborhoods rather than moving to a lower-tax state or cheaper, more rural areas within their states. That's according to a new study from United Income, called "The State of Retirees: How Longer Lives Have Changed Retirement."

Nearly half of retirees are now living in the suburbs of cities, and their numbers have increased by almost 40 percent over the past 40 years. The share of retirees who say they have moved in the past five years has fallen from a high of 23 percent in 1980 to a low of 15 percent in 2015, the most recent data available, and only 1 percent report moving out of state, according to the study.

Three of the five states with the largest populations of retirees — California, New York and Pennsylvania — are among the states with the highest taxes. Indeed, the share of Californians who are seniors has climbed from 7 percent in 1965 to 11 percent currently. Low-tax Texas and Florida round out the five states with the largest senior populations.

Friday, May 4, 2018

April's Jobs Report

After spending six months at exactly 4.1 percent, the unemployment rate dropped to 3.9 percent in April, the Bureau of Labor Statistics reported this morning. That's the lowest the unemployment rate has been since December 2000. The economy added 164,000 jobs for the month.

The headline figure fell despite the fact that the number of new jobs added was slightly lower than we've been used to. April's figure compared with an average monthly gain of 191,000 over the prior 12 months. Job gains have averaged 208,000 over the last three months.

The biggest driver of job gains last month was professional and business services, which added 54,000 positions. Over the past 12 months, the industry has added 518,000 jobs. Employment in manufacturing increased by 24,000 in April; manufacturing employment has risen by 245,000 over the year, with about three-fourths of the growth in durable goods industries.

Thursday, May 3, 2018

The Biggest Retirement Worry

Retirees’ overall confidence in their ability to continue to cover basic expenses is on the decline, according to the latest Employee Benefit Research Institute’s Retirement Confidence Survey. One major problem:  More than four in 10 retirees report that their health care expenses are higher in retirement than they planned for.

More than any other category of expenses, health care costs have taken retirees by surprise. The 44 percent that say health care costs are higher than they planned for compares to 26 percent who said housing costs are higher than they planned for. And 27 percent said their overall expenses are higher than planned for.

Retiree confidence tends to track with the economy’s performance. In 2009, as the economy was climbing out of recession, only 20 percent said they were very confident in their ability to survive retirement comfortably. The number peaked in 2016 at 39 percent. But this year, despite a strong economy, the number of very confident retirees has dropped back to 32 percent.

Wednesday, May 2, 2018

Apple's Big Day

The world's biggest stock outdid itself yesterday. Apple announced its earnings per share at $2.73 versus the analysts' expectations of $2.67. The company's net income for the first quarter was $13.82 billion, up from $11.03 billion a year ago.

Apple has often faced low expectations and managed to surpass them. Apple's earnings-per-share results have now beaten the Wall Street consensus in 20 of the past 21 quarters.

But the ploy worked: Apple's stock price rose as much 5 percent after hours, as investors digested the company's better-than-expected outlook. The company also announced a plan to return $100 billion to shareholders in a massive stock buyback.

Tuesday, May 1, 2018

Sell in May?

There's an old stock market adage to the tune of "Sell in May and go away." There's a bit of truth to this, since returns are lower on average for the period of May through October, versus November through April.

But some experts think this year might not hew to tradition. The S&P 500 is flattish year-to-date after a wild ride higher at the beginning of the year, with a lot of volatility in between. After some down days in April, some pundits are seeing an upside correction coming in May.

While the S&P 500's total return in the May-through-October period has averaged just 1.2 percent in the past 20 years, it has nevertheless finished higher 70 percent of the time. During the November-to-April period, by contrast, the S&P was up 85 percent of the time, averaging a 6.2 percent total return.

Monday, April 30, 2018

First Quarter GDP

Gross domestic product expanded at an annual rate of 2.3 percent for the months January through March, the Commerce Department reported Friday. That marked a slight slowdown from the 3 percent growth rate registered during the final three quarters of 2017.

One key area of growth: Nonresidential fixed investment, reflecting business investment in buildings, equipment, software and more, grew at a 6.1 percent rate. That was faster than this category's average growth rate of 4.6 percent during the economic expansion.

Household spending increased at a 1.1 percent rate in the first quarter, pulling back from the fourth quarter, when it rose at a 4.0 percent rate on strong holiday spending. The saving rate rose from the fourth quarter to the first, meaning households pocketed added disposable income from tax cuts rather than spending it.

Thursday, April 26, 2018

The American Dream on the Rise

One economic trend that continues to grow: More Americans own their own homes, and fewer of them are renting. According to U.S. Census data released yesterday, the homeownership rate rose from the prior year for the fifth consecutive quarter in 2018.

The homeownership rate is now at 64.2 percent, its highest level since 2014. The share of Americans who own a home rose from 63.6 percent in the first quarter of 2017.

Last year, surprisingly enough, the homeownership rate rose for the first time in 13 years. The U.S. added 1.3 million owner households over the last year - and lost 286,000 renter households. That marked the fourth consecutive quarter in which the number of renter households declined from the same quarter a year earlier.

The Unlikely Growth in Checking Accounts

Where have you been putting your money lately? One unlikely savings vehicle that's been growing lately is the checking account. The average checking account customer today has more than $3,700 stashed away.

That's well above the recent averages: The median amount held in checking accounts since 1991 is $2,263. In 2007, when times were good just before the Great Recession, consumers had on average less than $1,000 in their account.

Since 2008, apparently due to fear of riskier investments, the checking account customer has been hoarding more money. Moebs Services, an economic-research firm, found that the average consumer checking balance has increased in 23 of the past 30 quarters.

Wednesday, April 25, 2018

The Ten-Year at 3 Percent

The big news on Wall Street yesterday was that the ten-year Treasury bill reached 3 percent, for the first tim ein more than four years. How might this affect you?

The ten-year note is the benchmark for longer-term lending. The rate on a 30-year mortgage, for example, tends to move in relation to the 10-year yield. Freddie Mac said last week that the average rate on a 30-year, fixed-rate mortgage was 4.47 percent, up from 3.99 percent at the end of last year.

The long-term effect on stocks results from the fact that higher yields mean that companies have to pay more to borrow. If rates go high enough, rising borrowing costs can weigh on stock prices because companies need to pay more to service their debt, something that can erode financial performance.

Tuesday, April 24, 2018

Young People in Need of Financial Advice

What's the hottest benefit being offered by employers to young people? It's financial wellness plans. More than a few Generation Zers just entering the workforce are stressed about making ends meet, and many would like their employers to help them better manage their finances, according to a new report from LifeWorks.

A whopping 84 percent of Gen Zers, defined as those under the age of 23, agree it’s important that employers offer financial wellness programs.  But less than half (40 percent) of respondents can’t say their employer cares about their financial wellness and helps them manage it.

Their most pressing obstacles include cost of living, 58 percent; student loan debt, 41 percent; taxes, 34 percent; poor spending habits, 33 percent; and credit card debt, 29 percent. When they face unexpected expenses, 31 percent resort to using credit cards, which suggests that Gen Zers don’t have enough to cover the cost of emergencies.

Sunday, April 22, 2018

This Week in Earnings

This will be a big week for earnings reports, with three of the market's most widely watched stocks set to report. Alphabet, Google's parent company, reports today, Facebook reports on Wednesday, and Amazon reports on Thursday.

  • On average, analysts polled by FactSet expect first-quarter earnings for Facebook of $1.35 a share. Of the 45 sell-side analysts who cover Facebook, the average price target is $216, up from Friday’s closing price of $166.
  • Those analysts expect earnings of $9.28 a share and adjusted earnings of $11.75 for Alphabet. Most people are watching to see how Alphabet's stake in Uber affects its value.
  • Expectations are also high for Amazon, which just reported in its annual shareholder letter that it has more Prime members than Costco. Analysts are looking for Amazon to report revenue growth on average of about 40 percent in its first quarter on Thursday. 

Friday, April 20, 2018

Bullish Sentiment Grows

Despite all the ups and downs in the markets the past few months, individual investors are feeling more positive these days. According to this week's AAII Sentiment Survey, 37.8 percent of investors describe themselves as bullish, meaning they expect prices will be higher six months in the future.

The reading represents an eight-week high, and a jump of 11.7 percentage points from the previous week, although it is still below the long-term average of 38.5 percent. Pessimism fell by 13.5 percentage points to 29.2 percent in the latest week, dropping below its long-term average of 30.5 percent for the first time in four weeks.

The optimism and pessimism gauges have been extremely volatile of late, seeing steep swings on a near-weekly basis. Last week, the number of bearish investors hit its highest level since March 2017.

Thursday, April 19, 2018

Taxes in New Jersey

Now that you've made it through Tax Day, here's a sobering fact to keep in mind: Residents of New Jersey pay the fifth-most federal taxes among the 50 states. The average American adult pays $6,151 per year in federal taxes, but filers here in New Jersey pay $8,835.

The average income per capita in the Garden State is $53,534, which means that the average adult has a tax liability of 16.5 percent. It's slightly worse in New York, where the average adult pays $8,850, for an average tax liability of 17.4 percent.

But that's not the worst in the nation. That distinction belongs to the state of Connecticut, with an average payment of $10,861 and an average tax liability of 18 percent.

Wednesday, April 18, 2018

Companies and Their Cash

American companies are awash in cash: S&P 500 companies, excluding financials, had $2.39 trillion in cash and investments in 2017, according to JPMorgan Chase & Co. researchers. That’s up from $2.2 trillion in 2016 and $1.75 trillion in 2010.

What are they going to do with all that cash? A lot of it could go towards stock buybacks, as companies figure out what to do with their fatter profits and bring back overseas money as a result of the recent tax-code overhaul. That would be good news for a market that has struggled to break even this year.

Based on the amount of buybacks already announced this year by S&P 500 companies, JPMorgan analysts project roughly $800 billion in total buybacks in 2018. That would be up significantly from $530 billion last year.

Tuesday, April 17, 2018

Retail Bounces Back Strong in March

U.S. retail sales rebounded in March after three straight monthly declines as households boosted purchases of motor vehicles and other big-ticket items, suggesting consumer spending was heading into the second quarter with some momentum. The Commerce Department said yesterday that retail sales increased 0.6 percent last month after an 0.1 percent dip in February.

The biggest winners: Auto dealers posted their best month since last September, with sales rising 2 percent. Sales fell 0.3 percent at gas stations, but they were up 9.7 percent from March 2017.

Sales also rose at grocery stores, restaurants and bars, and drug stores. They fell at home and garden stores, clothing shops and sporting goods stores.

Monday, April 16, 2018

Tax Day Facts

Some numbers to keep in mind on this Tax Day:

  • $1.72 trillion: The amount the IRS expects to collect this year
  • $406 billion: The gap between what the IRS estimates people owe and what they collect
  • 155 million: The number of returns Americans are expected to file
  • 70 percent: The number of filers who get a refund
  • $2,925: The average amount of that refund
  • 8.1 billion hours: The amount of time Americans spend working on taxes
  • 1.1 million: Number of tax returns audited by the IRS each year
  • 0.6 percent: The chances that you personally will be audited

Friday, April 13, 2018

Hints of Inflation

At their meeting last month, Federal Reserve policy makers said they’re increasingly confident inflation will rise to their 2 percent target. That's according to the minutes from the March 20-21 meeting that came out this week, which highlight just how much Fed officials’ outlook has changed since last fall, when surprisingly slow inflation raised questions about the need for continued rate increases.

In some senses, we're already there. During the first quarter of this year, consumer prices rose at an annual rate of 2.5 percent, while core prices (which exclude volatile food and energy) climbed at a rate of 2.9 percent.

The Fed’s preferred inflation gauge, the personal consumption expenditure price index, tends to run a little cooler than CPI; it was at 1.8 percent at its least reading in February. But the trend is clear: Underlying inflation is picking up.

Thursday, April 12, 2018

Cash Is on Top - for Now

A new study out from Pension Partners LLC points out that the best place for investors to be in the first quarter of this year was cash. Both bonds and stocks declined over the first three months, which means  that three-month Treasury bills outperformed both U.S. equities and long-dated Treasury bonds, returning 0.3 percent.

The fear among investors is that this trend will continue, but historically, it is relatively rare for cash to outperform both bonds and stocks. Pension Partners analyzed annual returns of the S&P 500, 10-year Treasury notes and three-month Treasury bill going back to 1928. Over that stretch, there were only 12 calendar years in which cash was the top performer.

And in longer time frames than a year, there are basically no scenarios in which cash is the optimal investment choice. Pension Partners notes that as investors increased their holding period from 1 year to 30 years, the odds of cash being king declines from 13 percent to 0 percent.

Wednesday, April 11, 2018

Small Business Sentiment Pulls Back

After hitting multi-decade highs in February, optimism on the part of small businesses pulled back a fair amount in March.  The month-over-month decline of 2.9 points was the largest drop since 2015.

That's the bad news. The good news is that, even with this month’s decline, sentiment on the part of small businesses remains positive and is well above the historical average reading of 96.6. 

Small business owners do report having an increasingly difficult time filling jobs. “Owners complain at record rates of labor quality issues,” the National Federation of Independent Businesses said, “with 89 percent of those hiring or trying to hire reporting few or no qualified applicants for their open positions.” Meanwhile, the number of respondents saying they are increasing worker compensation rose to its highest level since 2000.

Tuesday, April 10, 2018

Preserving Your Retirement Assets

Is there too much risk in your retirement plan? A new MassMutual Retirement Savings Risk Study claims that a lack of understanding about risk has led some retirees and workers within 15 years of retirement to focus more on growing, rather than preserving, their assets.

For instance, 59 percent of preretirees and 32 percent of retirees describe their primary investment strategy as focused on either “aggressive growth” or “moderate growth.” In addition, 32 percent of preretirees and 49 percent of retirees characterized their investment mix as a balance between growing and preserving their savings.

But preretirees say they plan to become substantially more conservative when they retire, with 43 percent of them saying they expect to be primarily focused on asset preservation when they retire. The problem: In the event, just 23 percent of retirees said they were focused on asset preservation at that time.

Monday, April 9, 2018

Why Did Jobs Slow Down?

After Friday’s jobs report showed weaker-than-expected job growth in March, economists have been scrambling to find an explanation. U.S. nonfarm payrolls rose by 103,000 in March, a sharp slowdown from the prior month’s gain of 326,000, the Labor Department said Friday.

Some economists pointed to March’s inclement weather, citing pullback in industries that are easily affected by snowstorms and freezing temperatures. Employment in construction rose robustly by 65,000 in February, but fell by 15,000 in March. Similarly, the retail trade industry lost more than 4,000 jobs after gaining a solid 47,000 in February.

But other analysts said the weaker number in March was bound to happen simply because of February’s strong jobs growth figure. After the unusually and unsustainably robust February gains, the March weakness may just represent an unavoidable hangover.

Friday, April 6, 2018

March Jobs Report

The U.S. economy added just a somewhat disappointing 103,000 jobs in March, the lowest number in six months, the Bureau of Labor Statistics reported this morning. The headline unemployment rate was unchanged at 4.1 percent.

The figures for the first two months of the year were also revised downward. The new numbers show employers added 326,000 jobs in February and 176,000 in January, a net downward revision of 50,000. Still, through the first three months of the year, employers have added an average of 202,000 workers to payrolls, ahead of 2017’s average monthly growth of 182,000.

Wage growth ticked upward, but was still below expectations. Average hourly earnings for all private-sector workers increased 8 cents last month to $26.82. Wages rose 2.7 percent from a year earlier in March. Wages haven’t increased at better than a 3 percent rate from a year earlier since the recession ended in 2009.

Thursday, April 5, 2018

The Growing Rental Market

One thing that may be slowing the recovery of the housing market: A growing share of apartment renters aren’t interested in buying a home. They’re just too expensive.

In all, 20 percent of renters said they have no interest in owning a home, up from 17 percent in August and 13 percent in 2016, according to results of a semiannual survey of renters by mortgage company Freddie Mac. Two-thirds of renters who plan to continue renting said they are doing so for financial reasons.

The growing preference for renting comes even as the economy has strengthened and credit has loosened. Renters generally report being better off financially, with some 39 percent saying they have money to take them beyond the next payday, up from 34 percent in August, according to Freddie.

Tuesday, April 3, 2018

An Outlook for Brighter Days

After a rough patch for the markets, there's a reason for optimism ahead. S&P 500 firms are forecast to report profit growth of 17 percent in the first quarter of 2018 from a year earlier, according to reported results and analysts’ forecasts compiled by FactSet.

Those estimates reflect an upward revision of 5.4 percent throughout last quarter. That would be a record move higher, as analysts lifted their earnings targets due partly to the effects of a drop in the corporate tax rate.

Some sectors where share prices have lagged recently are expected to have some of the most robust profit growth. Energy companies are forecast to have 79 percent earnings growth. S&P 500 tech companies are expected to have grown profits by 22 percent, with Facebook, Apple, and Netflix  showing an even bigger rise.

Tech Troubles

It was a rough day yesterday for the broader market, but maybe the most significant declines happened on the tech-heavy Nasdaq index. The Nasdaq Composite Index was down 2.7 percent on the day, erasing all its gains for the year. It is now down 0.5 percent for 2018.

All 100 components in the Nasdaq-100 Index, which contains 100 of the largest stocks in the broader index, declined on the day. That index is also now in negative territory for the year. was the most notable loser of the day, dropping more than 5 percent.

The Nasdaq is nearing correction territory, defined as a drop of at least 10 percent from a peak. The Nasdaq hasn’t had a correction in more than two years, since February 2016.

Monday, April 2, 2018

Welcome, April

The U.S. stock market is coming off a rough March. The S&P 500 and Dow Jones industrial average both declined, and  it was the worst month for the Nasdaq in more than two years.

But things might be getting better. April has historically been a strong months for stocks, with the Dow Jones Industrial Average gaining an average of 1.9 percent going back to 1950. That stands as the single best month of the year for the Dow, based on average monthly performance.

It is the third-best month of the year for both the S&P 500 and the Russell 2000 index of small-cap stocks. The S&P has historically gained an average of 1.5 percent over the month, as has the Russell. For the Nasdaq, April stands as the fourth-best month, with an average gain of 1.4 percent.

Friday, March 30, 2018

Goodbye to the First Quarter

Today marks the final day of the first quarter of 2018, and most investors will be happy to see it go. Both the the S&P 500 and the Dow Jones Industrial Average will finish down for the quarter, ending a nine-quarter streak of gains for both.

In the U.S., the stock market’s decline was widespread. Of the 11 primary S&P 500 sectors, nine of them posted negative returns over the quarter. The only two positive groups—technology and consumer discretionary—saw their gains come almost entirely from the so-called group of FAANG stocks: Facebook,, Apple, Netflix and Google.

Things were even worse around the globe. The STOXX Europe 600 Index was down 4.7 percent for the quarter, while Japan's Nikkei 225 Index dropped by 7.1 percent.

Thursday, March 29, 2018

The Final Look at Fourth Quarter GDP

The growth in the economy in the fourth quarter of 2017 was boosted to 2.9 percent from 2.5 percent, the Commerce Department reported in its third and final estimate yesterday. The U.S. fell just short of 3 percent growth, after racking up gains of 3.2 percent in the 2017 third quarter and 3.1 percent in the second quarter. It would have been the first time since 2004-2005 that the economy expanded by 3 percent in three straight quarters.

The economy got a big lift from consumer spending at the end of the year and businesses also increased investment. Consumer spending was revised to show a 4 percent increase instead of 3.8 percent. That’s the largest gain since the end of 2014.

Businesses also spent a bit more than previously estimated. Investment in structures such as office buildings and drilling platforms was raised to 6.3 percent from 2.5 percent. The value of unsold goods, or inventories, was also revised up sharply to $15.6 billion.

Wednesday, March 28, 2018

Retirement Fears of Gen X

The Insured Retirement Institute recently conducted a survey of Generation X - defined as people aged 36 to 55 - about their retirement planing fears. Surprisingly, having enough money in retirement was not the top concern. Here are the fears that outweighed that:

  1. Covering their own long-term care costs: Only 63 percent of the Gen Xers said they were somewhat or very confident about having enough money to pay their long-term care bills.
  2. Meeting their parents’ LTC needs: About 53 percent of the Gen Xers said they were somewhat or very confident about being to help pay their parents’ LTC bills.
  3. Paying their children’s college bills: Only 51 percent of the Gen Xers said they were somewhat or very confident that they will have enough money to cover their children’s higher education expenses.

Tuesday, March 27, 2018

Red Flags for Audits

The IRS audited less than 1 percent of returns last year, and that number may be even lower this year, according to the personal-finance website Kiplinger. If you want to stay out of that small number of auditees, here are red flags tax experts say you should avoid:

  • One of the most common reasons for an audit is when the taxpayer is taking higher-than-average deductions in relation to his income. This can come from various types of deductions: Charitable contributions, real estate interest or student loans interest.
  • There are some scenarios where an individual is allowed to take withdrawals from a retirement account prior to 59 ½ years old. But the IRS charges a 10 percent penalty (on top of the tax paid on the withdrawal) when none of those exceptions are met. Almost 40 percent of taxpayers did not report the withdrawal when they did not qualify for the exceptions, according to Kiplinger.
  • A sudden avalanche of business expenses: In previous years, employers were allowed to deduct more than 2 percent of their adjusted gross income for unreimbursed employee expenses, but will no longer be allowed to do so in 2018. So if you suddenly have a thick wad of restaurant and Uber receipts for business trips all over the city at night, the IRS will notice. 

Monday, March 26, 2018

An Unusually Rough March

The final week of March starts today, and unless things turn around quickly, this could end up as one ugly month. March is historically fairly kind to the markets, but the Dow Jones Industrial Average and the S&P 500 are both looking grim.

The Dow Jones, down 6.0 percent so far, is on the verge of putting in its worst March since 1980, when it declined 9.0 percent, according to WSJ Market Data Group. The S&P 500 index is on pace for its worst March in 17 years, since a 6.4 percent March decline in 2001, having lost 4.6 percent so far. The Nasdaq, down 3.9 percent on the month, is staring looking at its worst March decline since 2001, when it fell 14.5 percent.

Amid all this,  the CBOE Volatility Index was nearly 57 percent higher last week. Wall Street’s so-called fear index has more than doubled thus far in 2018.

Friday, March 23, 2018

Hard-Hit Industrial Stocks

Who's going to be hurt by the Trump Administration's proposed tariffs against the Chinese? The market seems to think it's manufacturers, who could end up spending significantly more for the metals in their products.

The S&P 500's industrial sector fell by 1.4 percent yesterday. Some of the more notable losers:

  • Lightweight metals engineering firm Arconic, down 3.1 percent 
  • Airplane giant Boeing, down 2.8 percent 
  • Heavy-machinery maker Caterpillar, down 2.7 percent
  • Farm machinery maker Deere & Co., down 2.4 percent 
  • Maker of steel products Nucor, down 2.1 percent 
  • Producer of aluminum cans Amcor, down 1.5 percent

Thursday, March 22, 2018

The Fed Moves

The first Federal Reserve meeting under the leadership of new chair Jerome Powell held few surprises yesterday. As widely expected, the Fed raised its benchmark federal-funds rate by a quarter percentage point to between 1.5 percent and 1.75 percent. That is the sixth quarter-point move since December 2015.

The Fed stuck to last December's forecast of three interest-rate hikes this year, but central bankers did push up their expected rate path in 2019 and 2020, however. The Fed now sees a total of eight quarter-point hikes in the Fed funds rate through the end of 2020: three increases this year, including Wednesday’s move, three in 2019 and two in 2020. By the end of 2020, rates would be near 3.4 percent.

In its statement, the Fed said “the economic outlook has strengthened in recent months.” It also said that household and business investment “have moderated from their strong fourth-quarter readings.”

Wednesday, March 21, 2018

Bank Rates Inching Up

Now that the Fed has begun raising interest rates, it seems that banks are, too. The average rate on a one-year certificate of deposit rose to 0.49 percent last week, according to While that’s tiny by historical standards, it is the highest that figure has been in more than seven years.

Banks over the past year have already raised the interest paid on deposits held by businesses and affluent individuals who demand it. But higher CD rates are intended to lure in average customers.

Still, banks aren’t moving en masse to raise rates. The average rate on a money-market deposit account started at 0.10 percent before the rate-raising cycle and is now still at just 0.15 percent, says.

Monday, March 19, 2018

Bad Day at the Market

It was a rough day on Wall Street yesterday, headlined by Facebook's woes. Facing charges of misusing customer data, the social media giant dropped 7 percent and had its biggest one-day percentage decline since September 2012.

While the tech sector was the biggest decliner on the day, losing 2.8 percent, the day's losses were broad. All 11 of the primary S&P 500 sectors were lower on the day, as were all 30 Dow components. The Dow's decline of 1.4 percent erased its year-to-date gain and pushed the index into the negative for 2018.

Not surprisingly, the market's Volatility index also jumped on Monday. The VIX gained 38 percent to 21.82, a level that is above its long-term average of 20. The VIX is up nearly 100 percent so far in 2018.

Positive Sentiment Almost Everywhere

Most investor sentiment is pretty strong right now. The University of Michigan's consumer sentiment index hit the highest level since 2004 in March, helped by a record favorable assessment of current economic conditions. At 102, it is well above the long-term average of 86,

The good vibes haven’t just been isolated to consumers. A reading on small-business optimism hit its second-highest level ever in February, behind only to a reading from 1983 and extending a surge that started with the 2016 U.S. presidential election.

Is there anything to be nervous about? There's one thing: According to Saxo Bank’s head of commodity strategy Ole Hansen, the Geopolitical Risk Index is at its highest level since 2003, during the invasion of Iraq.

Friday, March 16, 2018

Misunderstanding HSAs

Do you understand health savings accounts? A new survey by the LIMRA Secure Retirement Institute and the Insured Retirement Institute finds that 51 percent of Americans believe they are knowledgeable about HSAs, which indicates there is much to be done to educate consumers, advisors and employers about these vehicles.

And that 51 percent probably overstates the case. According to the survey, many Americans are unaware that they can use their HSA assets — accumulated in their working years — to pay for health care and long-term care expenses in retirement.

Two in five Americans mistakenly believe that balances must be spent by the end of the year or forfeited. This may explain why 74 percent of the 294 non-retired workers participating in an HSA said they use it to pay for current health care expenses. The remaining 26 percent said they plan to save their HSA assets for future health care expenses.

Thursday, March 15, 2018

The Madness of March

Have you filled out our brackets yet? A whopping 70 million tournament brackets were completed last year, amounting to about $10.4 billion wagered in total, according to a report by WalletHub. That's about twice as much as during the Super Bowl.

But across the U.S., all that time spent on sports brackets instead of actual work has a serious impact on the bottom line. In fact, unproductive workers during March Madness amounted to an estimated $6.3 billion in corporate losses last year, WalletHub said. A separate survey by Seyfarth Shaw at Work found that March Madness ranked third among tech-related office distractions, directly behind texting and Facebook.

Although 81 percent of human resource professionals said their organizations don't have policies to police office pools, employees are happy to leave well enough alone. Ninety percent of workers agreed March Madness was good for employee morale, WalletHub says.

Wednesday, March 14, 2018

A Sleepy Inflation Report

Inflation appears to be under control, despite fears earlier this year that it might be accelerating. The last major consumer-price report before Fed officials meet next week, released yesterday, indicated that inflation is gradually picking up without a big breakout.

The Labor Department said its Consumer Price Index rose 0.2 percent last month after jumping 0.5 percent in January. In the 12 months through February, the CPI rose 2.2 percent, up just a tick from 2.1 percent in January.

Excluding the volatile food and energy components, the CPI gained 0.2 percent, down slightly from a 0.3 percent increase in January. The year-on-year rise in the so-called core CPI was unchanged at 1.8 percent in February.

Tuesday, March 13, 2018

The Pre-Meltdown Losers

As we noted yesterday, during the nine years of the current bull market, some stocks have done extremely well. But it's worth remembering that the bull run was preceded by a disastrous meltdown in the financial sector.

If you look not at the past nine years but back to July 13, 2007, when the market's previous high point was reached, there have been some terrible losers in the market. Some of the worst performers over that 10-plus-year period:

  • AIG, down 95 percent
  • Office Depot, down 92 percent
  • MBIA, down 86 percent
  • Citigroup, down 84 percent
  • ETrade, down 76 percent

Monday, March 12, 2018

The Bull's Biggest Winners

It was nine years ago that the S&P 500 turned around and began the bull run that has lasted to this very day. The S&P itself is up more than 300 percent over that time period.

Here are the biggest winners among the individual stocks in the S&P over that time frame:

  • Netflix, up 6,998.5 percent
  •, up 2,321.4 percent
  • Align Technology, up 2,316 percent
  • Regneron Pharmaceuticals, up 1,869.6 percent 
  • Booking Holdings, up 1,738.9 percent
Netflix and Amazon are familiar names. Align technology makes the Invisalign dental device; Regneron makes a variety of pharmaceuticals; and Booking Holdings owns, OPenTable, and other fare aggregators.

Friday, March 9, 2018

February's Jobs Report

The U.S. economy added a surprisingly strong 313,000 jobs in February, according to this morning’s employment report from the Bureau of Labor Statistics. The unemployment rate held steady for the fifth straight month at 4.1 percent, an 18-year low.

Construction, retail, manufacturing and health care drove most of the growth in February. Specialty trade contractors saw employment gains of 38,000, while building assembly jobs jumped by 16,000. Retail trade expanded by a whopping 50,000 jobs. Manufacturing maintained a course of steady growth in February, increasing by 31,000 jobs, with most of them sprouting in transportation equipment (8,000) and fabricated metal products (6,000).

Wage growth came in less than expected, rising 0.1 percent for the month and 2.6 percent on an annual basis. That's helping to dampen fears that inflation may be on the rise again.

Thursday, March 8, 2018

Latest From the Beige Book

Employers across the U.S. said wage growth picked up since the beginning of the year, according to a Federal Reserve's new Beige Book. Employment grew at a moderate pace compared with recent months, a sign the economy may have more labor market slack to pick up. Still, companies across the country reported continued worker shortages, particularly in the construction, information technology and manufacturing sectors.

But there were few reports that the price increases were being passed to consumers, at least not yet. For instance, in the New York region, which covers northern New Jersey, most businesses said they have raised their selling prices “only modestly” but said “they planned to hike prices in coming months.”

Businesses in the Philadelphia region, covering southern New Jersey, complained about keeping new employees on the job. “Workers appear to have less loyalty to the job, and more job-hopping is showing up on resumes,” the Philadelphia Fed reported.

Wednesday, March 7, 2018

A Month of Losses

February was a topsy-turvy time in the markets, and investors reacted accordingly. According to the TrimTabs Investment Research, $41.1 billion was pulled from U.S. stock funds in February, the third-highest monthly outflows on record (including both exchange-traded funds and mutual funds).

Most of the month’s outflows were concentrated in the first week of the month, when more than $37 billion was pulled from equity products. According to global fund tracker EPFR, this represented the largest one-week outflow in history.

The month’s redemptions, while historic, represented less than 0.5 percent of the $10 trillion in total assets currently held in domestic stock funds. In July 2002, the last month with similar outflows in terms of the dollar amount, the redemptions were much larger by this metric, accounting for what was at the time 1.7 percent of assets.

Tuesday, March 6, 2018

America to Lead the World in Oil

Is America's energy independence day approaching? According to the International Energy Agency, the U.S. will overtake Russia to become the world’s largest oil producer by 2023.

U.S. crude production is expected to reach a record of 12.1 million barrels a day in 2023, up about 2 million barrels a day from this year. American oil output will surge past Russia, currently the world’s largest crude producer at about 11 million barrels a day.

Of the 6.4 million new barrels of oil that will be pumped every day between now and 2023, almost 60 percent will come from the U.S., the IEA said. American influence on global oil markets is also expected to rise, with U.S. oil exports more than doubling to 4.9 million barrels a day by 2023. Until 2015, the U.S. didn’t export any crude oil by law, but in five years it is expected to be among the world’s biggest exporters.

Monday, March 5, 2018

A Record Year for Buybacks

S&P 500 companies will buy back a record $800 billion of their own shares in 2018, funded by savings on tax, strong earnings and the repatriation of cash held overseas, according to a new study by J.P. Morgan. That will far exceed the $530 billion in share buybacks that was recorded in 2017.

Companies have already announced $151 billion of buybacks in the year to date. There were $113.4 billion of buyback announcements in February alone, a three-year high, according to Trim Tabs Investment Research.

It's worth noting that stocks with higher buyback yields and new announcements tend to outperform their peers, especially during corrections and recessions. Since 2000, those stocks have outperformed peers by 150 basis points during corrections and 200 basis points during recessions, J.P. Morgan analysts said.

Friday, March 2, 2018

Retirement Is Easier Than Ever

Retirement planning is getting easier and easier. A Willis Towers Watson survey finds that plan sponsors continue to add enhancements to their retirement plans, including automatic features. In fact, 73 percent now automatically enroll new participants—a percentage that’s been rising steadily, from 52 percent in 2009 and 68 percent in 2014.

Still, 47 percent of those companies who haven’t added auto-enrollment cite cost as the chief reason not to do so. They also hesitate to add re-enrollment, with 80 percent only making the effort to auto-enroll at the time the employee is hired.

But just a quarter of employers have increased their plan contributions over the past five years. Among those doing so, 60 percent raised the employer match to do it; 51 percent did so by encouraging employee savings and employee engagement; and 44 percent offset benefit changes in their defined benefit program.

Thursday, March 1, 2018

The Monthly Streak Ends

A historic streak came to an end with the close of trading yesterday, on the final trading day for the month of February. On a total-return basis, the S&P 500 fell 2.6 percent over the course of the month, representing the index’s first such decline since October 2016.

That means that an uninterrupted 15-month rally has just come to a close. This was by far the longest such streak in the history of the S&P; the previous record was a 10-month rally that ended in September 1995.

The Dow Jones Industrial Average had a 4.3 percent decline for February, coming off 10 straight positive months. The Nasdaq Composite Index fell 1.9 percent for February, ending a seven-month rally.

Wednesday, February 28, 2018

Confidence Continues to Rise

This week’s consumer confidence report for February was very strong, as the headline index came in at 130.8, its highest level since November 2000.  While consumer confidence had a hard time getting above its long-term average for much of the current expansion, it has now been above that level of 94.2 for 21 straight months.

One area of the economy where consumers are very confident is in employment: The percentage of consumers who consider jobs as being "plentiful" continues to be on the rise. In February’s report, it came in just under 40 percent, which was the highest level since April 2001.

The generational divide, which widened during the early part of the expansion with younger people being much more confident than older ones, is now roughly equal. Younger consumers (under 35) have seen little in the way of a confidence boost over the past year, while older consumers (over 55) have had their confidence surge.

Tuesday, February 27, 2018

The Secret Factor for Recessions

You might think there are rumblings in the economy before a recession hits - but in the maternity ward? A new study into fertility and birth rates found that people in the U.S. cut down on baby-making decisions well in advance of recessions — almost as though anticipating them.

The study, from the National Bureau of Economic Research, found that over the past 30 years, conceptions fell at the same time or even before other indicators whenever a recession was about to start. For example, conceptions peaked in 1998 and 2006, well in advance of recessions, and the large decline in conceptions came before the large increase in unemployment. In fact, conceptions worked as well as other economic leading indicators, such as consumer confidence or durables-goods purchases.

And now? U.S. fertility rates have reached a record low, at 62.0 births per 1,000 women of childbearing age, according to the most recent government figures reported by the Pew Research Center last month.

Sunday, February 25, 2018

The Rise of HSAs

Do you have a health savings account? These pretax savings vehicles are growing in popularity: U.S. residents’ use of public and private health coverage stayed about the same between 2016 and the first three quarters of 2017, but use of HSAs climbed about 15 percent.

The number of U.S. residents under the age of 65 who had HSAs increased to 17.9 million in 2017, from 15.5 million in 2016. The number of people under 65 with high-deductible coverage and no HSA increased 5.9 percent, to about 24 million.

If you don't have one, it may be because you're only eligible for an HSA if you have a high-deductible health plan. The high-deductible cut-off is $1,350 for self-only coverage and $2,700 for family coverage.

Friday, February 23, 2018

Earnings Coming On Strong

This earnings season has been a banner one. S&P 500 companies are expected to post profit growth of 15 percent in the final three months of the year versus a year earlier, according to FactSet. That would mark the third quarter in the past four in which companies have reported profit growth of 10 percent or more.

Nearly three-quarters of reporting companies have topped analyst estimates, above the five-year average of 69 percent. And firms are expected to have grown their top-line sales numbers by a strong 8.1 percent last quarter.

So why is the S&P 500 is down about 2.4 percent since earnings season kicked off in mid-January? Most analysts seem to think that the strong earnings numbers came as no surprise to most investors. The strong numbers were already baked into stock prices - even before companies started reporting them.

Thursday, February 22, 2018

Inside Housing's Decline

The housing market is beginning to show signs of weakness: U.S. home sales unexpectedly fell in January, leading to the biggest decline in more than three years. Existing home sales dropped 3.2 percent last month.

Existing home sales, which account for about 90 percent of U.S. home sales, declined 4.8 percent on a year-on-year basis in January. That was the biggest year-on-year drop since August 2014.

The weakness in home sales is largely a function of supply constraints rather than a lack of demand. While the number of previously owned homes on the market rose 4.1 percent to 1.52 million units in January, housing inventory was down 9.5 percent from a year ago.

Wednesday, February 21, 2018

The Woes of Walmart

U.S. stocks snapped a six-day winning streak yesterday, with the Dow and S&P 500 both dropping by about 1 percent. The biggest culprit: The world's biggest retailer, Walmart.

The retail giant's stock notched the worst dollar decline in its history, after it reported its first earnings miss in ten quarters. Walmart's adjusted per-share earnings came in at $1.33, below the $1.37 consensus of analysts polled by FactSet.

Shares of Walmart lost $10.67 on the day. The stock price lost 10.2 percent of its value. That percentage decline represented the steepest one-day drop for Walmart since January 8, 1988, when it dropped by 10.3 percent.

Tuesday, February 20, 2018

The Millionaire State

There's a new study out from Phoenix Marketing International, breaking down the number of millionaires by state, and New Jersey places at a lofty No. 2. Fully 7.86 percent of all the households in our state qualify as millionaire households, with more than $1 million or more in liquid wealth, The total for the state is nearly 250,000.

All told, millionaire households across the nation increased by 6 percent between 2016 and 2017. They now total about 7.2 million households in the U.S.

The only state with a higher percentage of millionaires than New Jersey? Surprisingly, it's Maryland, where 7.87 percent of all households qualify as millionaires.

Monday, February 19, 2018

Assessing the Damage

Is the market downturn over with? For the moment, at least. The Dow Jones industrial average and the S&P 500 index each logged their sixth straight advances on Friday, notching a slight gain at the close.

The Dow last had a rally of this length in November, while the S&P’s last six-day advance was in January. For the week, the Dow rose 4.3 percent, marking its biggest one-week percentage rise since November 2016. The S&P 500 also gained 4.3 percent in its best week since January 2013.

But it wasn't enough to erase the damage of the correction. The Dow remains 5.3 percent below its all-time high, hit last month. The S&P is 4.9 percent below its own record. U.S. financial markets will be closed today in observance of Presidents Day.

Thursday, February 15, 2018

The Market's Moves

How much has the stock market been moving lately? The daily move in the S&P 500 has totaled nearly 17 percent during the first half of February, according to The Wall Street Journal’s Market Data Group.

That’s surpassed such moves for every full month since June 2016, when the index moved 17 percent amid market turbulence spurred by the Brexit vote. With half a month to go in February, the absolute move in the index has a good chance to surpass those levels.

Sliced another way, the average up-or-down daily move so far in February has been 1.7 percent, according to the Market Data Group. That’s the biggest such average since August of 2011, when S&P downgraded the U.S. credit rating.

A Nation of Debtors

We are increasingly becoming a nation of debtors. According to the New York Fed’s latest Quarterly Report on Household Debt and Credit, household debt rose in 2017 for the fifth consecutive year. In the fourth quarter of 2017, household debt grew 1.5 percent from the third quarter to $13.15 trillion. That’s equivalent to 68 percent of U.S. GDP.

Debt increased in all major categories: in mortgages (1.6 percent), student loans (up 1.5 percent), auto loans (up 0.7 percent) and credit cards (up 3.2 percent). On the other hand, it did fall 0.9 percent for home equity loans.

Although credit card debt led the fourth-quarter debt increase, consumers owe far less in credit card debt than in all other major categories, just $834 billion. That's compared with $8.88 trillion for mortgages, $1.38 trillion for student loans and $1.22 trillion for auto loans.

Wednesday, February 14, 2018

Creeping Signs of Inflation

U.S. consumer prices rose more than expected in January, the Labor Department said this morning. This could be like a further sign that inflation is firming up after a long run of softness.

The consumer-price index, which measures what Americans pay for everything from bananas to housing costs, rose 0.5 percent in January. It had risen a seasonally adjusted 0.2 percent in December.

In the 12 months leading up to January, overall prices rose 2.1 percent, matching the same annual increase as in December. Core prices, stripping out the more volatile food and energy prices, were up 1.8 percent on the year. The increase in inflation last month was largely driven by higher prices for gasoline, shelter costs, medical care, food and apparel.

Tuesday, February 13, 2018

Optimism at Small Businesses

Optimism among small companies in the U.S. rose sharply in January, fueled by a record number of owners who said now was a good time to expand, according to a National Federation of Independent Business survey released yesterday. Six of the 10 components that make up the small-business optimism index increased in January, producing one of the strongest readings in the 45-year history of the survey.

The figures show sustained, sturdy business sentiment since the November 2016 election. A measure of plans to boost capital spending in coming months increased by 2 points to 29 percent, consistent with other data indicating stronger future outlays for equipment.

Finding qualified workers remains problematic for small businesses, underscoring what a tight job market we have. One in five small companies said they plan to boost hiring, which was unchanged from the prior month.

Monday, February 12, 2018

Heavy Volume

It should come as no surprise that a week of volatile price action and slumping stocks saw a huge jump in trading volume. Total composite volume for the week was 54,528,267,895 shares, the highest since the week ending August 12, 2011, according to WSJ Market Data Group.

Total composite volume for Friday was more than 11.8 billion shares, making it the second-largest volume day of the year. The day with the most volume this year was last Tuesday, when stocks rebounded some after losses last Friday and Monday. More than 12.04 billion shares changed hands on Tuesday.

Stocks gained ground late Friday, with the S&P 500 index rising about 1.5 percent. But the S&P 500 and Dow Jones Industrial Average each fell by more than 5 percent over the course of the week.

Friday, February 9, 2018

The Biggest Losers

It was another rough day on Wall Street yesterday, as the S&P 500 fell by 3.8 percent and the Dow Jones industrial average fell 4.1 percent. All 30 stocks in the Dow declined on the day.

Incredibly, four of the Dow 30 have lost more than 10 percent of their value already this year. They include:

  • General Electric, down 17.2 percent
  • Procter & Gamble, down 12.7 percent
  • American Express, down 11.0 percent
  • Chevron, down 10.3 percent

But all of those look better than the biggest loser in the S&P. Chesapeake Energy has lost more than a quarter of its value - declining 28.8 percent - since the beginning of the year.

Thursday, February 8, 2018

Looking Forward From the Rout

The stock market's dramatic drop on Monday may scare some investors away from Wall Street for a while. But if history is any guide, it shouldn’t. According to the WSJ Market Data Group, there have been 131 sessions in the history of the S&P 500 with a 4 percent drop, as occurred on Monday. A month after a 4 percent drop, historically speaking, the S&P 500 is higher 54 percent of the time, and gains an average of 0.87 percent over that period.

The odds are only slightly better on a three-month basis—the return has been positive 56 percent of the time.  But the gains are significantly higher, with an average advance of 6.11 percent, which would be enough to erase the day’s drop.

Six months after a 4 percent drop, the S&P is higher 63 percent of the time, gaining 7.31 percent over that period. Over the course of a year it is up an average of 16.48 percent, and it is positive in 62 percent of such periods.

Wednesday, February 7, 2018

The Labor Theory of the Market Rout

Was the rout in the stock market caused by rising wages? That's one theory. A Labor Department report of rising U.S. wages last week fed market inflation fears and may have kicked off the market's swoon. But a deeper look at that report raises questions about whether wages really are rising in such threatening ways.

Average hourly earnings for all private-sector workers increased 2.9 percent in January from a year earlier, the best gain since June 2009. But the gains aren’t very widespread. A separate gauge showed that wages for nonsupervisory workers, who account for around 80 percent of employment, rose just 2.4 percent for the year ended January, in the range that’s prevailed for several years.

This isn’t the first time managerial workers have seen a big uptick in monthly pay. Wages for this group rose 1.2 percent last February and 1 percent last July, pushing overall wages up 0.3 percent in both months, But that pace wasn’t sustained in the following months.